 Good morning and welcome to the 19th and last meeting before the summer recess of the committee, and if you wish to use tablet devices or mobile phones during the meeting, please switch them to the flight mode as they may otherwise affect the broadcasting system. Some committee members may consult tablet devices during the meeting. This is because we provide meeting papers in digital format. We have received apologies today from Alec Rowley. Agenda item 1 is a decision on whether to take agenda items 4 and 5 on consideration of the oral evidence received in the future work programme in private. Are we all agreed? Thank you very much. Our next item today is consideration of a negative SSI, the building Scotland amendment regulations 2015 SSI 2015-218. Members have a cover note from the clerk explaining the instrument. As you will note, the Delegated Powers and Law Reform Committee has comments to make on this instrument. Do members have any comments to make on this instrument? I should have said no comments to make on this instrument. Are we agreed not to make any recommendations to the Parliament on these instruments? Thank you very much. We now move on to our third item of business today, which is an oral evidence session on the Accounts Commission for Scotland's 2015 local government overview report. I would like to welcome Douglas Sinclair, chair of Accounts Commission for Scotland, Fraser McKinlay, director of performance in audit and best value, and Kathy McGregor, audit manager of Audit Scotland. Before we move on to questions, do any of you wish to make another next statement? Perhaps I could. The Accounts Commission welcomes the opportunity to discuss with the committee its 2015 local government overview report. For a number of years now, councils have had to cope with reducing resources, rising demand and ever-increasing public expectations. Our audit work tells us that councils generally cope well so far, until now they have dealt with reductions in income largely by cutting employees, but that alone is not sustainable in the longer term. Councils will face pressures beyond next year of a scale not previously experienced as budgets are expected to become even tighter and demands and services continue to increase. Many councils are now reporting a budget shortfall that is a shortfall between the projected income and expenditure. Over and above the known reductions, the Conservative Government is, as you know, committed to reducing the deficit in the lifetime of this Parliament. The chancellor will announce where those expenditure reductions are to be made, both in the emergency budget on 7 July and in the public spending review in September. Again, that is bound to have implications for Scotland's finances and in turn for Scotland's councils. In the commission's view, councils need to have effective long-term financial plans to give them a good understanding of their finances and future pressures. They need to identify all practical options for addressing those pressures and funding shortfalls, partly by making better use of benchmarking data and increasing the involvement of service users and local communities in developing ways to improve services and to help save money. The challenge for councillors is to make best use of the money that is available and to take the difficult decisions now to avoid storing up problems for the future. There are, of course, a lot of changes going on in council staffing, management and delivery structures, including, of course, the integration of health and social care, the continuing use of alias to deliver services. It is absolutely crucial in the commission's view that governance and scrutiny arrangements keep pace with all those changes. Community planning and health and social care integration require a continuing focus on governance and partnership working, where the responsibility for good governance is shared and which depends crucially on building a culture of trust between partners. My colleagues and I are happy to answer questions. Mr Sinclair, does Mr McKinley or Ms McGregor wish to add anything to that? No, thank you. If I can move straight into the report itself and on page 29, we have quite a lot about consulting service users and communities, but you feel that there is a need to involve these folks more in planning and delivering services. I wonder if you could give us some good examples of where that is happening and where you think that that is maybe not happening to the degree that it should be, because from my past experience, and I'm sure from others around the table, when you do involve communities themselves, you tend to reach better decisions. Given that, given convener paragraph 57, the Western Islands Council brought together views of communities and used them to influence decisions and develop services, the Falkirk community planning partnership in the Bainsford area involved older people in developing new ways of providing services to help enable older people to live in their homes longer. Perthyn Cymru's Council is a facility in working communities where people who need social care services and their families are developing local services to meet service needs. All councils need to do more is to engage with the service user as well as the community to find out the experience of the service user in their journey in contacting the council and how that can be improved as well. I think that satisfaction surveys are useful, but they actually have a limited use, because if the council is a monopoly provider, for example, in terms of road or refuse collection, there's no alternative provider for the public to build a benchmark at the performance of their council. They're useful satisfaction surveys, but they have a limited use. I think that we'd like to encourage councils to do more work in analysing the experience of the individual service user. I think that's particularly true with the development of self-directed support, for example. How well does the council respond to somebody who's applied for self-directed support? What's the journey of engagement with the council being like? Areas like that, councils are still a fair bit to do. I think that's a point that I would make. I don't know if you want to present. The committee will probably know as well, if not better than we do, given all the work that you've done around the community empowerment bill, which was passed last week, that bit of legislation could be a genuine step change in how this all works. One of the things that we'll be interested in is the extent to which councils and other public bodies embrace that as an opportunity to do that or whether they grudgingly think that it's something that they have to do. As well as the stuff that's in the bill around public assets, I think that some of the stuff around participation is potentially hugely important in getting communities involved much, much earlier in not just saying, do you want this or do you want that, but actually designing and co-production in the jargon in a genuine sense. So, we'll be very, very interested to see how the community empowerment bill is actually enacted in practice because it does have potential to change this quite significantly. The report highlights good practice as it always does, it doesn't really point out bad practice. As we've gone round the country to discuss the community empowerment bill and other aspects of work that we've been carrying out, we've been to a number of places where folks folk have told us that, yes, people will come out and speak to us about certain things but they go away and seem to forget the views that we have given at those events and they don't feel that that's proper consultation at all. Is that something that you have found in terms of formulating the report and in your day-to-day work? I think that there are lots of examples of communities that are very