 Welcome, members of the Press and Public, to the sixth meeting of the Public Audit Committee in 2015. First of all, I will ask all those present to ensure that their electronic items are switched off or placed into flight mode to ensure that they do not affect the work of the committee. Colleagues, agenda item number one is the decision taking business in private. The Items number four and five are private. I will legadry. In section 23, report on the Scottish Government's purchase of Glasgow Pressweek airport. Before us today, we see the panel members who are here. We welcome, first of all, David Middleton, Transport Scotland, John Nicholls, director of aviation, maritime and freight in Canals, Transport Scotland and Sharon Fairweather, who is currently the deputy director of finance programme management at the Scottish Government, but at the time of the airport purchase was the finance director of Transport Scotland. I welcome panel members this morning. I understand that Mr Middleton would like to make a brief opening statement. Thank you, convener, and thanks for the opportunity to come along today to discuss the Audit Scotland report on the Scottish Government's purchase of Glasgow Presbyt Airport. We note from the report in particular the key message that the Scottish Government's purchase process was reasonable and that good governance arrangements are in place to monitor the airport's on-going business and financial performance. We have noted what Audit Scotland said about passenger growth assumptions in the purchase business plan. The business plan was commissioned from appropriate professional advisers who, in turn, based their projections on analysis from aviation experts. That assisted in informing the purchase process, which, as noted, was conducted in six weeks. We understand Audit Scotland's observation that the assumptions were optimistic, although we also know Audit Scotland's judgment that recalculation using less optimistic assumptions would not have influenced the decision to buy. The purchase business plan was only the start of a process. Since acquisition, it has been a challenge for the board and the press week management to deal with the realities of actual passenger and freight numbers and to develop a vision for press week. That was done initially through the appointment of a senior adviser to prepare a revised business plan. That work was completed in May 2014. As noted in the Audit Scotland report, the airport published its strategic vision in October 2014. That was a combination of the senior adviser's work and other factors that the airport considered may play a critical part in its future business strategy. We noted in our evidence to this committee four weeks ago the Auditor General for Scotland said that the strategic vision looks reasonable. Of course, there is no quick fix, as has been said on a number of occasions, and it is also noted at the committee last month. There are considerable challenges and that forecasting the future, as it says, is always difficult. However, there is a non-executive chair, Andrew Miller, now in place. We are in the process of appointing other non-executive directors with commercial property and aviation or engineering backgrounds. We have, as the report noted, good governance arrangements in place to monitor the airport's on-going operations. We all want to see that performance improve so that the hope and intention that the then Deputy First Minister expressed in her statement to Parliament on 8 October 2013 can be fulfilled, namely to see Prestwick as a thriving airport returned to private sector ownership at some point in the future. Ministers have not set a timescale for this, as the report records, as the long-term opportunities could take some years to take effect. We should, however, recognise the improvements in Prestwick's fortunes since acquisition. Freight cargo tonnages have grown by 32 per cent since acquisition to a rolling annual total of 12,683 tonnes. That follows cargo luxe increasing their weekly service from four to six in early 2014, combined with improved charter and Air France performance. Bristol helicopter's search and rescue base has been secured and construction has commenced ahead of a first January 2016 start date. The Trump organisation has decided to base its aircraft at Prestwick, linking with Ternbury and its other resorts. Prestwick, as the committee noted last time, has been shortlisted for the location of the UK spaceport. Prestwick has redeveloped and sold non-operation on surplus land holdings where appropriate. It has worked with local partners to recommence the Scottish Air Show after a 22-year absence. Work is now taking place to build on the success of the 2014 show. The team at Prestwick is working on a range of other potential opportunities, and, although they are commercially confidential at this stage, we hope to see some positive announcements later this year. By working at these and other initiatives, we hope that Prestwick will prosper to the benefit of Ayrshire and, of course, the Scottish economy as a whole. First, I thank you for your presentation. I have a couple of questions and then I will pass you over to other colleagues who might not have questions as well. Can you just clarify for the record who the accountable officer would have been during the process of the negotiations that took place? The accountable officer for the acquisition was myself. Can I just clarify? Obviously, it is not every day that you would find yourself in the position where you would be acquiring, on behalf of the Scottish Government, an airport. Obviously, it requires quite significant responsibility in your part. Can you say without any fear of any contradiction that you had all of the information available to you prior to the acquisition of the airport? We had all the information necessary. Can you just say that, in terms of being necessary, how would you expand on that? Sorry, I was not meaning to have a significance. We had all the information available to us, which allowed us to make the decision. In terms of the Auditor General's report, there are issues concerning the actual planning and simulating the reliance on a single operator. Can you just clarify that you had all