frustrated with this stuff. We've spent a lot of time recently looking at the Castle Tower situation, for example, in Argyll and Bute, where we have a community that is very frustrated with how that's gone. In that case, we have a council that's clear that they made the right decision based on the facts that were in front of them and wider considerations of best value. The commission has asked us in Audit Scotland to look at how the audit of best value is carried out and this whole discussion around community engagement and community involvement will, I think, form a bigger part of that discussion. The baby guidance from 2003-04 when you read it now does feel a little bit outdated on this issue. It talks about community consultation and I think the world has moved on a great deal. I think expectations are very different. I think the community empowerment bill and other things have really moved that agenda on and our audit work has to keep pace with that and reflect that. I think that we will be, probably in future, convener more challenging around this kind of issue and, in a sense, expecting councils to be starting with the proposition that, yes, you can do that unless there's a very good reason not to rather than other way around. I know that some of the work that you've done has picked up some really powerful examples of where communities feel very, very frustrated at not being able to move through the machinery of councils as quickly as they would like. As you mentioned, Castle towered there and I don't think there's anyone in this Parliament that's not aware of that situation because Michael Russell has brought that to the fore in recent times, it has to be said, including it to this committee. One of the things that we've had, which we've never had prior to this meeting previously, is correspondence from members of the public round about certain aspects of your work. One of the emails that all members have received is from Aberdeen and it's round about public objection to unpopular investment decisions. I'll just read what the folks have had to say about that. They say, currently the public are involved in pre-application consultations for major developments and is consulted in all planning applications. If councils consult on major planning policy developments, investment decisions are often communicated to the public poorly, often shrouded in secrecy, claiming commercial sensitivity. This has led to a breakdown in trust between some councils and the people who elected them. Auditing bodies often fail to respond adequately in a timely manner with the potential for catastrophic effects to the nation's built environment. The question that they ask is what can be done to restore the public's trust in or respect for councils and auditing bodies who consistently react dismissively to the public's objections to unpopular investment decisions for major projects and who seem to intentionally delay their response or refuse to respond to legitimate requests for information on how such decisions are reached. How would you respond to that, Mr McKinley? I think clearly we are very interested in and committed to good governance, convener, and the transparency of that. I think we need to be better at helping people to understand what our role is in some of these big things, because a lot of these things are planning issues first and foremost. Particularly in big planning decisions in places such as Aberdeen and others, they are very controversial. It is important that people feel engaged and some people clearly in some of these cases do not feel engaged. Our engagement with that as auditors is something that we need to think through quite hard. At the moment, we are looking to put together some guidance that tries to set out a bit more clearly for people who are writing to us about what our interests are and what our limitations are as auditors in a quasi-judicial process like planning. Certainly, in relation to issues of good governance and transparency, we would always be very interested in that and the commission and the overview report set out quite clearly their expectations of councils in terms of what good and transparent governance looks like. Those folks have concentrated on the investment issues rather than on any planning issue in terms of the questions that they have suggested that we ask today. I do not want to go into the planning situation because that is not your guys' work at all. I think that sometimes these things become intertwined in folks' minds and we cannot separate them out to deal with the individual things. Obviously, the investment is a concern to these folks and you are saying that sometimes you do not relay back to them your reasoning for doing or not doing something. I think that we do do that. There are probably ways in which we can do it more clearly and on occasion more quickly. I absolutely accept that, convener. For us, at the end of the day, we are interested in the process that the council has followed. If at the end of the day, councillors make a decision to invest in something and not other things, then the process has been followed and that is entirely legitimate. That is local councillors. I absolutely agree with that. The interest of the commission is on the process. Was the process comprehensive? Were the reports by officers comprehensive? Were councillors given the full information? Were they given all the options that are open to them? At the end of the day, you have to respect the fact that people have elected the council and the council has the right to make that decision. The decision that some of the public might not like, but as long as the process has been thoroughly and properly followed, we have to accept the consequences of democracy. Ultimately, if people are agreed, they have the option that they can stand for the council at the next election. That is how local government works. You are not going to satisfy all the people all the time. Our interest as a commission, as the controller has indicated, is to ensure that the principles of good governance are being applied by the council in making decisions. I draw your attention back to your report about consultation and the fact that those folks feel that they have not been consulted properly on this investment issue and do not feel that their voices have been listened to. We are saying that the responsibility lies with the councils. I would not disagree with you on that point. I think that we all understand that. In terms of your focus in the report on consultation, that seems to be lacking in certain areas of councils business. I certainly take your point that if councils are going to engage in consultation with members of the public, there is an obligation on the council to feedback their views on the consultation and why they have taken a particular decision. They have to complete the loop, and as Mr McKinley has indicated, in the next iteration of best value we will look much more closely at how effective councils are at engaging with their local communities and what the feedback loop and follow-up is by the councils. It is clearly an important part of the community empowerment act, I think that I can call that now, and we will take that on board in our future best value work. I am sorry to focus on the Aberdeen beautiful city, but it is relevant in the news today. It is a council that undertook a referendum of consultation with people and rejected those findings. I am trying to feel what is happening, but not specifically in the Aberdeen context. My understanding is that the project that has been suggested there is a joint partnership where the council will be left holding the risk should the hotel development not realise the projected income. I would like to get a feel for what you would expect the council's assessment of risk in undertaking some of the joint ventures and big projects. That is a great question, and that is absolutely of interest to us. Our auditors would routinely, when big investment decisions like that are made, look at, as the chair said, the process that the council has followed to get to that point, including their understanding of risk. Where there are big investment decisions and where capital investment in particular is being undertaken, our auditors would routinely look at the delivery of the capital plan. Increasingly these days, what we are finding is that there are some new and innovative funding models coming through, which bring different kinds of risk. It is difficult to keep up with the different formats that there are these days. I think that the commission has been very clear that one of the key things in there for officers is to ensure that elected members, when they are making the decisions, understand the risk that they are taking on. Again, it is not for auditors to say that it is right or wrong or it is good or it is bad. What we do see in the risk assessment is do you understand what that risk is, how are you managing it, what are the mitigating actions that you are taking to manage those risks. That is becoming increasingly complex in a world where capital budgets have reduced significantly. People are looking for more innovative sources of capital investment and funding, which is becoming enormously complex. The chair might want to say a little bit about the commission's interest in helping councillors and expectations on councillors who already have a very difficult job to do to understand all of that stuff, which is becoming increasingly complex. I think that managing risk is one of the principles of good governance. We do not want councils to be risk averse, but they need to be risk aware. That is the really important bit. The point that Mr McLean has touched on is the critical importance of ensuring that elected members have the necessary skills and training to understand what they are doing in terms of managing risk as part of their job. They are the historians of public money at the end of the day. They have to make those decisions. They have to ensure that they have the skills and competence that are the right questions of their officers and get the right answers that they are satisfied with. The committee is interested in other funding models, and we are looking at pension funding at the moment. As you said, those are new models, so would you expect the council to seek external advice on that and legal advice if that is not a project that the council has not used before? I think that yes is the short answer. Depending on what it is and what it is for, there are things such as the Scottish Futures Trust, which would play a role in that. But absolutely, when we look at things such as tax incremental finance or the growth accelerator model and all those kinds of things that can trip off the tongue, it is really important that officers and members understand what they are getting into. Importantly, as the commission said in its recent report about borrowing, that they understand the long-term implications of that. So what does that decision that you are making today mean for the commitment that you are making over the next 25-30 years in some cases? You really do need to look at the longer term in all this. John Wilson, please. Thank you, convener. Good morning. Just to follow on from that line of questioning at the present moment, is that in the chair's opening statement introduction to your report in page 6, at the top of the page, you actually say that councillors also need to assure themselves that there is sufficient capacity within their councils to deal with day-to-day business as well as manage improvement and change. How do the elected members get sufficient information to allow them to make that assessment, whether or not the information is being provided? If I take you back a number of years ago to PFI PPP contracts when they initially came out, a lot of local elected members relied on their own officials to advise them on the establishment of these contracts. As we now know a lot of the contracts, if we had known then what we know now, we would never have signed up to them. However, elected members are the custodians of the council. They rely on the advice and information that they receive. How do we ensure that they get the best advice and information? Let me just give a little bit of context to that. One of the points that we make in our report is that councils have banned their budgets by reducing their staff complement. They spent £380 million on voluntary early retirement. All the indications are that at least half of Scotland's councils will continue to shed staff. One of the concerns that we have about that is the loss in capacity, particularly in services such as human resources and in finance. That is a particular issue in smaller councils where you may have one person who is an expert, for example, in housing benefits and that person goes and it is difficult to replace that person. There is a responsibility on the chief executive in terms of workforce planning to ensure that he or she informs the council where he believes that there are shortfalls in capacity. If there are shortfalls in capacity, it is his responsibility, his duty, to ensure that the council can gain access to that expertise, be it from another council or in the private sector. That is a critical factor. Workforce planning is really important to ensure that councils retain a balanced workforce and that they have the capacity. Particularly as the whole pattern of service delivery becomes more and more complex, the day of the council being the sole provider of services, as you rightly pointed out, Mr Wilson, has changed dramatically, so ensuring the council has the capacity to monitor that changing pattern of service delivery is fundamentally important. That is a real obligation on the chief executive to ensure that he advises the council, but to ensure that the councils have the necessary skills and the confidence to ask the searching questions of their officers to make sure that they can be assured that capacity is in place. I will go back to the original question and ask how to ensure that councillors are suitably equipped to ask the pertinent questions of the officials to understand whether or not they are getting the best advice, the best information and the information advice that they are receiving as pertinent to the decisions that they are making. Let me take this in a slightly different angle. It is fair to say that virtually all councillors do a very good job, but the world in which they live now is a much more complex world than, say, in 1975. I mentioned the differential arrangements for service delivery. One of the things that we found in our reports is that the take-up of training by councillors is incredibly variable. It is fair to say that most councils do provide good induction training, but in terms of continuing professional development, there is a real question mark about how good that is. It is difficult to imagine that somebody being the chair of a finance committee unless they are financially illiterate. It is difficult to imagine somebody being chair of an education committee unless they have a good understanding of education policy. I think that there is a debate to be had about how effective the training is for councillors. Given that they are in charge of a budget of £21 billion that employ over 200,000 people, have we got unrealistic expectations of our councillors? Do we need to do more to ensure that they are properly trained? There is nothing in the code of conduct that requires a councillor to undertake training. There is no standard job description for councillors. Mr McKinley mentioned the best value guidance of 2003, the eight characteristics of a best value council, but that guidance is absolutely silent