of that information in terms of the detailed spreadsheets before you at that point? I am not sure what detailed spreadsheets mean in that context. I can maybe ask my colleague Sharon Fairweather to expand on the spreadsheet's point. In terms of understanding that there was a single operator, I think that that was very clearly understood. I think that the Audit Scotland report referred to issues around the modelling of that. I am not sure, whilst we accept as a statement the fact that we did not model that particular aspect, we were very clear on our minds that we understood it. In terms of understanding the consequences and significance of there being a single operator, we were perfectly clear on that. I need to think that the Auditor General in her evidence a few weeks ago recognised that it was ultimately a yes or no decision. Would you mention the issue of spreadsheets in relation to some particular issues? Perhaps it would be best for me to invite Sharon Fairweather to say a few words about that. During the acquisition process, we worked very closely with the advisers alongside us, both during the due diligence and preparation of the business plan. We were very clear around the information that they were using as their source information. We were clear about the assumptions that they were applying to that, and we were very clear about the outputs from that. We had that level of detail in enabling us to do our assessment. The only aspect that we did not have was the actual spreadsheet models that they used to produce those outputs, based on the inputs that we had agreed with them and the assumptions that we had agreed with them. I appreciate your position on what the Auditor General is setting out. As we have discussed previously in evidence sessions with the Auditor General, I just wanted to see clarity that you said that you had all the information that is necessary to be available to you prior to the acquisition. Do you think that, following the acquisition, there is information that could have been sought during that point that should have been sought? I think that you are always bound to know more about assets than the operation of a commercial operation once you are in possession of it and once the management is, in a sense, directly accountable. I think that you can always be better informed, and that is almost inevitable when you take over. As you say, it is not every day that we do this kind of thing. However, there is nothing that we have learned since that leads us to revisit or reconsider reflect on any part of the decision-making process. Parliament had clearly expressed general satisfaction and approval of the intention and principle that the then Deputy First Minister announced on 8 October 2013. From then on, we had a process to undertake, and, although there may have been circumstances where we could have gone back to ministers, there was nothing that was subsequent. We knew that it was a challenge. We knew that there were difficulties—after all, it was a statement of fact—that it had been in commercial difficulties and had not been making money. That is why its owner was putting up for sale. That is why it had clearly not proved attractive to another commercial purchaser. We knew that there were challenges. Obviously, you will learn more once you are in possession of being the owner. However, there is nothing that we have subsequently found out or learned about the business since acquisition, which leads us to reconsider any aspect of the decision-making process. To the record, I welcome John Scott to the committee to understand and note that John Scott has got a constituency interest in the airport. Mary Scanlon. I am sorry that I was late. I was in another meeting. Forgive me. Thank you, Mr Middleton. I think that we all want press week to be a thriving airport. You mentioned the freight. There was a very welcome increase in the airport's freight volumes and also a significant increase in Glasgow airport for freight. I really wanted to concentrate or focus on the passenger numbers. In the last year, passenger numbers fell by 15.2 per cent. That is obviously a significant fall. I note in the Audit Scotland report, page 26, that, despite the fall of 15.2 per cent, you are projecting a 10.2 per cent annual growth rate in passengers, but you have revised that to 6.5. We have a fall of 15.2 and a revised estimate of 16.5. I wanted to ask on the back of what the convener was saying. I understand that the revised business plan passenger growth forecasts are still higher in each of the five years compared to the Department of Transport's UK aviation forecasts, which I understand are between 1 per cent and 3 per cent. That is quite a difference between your 6.5 per cent. I also understand that the Scottish Government assumed higher passenger growth on the advice of its aviation experts. Is there a difference? Where did you come up with 6.5 when the Department of Transport's UK aviation estimated between 1 per cent and 3 per cent? I hope that that is helpful to the committee. I think that there are always sources of general projections on the aviation business. The aviation business is an uncertain business. It is a highly competitive business. Things change all the time. Forecasts and projections will be made over a number of years. We knew that there was a much smaller number of passengers than would ideally have been the case at Prestwick. Therefore, the percentage impact of the Ryanair adjustments in their service pattern in 2014 had an impact, and it makes figures look over a short period of time very difficult. I do not think that when we project numbers or we make use of projections, we are saying that those are exact and precise predictions for all services and all circumstances. We are looking at the generality of the aviation industry, we are looking at the generality of projections. I mean that I know that Edinburgh's growth, for example, is above the DFT's projected growth. That does not make DFT wrong because DFT's assumptions will be put in a general context for aviation across Britain. Prestwick is a particular airport, and just as the loss of certain services makes a big percentage reduction in its business, we all hope that it is successful in