on the skills that councillors need to discharge their responsibilities. It just assumes that they are there. Local government is a big business, and I think that there is a debate to be had about how effective the training is. A way back in 2008, the Scottish Local Authorities Remuneration Committee, which no longer exists, recommended that there should be a standard job description for councillors, that every councillor should have a training needs analysis and a personal development plan. I think that there is really a debate to be had, and I am not in any way demeaning councillors. I am actually trying to make sure that they have the skills and the competence and the confidence to do the kind of job that you are talking about, Mr Wilson. I think that there is a debate to be had about how good that training is. Two years ago, the commission published a report on roles and relationships. We talked about roles and relationships between members and officers, and we are going to revisit that report to try to get under the skin of the report to ascertain how effective training and development is for councillors. I should have declared at the beginning that I was formerly a councillor, and my wife is currently a councillor. I have some experience of what is happening in local government at the present time. I might be too close to a particular local authority, but I do get a general feeling of what is happening in local government. That takes me on to the next issue that I wanted to raise, and it is back to the chair's introduction, which is the issue about scrutiny. As you mentioned, it makes specific reference to the chair of the scrutiny, or audit committee should be a member, not a member of the ruling group, because we now know that we have coalition groups in certain local authorities in Scotland. We recently had a situation in a local authority in central Scotland where the chair of an audit committee was removed. The ruling group came up with various reasons why the individual was removed, but one of the suspicions or one of the allegations that had been made is that the chair of the audit committee was asking awkward questions about a particular contract that was awarded by the council. Has the Accounts Commission been involved in any way whatsoever in investigating the circumstances behind that? Perhaps Mr McKinlay could take the first part of that, and then I will come in. We are very aware of the situation that you are referring to, Mr Wilson. I asked the auditors in that council to have a look at it, and as you are probably aware, it is on the front page of the herald today. The issue around the contract is with the Audit and Governance panel in that council today, and we will be interested to see what comes out of that discussion later on. In relation to the position of the convener, I asked the auditors to have a look at that. Their view, which I am satisfied with, is that the process was in accordance with the council's standing orders, so in a sense, no rules were broken. I absolutely accept that there is a different question about the nature of the standing orders. As part of that piece of work, auditors also looked at how other councils do that kind of thing, how appointments are made, how people are, whatever the word is, unappointed from committees. The reality is that, in most councils, it is a political process. There is a process through which, in councils where there are party groupings, it is part of that process. In other places, there is a process that ultimately involves council agreeing to those things. As you said at the start, and I am sure that the chair will want to come in at this point, our interest more widely is in the way in which, particularly for our interests, things such as audit and scrutiny committees and panels are led and chaired, how those appointments are made and how you can remove people from those positions is something that I am sure the commission will be interested in in the future. In a world of coalitions and cabinets, good scrutiny is even more important. As Mr McKim has indicated, it is a matter for each council to determine the arrangements for the appointment of the chair of the audit committee, but the commission's view and its state in our report is absolutely clear. Paragraph 67, we believe that public trust, public confidence in scrutiny and audit arrangements is much more likely to be achieved if the chair of the audit committee is not a member of the administration, where the committee has clear terms of reference, wide terms of reference is adequate support to undertake its task and the members of the committee have the necessary skills in training to do their job. That is the commission's clear view that if you want to ensure that the public have trust and confidence in the scrutiny and audit arrangements, that is what councils should be doing. I will not go into debate about standing orders because there are issues around that and how. Often standing orders are changed in certain local authorities to accommodate the prevailing political mood. In relation to the issue about senior officers, Mr Sinclair made reference to the chief executive having an overarching role in ensuring that appropriate people are in place and that advice and information is being provided. What training is the audit commission involved in ensuring that we have relevant senior officers able to come through the council process to take on those roles? I know that in the last couple of years, as you have quite rightly said, some of the reductions that have taken place in staffing have been at that senior level. How are we ensuring that the people that are being appointed to take on those tasks are suitably equipped to be able to provide the best advice and information? There is no one organisation that does that. There used to be the Scottish Local Authorities Management Centre in South Clyde University, which was, if you want, breeding grounds, not going to the race that I am looking for, but an opportunity for potential TV datives to learn their craft. Part of the responsibility would lie with Solace to provide opportunities through learning sets and what have you for potential and future chief executives to understand what the job is about. In my view, there is also a case for revisiting the terms of reference for the chief executive in the world that we now live. The job description of chief executive is essentially the head of the paid service. What does that actually mean in practice? What is the dividing line between the chief executive's responsibility to manage the council and the elected member's responsibility for policy on the one hand and scrutiny on the other? Where do you draw the line between policy and management and the degree of independence that the chief executive has? It is also fundamentally important that, in the world of coalitions, I mentioned that chief executives do not lose sight of the fact that, while it is part of their job to help the administration of whatever colour to implement its manifesto, the chief executive still has that wider obligation, wider responsibility to the council as a whole and to always act in the council's best interests. I thank Mr Stinkler for that. I will move on with other members' questions, but if there is time at the end there might be a couple of questions. I think there may be. Willie Coffey, please. Mr Stinkler, in your opening remarks, you told us about the UK chancellor's budget proposals and the consequential impact that that is ultimately going to have in local government services. Has there been any impact analysis of this sort of level of cut that is being handed down basically from the UK treasury through the Scottish government to local councils? Has there been any impact analysis on where the cuts will hit hardest and what councils might be trying to do to address that? I want to help on this point. We do make a point in a report that funding to English councils has been cut since 2010, 11, 15, 16 by 37 per cent. There is a figure by the Office of Budget Responsibility which suggests cuts of 6.4 per cent. This is UK cuts in 2016, 17 and 4.9 in 2017, 18. However, I do not know if there is any detailed analysis of the impact of eliminating the deficit in the lifetime of the Parliament, the consequentials that that would mean for the Scottish bloc. What impact has been done in this phraser? Not specifically, Mr Coffey, but most people seem to expect that the NHS and schools will continue to be inadverted commas protected. Obviously, the history is that that has been passed through the Barnett consequentials to Scotland. Obviously, those things make up a bigger proportion in Scotland than they do in the rest of the UK. In a sense, that is why the commission has been very strong on councils doing their own long-term financial planning. We know that it is not perfect. We know that they do not know what is coming in July or September. It is not straightforward to do that in a three- to five-year look, but we think that their scenario planning is hugely important. We think that they need to understand what the ranges might be. I think that the cuts so far have been in the order of 8 per cent so far in local government. What would it look like if it was another 10, 12, 15 in future? Importantly, each local authority area will want to think about that in the context of its own priorities and local community needs. The decisions in Edinburgh might be different from the decisions that are taken in Murray about where you choose to invest and potentially where you choose to disinvest. We will, when the budget announcement comes over the summer, be looking very closely at that, as many people will, and continue to think about what is the effect of that on all public services in Scotland and how they are responding to that. It is interesting that, in the past week or so, there has been quite a lot of media coverage about councils doing exactly that, looking ahead, beginning to talk about some of the budget reductions that they are going to have to make, beginning to think about some of the really hard decisions that are going to have to be made, which is why everything that we have talked about so far in terms of elected member development and training and the quality of advice that they get is going to be even more important than it has ever been, because they have been making hard decisions and there are even harder ones to come. During my time in the audit committee, I was pleased to meet Mr McKinley several times there. This subject came up regularly about the continuing progress towards more and more cuts for the councils and how they could try to partner up and deliver shared services and so on and so forth. I know that Ayrshire has a joint roads service and there is good work going on across Scotland. When is the time to assess whether that is working and delivering the efficiencies that we might have hoped for as a response to these continuing cuts? I am happy to do that. I think that shared services have been a huge investment in time and resources in shared services, such as the Arborthonyd committee in the west of Scotland. In terms of tangible results in local government, there has not been very much. It would be a very interesting performance study by the commission and the other general to look at the spend in relation to shared services and what has actually been achieved. Our sense is that councils have rushed perhaps too much to shared services, rather than looking at the scope for reducing unit costs, because councils all provide the same services. You take the collection of council tax. The cost of doing that varies considerably from council to council. We believe that there is more scope in the benchmarking families for councils to say that if we are at £11 and are neighbouring councils at £4, why is that? Can we simplify and standardise our process with me to get down or to get up to the best in class? I think that we, as a commission, very much welcome the work that has been done by COSLA and SOLAS in developing benchmarking families so that councils can make sure that every pound they spend is value for money. There is still a long way to go in drilling down and looking at unit costs to see what I am trying to say is that we think that there is a lot of savings that could be achieved in reducing unit costs, probably as much as it might be gained from shared services. I think that that is where we want to see councils continuing to focus. Where, then, would you see the greatest opportunities for efficiency gains in that area, looking more internally at council costs rather than the shared service agenda? I think that there is a greater opportunity still there. I think that the back-office costs of councils, just the process of paying somebody's salary or paying a bill in local authority, varies enormously. You have got to get behind that and say why. Drive out the efficiencies, drive in the savings is something that councils need to continue to do. Cancelers keep arguing that we are all different. No, they are not really. They provide the same services, they do a lot of the same things, but they do their very differential costs, so there is a real opportunity in back-office services to become much more efficient. The chair mentioned what is happening south of the board at the moment, and I think that it is fascinating to look at how local governments are developing in England, and in particular things such as city growth deals, which Glasgow has one of now, and other cities are looking very closely at those in Scotland. The other interesting thing that we can see is councils being much more entrepreneurial, looking at how they can generate more income, as well as becoming more efficient. In a sense, that has been driven by, particularly in the big urban and metropolitan authorities in England, the scale of the budget reductions that they are dealing with, which have been of a different order than north of the border. However, it is very interesting to see how innovative some are being about investing to earn strategies, they would call it, so investing money in things and projects in some cases in start-up companies in order to generate a return that can then be reinvested in public services. We do not see much of that in Scotland yet, but, depending on what happens with the financial position over the next few years, that is something that we might see a bit more of. With that kind of innovation, inevitably, comes risk and capacity questions about how you do all of that, which, as auditors, we will obviously be wanting to keep a very close eye on. My last question, if I can. You also mentioned the skills profile of local councillors. I haven't been a councillor for many years, I can appreciate that and fully support that. I think that councillors do a fantastic job with the resources that they have. Ultimately, if we do achieve a real level of upskilling of the local elected members in Scotland, what kind of impact do you think that will really have if you are basically dealing with a diminishing budget? I mean, there's a limit to what you can do here. If you look at the profile of the local elected members, hasn't it really changed particularly much? It's pretty much part-time or semi-retired, and an opportunity was perhaps missed some years ago, congener, to really influence the type of people you might attract into local government, because the salary and remuneration for councillors didn't really move particularly much. That's a tricky subject to get into in terms of public perception of it, Mr Sinclair. Do you see that as something that might be a positive influence in this direction of travel for the delivery of local government services? Mr Sinclair? I think that's absolutely right. I mean, to some reason you get what you pay for, and it is difficult to broaden the range of people able to stand for a council. It's very difficult for somebody's employment to be able to combine his responsibilities to his employer, his responsibility to the council. What they're entitled to is reasonable time off. Now, what does that mean? There's no guarantee of adequate time off, so I think that we need to look quite critically at whether the current arrangements, including remuneration, are adequate to ensure that you're attracting a wide range of—actually, you're attracting the best possible people to stand for local government. Given that it is a big business, it's really important. It's a business becoming ever more complex. As I said earlier, there's a debate to be had about not only how effective the training is, but whether the current arrangements in terms of time off for work and what have you are adequate. There's a lot of good talent—absolutely. You don't have that particular time to devote to the tasks that they have to carry out. Cameron Buchanan, please. You keep mentioning the words as a debate to be had, particularly over certain aspects of what—Councils can get external advice. On investment, are you taking external advice, particularly on investment, because there's a debate to be had? I'm not too sure what you were saying about that. Is external advice being taken? By councils, yes. The commission did a report recently on how councils manage their borrowing and treasury management. One of the key findings in that was that it's a professionally run service and they all have external advisers to help them with their borrowing and investment decisions. We also said that it's very much seen as an officer-led and officer-driven process. It's a push and pull thing. On one hand, officers who get on and do the job well can do more to make it easier for councillors to be involved and to ask the right questions and to help them to make those decisions. I think that councillors need to be more demanding in asking for more information rather than just putting some really pretty significant decisions through quite briefly on the nod. So there is advice being taken. The commission has asked us to look now at—because that was, if you like, more traditional borrowing we looked at. The commission has now asked us to look at areas like PFI and PPP, some of the more innovative forms of funding that we mentioned earlier. I think that that might be a wee stream of work that we begin to look at over the next couple of years about how capital investment in particular is funded in other places. The council is pretty good at taking external advice on those things when they need to. You mentioned benchmarking. Are chief executives benchmarked of the councils? Mr McKinlay. They should be subject to appraisal within the council. That appraisal should involve not just the leader of the council but the leaders of all the political groups. It is often useful and helpful to have an outside person to help to facilitate that appraisal process, but chief executives need to know how they are performing. It might be an interesting question as to the extent to which leaders of council are appraised as well, but those are more issues for the individual political groups. It is good practice for a chief executive to be appraised by his peers, his political masters and, ideally, with the help of an outside person as well. That is important. Are they being appraised? Generally speaking, they are. Good chief executives would welcome an annual proposal. They want to know how they are performing. They want to know the areas where they need to improve. They want to know whether their relationship with the leader of the convener or the leader of the other groups is effective and whether there are issues that need to be resolved. Appraisal should be welcomed. There is no comparing and contrasting those appraisals afterwards in the benchmarking format that Mr Buchanan has asked me about. It is a myth that bodies such as COSLA say that we are not in favour of league tables, but councils are very competitive with each other. They want to be the best, and so they should. Clare Adamson, please. I took a couple of points. I, too, served as a councillor, and you will probably be pleased to know that the council that I served under did offer a personal development plan and training opportunities to councillors. One of those that I undertook was on board training because I was appointed to one of the council trusts. What was very clear on that training was that when I entered the board of that trust, I was responsible solely to that board. Given that we are now seeing examples of value that has been provided for roads for all sorts of areas in the extension to what they initially were, which was leisure trusts, mainly in the initial stages, do you have concerns that that democratic accountability is being lost? At the end of the day, the council is still responsible for the quality of the service and the use of public money, any public money that has been invested in the allio. However, it is really important that, if you appoint councillors to the allio, you understand their role, which is, as you rightly say, to pursue the best interests of the allio. At the same time, they have a balance of the fact that they are still councillors and there is a monitoring role for the council to play. One of our concerns is that the danger of councils setting up allios and forgetting about them is really important to monitor the performance of the allio to make sure that it is delivering the objectives that the council set out in the first place. I should have said earlier that good quality councillors can make a real difference. One of the points in our school education report was that those councils that performed best in attainment and achievement were those where the councillors played a very active role in setting clear targets to improve attainment and achievement and ensure that the performance of their council was benchmark against comparable councils. There is a real added value of councillors, the voice of councillors, the skills of councillors and holding officers to account and helping their council to improve. If I could come back to the point that you were making about the variation in cost of delivery of service. This morning, citizens by Scotland have produced their support with concerns about the charging of certain services. The council tax freeze-on was a tax that had raised considerably above the rate of inflation over the period in which it was in operation by up to 40 per cent in some councils. The report says that burial costs have increased by 10 per cent in the last year, a time when wages and restrictions on cost of living increases for council employees in those areas. Also, there is a variation across the country where similar charges in the Western Isles can be £649 compared to over £2,000 in central areas. Do you have any concerns about the variation or do you think that that is just down to the councillors to decide the charging policy in those areas? It is fair to say that councils rely on the income that they get from charges, which is £1.3 billion. There is a lot of money as a consequence of the council tax freeze. It is fair to say that some differences are understandable and justifiable because the cost of providing a service in the Western Isles as opposed to Edinburgh could be different, but I do not think that they are all justifiable. I think that it is really important that councils—we did a work series on charging—need to be transparent as to why that is costing that and be able to justify it with me, not just a figure plucked out of the air, but to justify it to the public. There is a concern about car park charges, which is a cash cow for councils. I think that councils could help themselves by explaining more clearly what the cost of administering car parking is. Does the income from that car parking go back into the road maintenance programme or does it go back into the central coffers of the council? I think that councils could do more in explaining to the public the rationale behind their charging policy. We do believe that it is really important that every council is very clear about charging policy and explains that effectively to their public. Just sticking with the financial context, I would be interested to know more about how the reduction in funding allocation to local authorities compares with the cut from Westminster to the Scottish Government. Is that a proportionate cut that has been passed on to local authorities? I am right in saying that the cut to local government, the 8.5 per cent up to 1314, reflected the cut, the 8.5 per cent cut to the Scottish Government. It broadly reflects the same proportions. It is difficult to totally disentangle, but there is not much in it. It is a totally different question to be fair. In the report, you talk about the growing population and the impact that this is going to have on council education services. Education takes up quite a high percentage of councils' budgets, 30 per cent and I think in five it is about 45 per cent of the local authorities budget. Local authorities can prepare for the extra budget and challenges as a result of the growth in the number of children, particularly in the not-to-five-year-old. I have already seen that local authorities have not looked at possible cuts to the school week to address this issue. I am thinking particularly in the context of national policies, such as the expansion of early years to maybe 30 hours a week. How can local authorities prepare for these budgetary challenges? The short answer is a great deal of difficulty, because it is not only the increase in the school population, it is the increase in the over 65s. You are going to have a 25 per cent increase by 2037, so there is pressures at that end of the age spectrum and pressures at the other end of the age spectrum. I think that it emphasises the point that Mr McKinley made about the importance of long-term financial planning, of building in these factors and making sure that you take account of them so that they do not come as a surprise. One of the concerns that we have highlighted in the report is the fact that 18 councils have not long-term financial plans, and that is a concern. There is also an interesting thing about the starting point for the discussion around some of those big decisions. I was speaking to a council chief executive recently who said, yes, our budget for education in schools has reduced, but we are still spending £300 million a year. The starting point in that council was, with his senior team in the education department, how would we spend £300 million on education in this authority, looking ahead to the five years, rather than how are we going to manage taking out whatever it was £10 million a year? I know that that is not easy, and it does not make it all go away, but there is an interesting thing for me about your starting point and your outlook on those things. If we are really seriously getting into a world of having to think quite differently about how services are delivered, I think that that is a more helpful starting point rather than trying to figure out how you manage a 5 per cent cut. The more witnesses speak, the more questions come up. I know, convener, that I have a great stick to two, but I will raise all the ones. I want to go back to the issue that Clare Adamson raised about the Allios issue. Quite clearly, you are saying that there should be democratic accountability. We had a situation recently in one local authority, where councillors were sitting and making a decision about funding being provided to an allio, and nobody was clear about who could participate in the vote to make the decision, because so many of them sat on various boards of allios. I know that there is work being done on that. When can we expect the findings on that work to be released and advice being given to local authorities about who should be making decisions after sitting on boards of allios at the same time as sitting on the same committee? I am happy to. The commission had a very useful briefing from Mr McKinley on allios earlier this year, and what we have done, I will just read this out to you. We have sent a letter to councils encouraging them to apply good practice more consistently across allios, highlighting the importance of strong governance for allios, particularly around minimising potential conflicts of interest, ensuring regular and proportionate monitoring, including clauses for review and termination of allios. We have sent that to every council leader, the chair of the audit committee and the chief executive of the council. We have also sent a guidance note to external auditors to assist in their audit of councils governance and funding arrangements with allios, drawing particular attention to the practical guidance in following the public pound. We have agreed that by autumn of this year we will undertake a review of following the public pound in conjunction with an update of the definition of allios to assist councils to apply the principles of good governance to the funding arrangements for allios and similar bodies. We also intend, through our next iteration of best value, to promote a stronger consideration of allios in our scrutiny work, particularly through the shared risk assessment, and to support training and information events with the local government community. For example, seminars and conferences involving Audit Scotland, the charity regulator COSLA and the improvement service, including references as appropriate to the commission's earlier report on how councils work. We have very much got that in our line of sight and we recognise the importance of the issues of allios. In 2012-13, the spend was £1.3 billion and it employs something like 25,000 people, so they are a permanent part of the public sector landscape. We need to ensure that there is the subject of proper scrutiny and that members understand the relationship to them. Can I ask that we get a copy of that letter, Mr Sinclair? To follow up on that, convener, I suggest that when you are sending letters like that, you mentioned that chief executives, council leaders and chair of audit or scrutiny panels suggest that in future you get those letters circulated to all elected members to ensure that everybody in the council knows what is being said so that they know it is just not a select few. As I said, they can all participate. Follow-up question ties into best value issue. We have had some discussion and I have referred the panel to my speech last week in terms of community empowerment bill where I made the point about best value not being purely monetary terms that has to be social, economic and environmental terms for many communities throughout Scotland. When can we expect that reassessment or revision of the 2003-4 guidance on best value in relation to the work that is being done? It is fair to say that we believe that there is a lot in the statutory guidance of 2003, which is as relevant today as it was then. It stood at the test of time as Mr McKinley has indicated. There are a number of areas where it does need updating, more focus, for example in options appraisal, more focus on scrutiny, some of the areas that you have mentioned in terms of engagement with communities. Our intention is that the next iteration of best value, I will not call it best value 3 or otherwise I will get into trouble with the controller, will be rolled out by May 2016. One of the interesting points about the next iteration is that it will cover all 32 councils. The proportionate and shared risk assessment approach to best value has been welcomed by councils because it was proportionate and risk based. As a consequence, there are half of Scotland's councils that have not had a best value review since 2005. That means that the public is not getting assurance about how well their council is performing otherwise. We think that it is important to continue to use the shared risk assessment that best value embraces all councils and that we can identify not only poor practice but also good practice in councils. That is our target date, May 2016. I wonder if we could go through a few quickfire questions and answers of areas that we have covered to an extent that might not be enough. You said, Mr Sinclair, that only 18 out of the 32 local authorities have a long-term financial plan. No, I said 18 don't. 18 don't, 14 out of 32. That makes it worse then. What are you and Audit Scotland doing to encourage local authorities that don't have long-term financial plans to get in gear and start formulating those plans? We, for example, convener, expect and most councils consider this report, the overview report. Similarly, we did a report a wee while ago specifically on developing financial reporting that talks specifically about this issue. Our auditors in all 32 councils will be routinely as part of the annual audit process, encouraging councils to do that long-term financial planning. We are continuing to bang the drum and do what we can locally to make sure that councils are doing that. If they still do not, what is the power at your disposal to try and get them to a position where they see sense and have long-term financial plans? That would be through the annual reporting process. Every year, the 32 council auditors report to me as controller of audit in September. That would be a mechanism through which, if councils are continuing not to plan for the medium and long term, I could either raise it on an individual basis to the commission or give it more prominence in the overview report. We do not have any sanctions as such to make them do it. Ultimately, it is for councils to do that, but there are ways in which we can increase the pressure if they are not moving on there. If you were a punter in a local authority that did not have a long-term financial plan, would you be worried about the situation? I think that they should be, but important for me is not because of what the auditors might do, because having a long-term financial plan is a really important thing. That is why they should be worried about not having one rather than us giving them a hard time, although that might help a bit. In terms of benchmarking, which we have touched upon, the committee has taken a great interest in the work that has gone on thus far. Mr Sinclair, you compared local authorities in terms of council tax collection costs. Have we seen anything out there that tells us that councils are taking cognisance of some of the benchmarking statistics that they are getting? Have we got proof that actions are being taken in certain of those areas to drive forward improvement? I think that we have. It is interesting that just a quote from the national benchmarking overview report 2013 states, The headline figure for Scotland as a whole is that councils have continued to make substantial improvements in efficiency and productivity so that the cost of delivery of services is reduced while service output and outcomes have been maintained and improved. There is evidence that they are doing reasonably. That is not to say that there is not a lot more they can do, but the direction of travel is a positive one. Mr McKinlay? I know that there is a lot of activity, so people are looking at it and using it and the family groupings are getting up and running. I know that you have already asked the improvement service in Solace for some examples of where we can then see what has happened as a result of that activity. That will be the key test over the past year to two years that the activity is building. The question now is where we are actually seeing the outcome of that in terms of actual practical service change. I think that that is the bit that we are still waiting to see more examples of. Again, it is worth making the point that, in the next iteration of best value, that is an area that we will look at in much more detail. It is certainly an area that this committee will continue to look at. A couple of questions about some of the other things that we have been focusing on of late as a committee. To what extent do you think that local authorities and CPPs are now focusing on outcomes when they are planning services and taking decisions? Is that improving? The short answer to that is yes. I think that it is improving. I think that the last national report that the Commission on the Order of General did around community planning said that there is evidence that, certainly at a local level, it is much more embedded that it was some good examples of local partnership working. There is still a long way to go, particularly around areas such as understanding the finances and how you share budgets and how you share assets. I think that the community empowerment bill is important in that context about how people are looking at assets that the public sector has, never mind just councils and how that might be better used. The focus is there. If you look back five, ten years, there is a real shift in how people operate and the extent to which partnership and collaboration is much more part of the everyday work of councils and their partners. Similarly, I think that we are still to see the real benefit of that being delivered in terms of real service transformation and services being delivered in a really different and changed way. We touched earlier upon Marshall Square and Castle Towers and have talked a fair bit today about the community empowerment bill. Do you think that local authorities and CPPs are ready for the community empowerment bill and are ready for devolving power to local people and communities? Is that one from you, chair? Do you want to go first then, Mr McKinnon? The million-dollar question. Kathy will give me a kick for this, because it is not really based on any audit evidence. My sense is that people and councils are dead up for it. At the senior level, people think that it is a good idea and it is a very big change. It challenges, quite fundamentally, a very long history of how local governance has worked in this country. It comes at an interesting time of what is happening to Mr McKinnon. I think that there is quite a big debate still going on and still to progress about what local governance looks like. Not in terms of structure but in terms of the relationship between councils and communities. The community empowerment bill is obviously part of that, but we have the commission on strengthening local democracy, the islands discussion on going as well. I think that those plates are continuing to move and shift. I really hope that they do embrace it. As I said right at the start, there is a real opportunity here that helps improve outcomes, improve services, potentially save some money and to get people engaged in it. As auditors, we are required to be professionally sceptical community and I suppose that would be my position. Mr Sinclair, do you want to add anything? I mean it, the cliché that the council closer to its communities is closer to its needs is very true. I suppose my slight worry, my niggle is capacity. You put a lot of new obligations on councils, whether they have the capacity given the reductions and staffing that they have had to take on these new responsibilities will be something that we will want to monitor and keep a close eye on. You are ready for the auditing challenge of all of this? We are indeed. I thank you very much for your evidence today. I suspend this meeting and we move into private session.