attracting some new services and some route development. That would have a percentage increase, which might be quite high over a short term. I think that it is always difficult to look at those percentage assumptions and compare them over a very short period of months, because inevitably some decisions will have a disproportionate impact. We hope that there is scope for building business at Prestwick. We must all hope that. We hope that those additional route development will come along. Not that passenger growth is the sole generator of revenue in Prestwick, but passenger services are an element of Prestwick Airport's income. Indeed, it is probably an unusually small element compared to some other airports. We were satisfied at the purchase point that we could see a path for this airport to return to prosperity. However, we have never said that that would be easy. We have never said that it would happen quickly. We have never said that it would happen in a short space of time. There is no quick fix, and it will be a challenge over a number of years. However, I hesitate to suggest that one set of projections is something that we base all our consideration on. We are concentrating on helping the board and the management to develop their vision and to look at all the business opportunities that exist to boost revenue in Prestwick Airport. I can only base my assumptions and my questions on the information that I have in front of me and the information that I have in front of me in the Audit Scotland report. There was a 15 per cent reduction in passenger between 2013-14. 29 fewer flights a week by Ryanair. I also have information that the Department of Transport has projected that annual growth is between 1.3 per cent and that your revised annual growth is down from 10 per cent to 6 per cent. If you will forgive me, Mr Middleton, I am not making up figures. Everything that I have is here in front of me, and I would be failing in my duty as a member of this committee if I did not ask you questions. Can I ask you again, were your projections, or why were your projections, three times higher than the Department of Transport's projections? The projections that were in our purchase business plan were part of the due diligence that we commissioned. It was not a sole piece of work just based on projected passenger numbers. It was about a whole range of financial and commercial matters concerning Prestwick Airport. The professional advisers and Audit Scotland whilst they made a number of comments in this have not suggested that we did not appoint appropriate professional advisers, which provided perfectly credible professional advice. I wonder if I could ask Sharon Fairweather to add a little bit on the business case assumptions. Yes, certainly. When we were looking at the passenger assumptions, as David mentioned, we looked at the growth in the passengers that we had at that time, but we also looked at the potential for route development and what that would mean for bringing extra aircraft into Prestwick. As David said, if you bring one extra aircraft into Prestwick, you then get a step increase in passenger numbers. I think also when talking about the DFT comparison, as David said, that covers the whole of the UK, including things like Heathrow, which is a very large airport and which is very capacity constrained, and therefore the potential for growth that Heathrow, in the absence of an extra runway, is constrained and that will have an impact on the overall DFT numbers. So we looked at the overall DFT numbers, we looked at the economic outlook, we looked at the passengers at the moment, we looked at what Prestwick is capable of, Prestwick has significant capacity, we have no capacity constraint at Prestwick at the moment and therefore there are opportunities there to attract additional airlines and we looked at the type of airlines that we would wish to attract there, and that's all the type of thinking that went into the work that we did with the professional advisers on looking at the passenger numbers going forward. But also if you look at the report, your numbers that you quoted are quite correct, but you'll also note from the report that post the first five years, our assumed growth in passenger numbers beyond that are below the projections for general growth that you're quoting from the DFT. So we are looking at a step change in the first five years with renewed management, renewed focus, renewed effort in increasing the passenger numbers at Prestwick. Are you content in the first five years, are you confident that you will meet the annual passenger growth of 6.5 per cent with Mr Trump and other operators coming into Prestwick? I think predicting the future and being absolutely confident, I mean if it was that simple then a commercial operator would have purchased it. We're saying that we believe on the basis of the opportunities that exist. If we can have an energised management with a well-led board at looking at all the opportunities, we believe that it is achievable. I think that there's a difference between going into a proposition that you believe is achievable and then stating as a fact that it will happen. I mean, I don't have the capacity to state as a fact that it will happen. What I believe is that we have put the infrastructure in place. I think that we've been, it's been commented on that the governance arrangements are there. We're in the process of recruiting non-executive directors and we hope that, with energy and ideas, things are possible. I think that that's the key thing about Prestwick. There are clearly opportunities there, opportunities that are perhaps not in the mainstream of the other big airports and, if realised, then it can have a success in a place in Scotland, but we can't absolutely predict the future. I wasn't asking you to predict the future, but I did ask you if you were confident that your projections were realistic, so please don't try to put words in my mouth that I didn't ask in the question. I asked if it was realistic. I think that that's a reasonable question and I would have hoped for a reasonable answer. Okay, well, I'm sorry if that didn't mean that at all. All I was trying to do was to help discuss the context in which all this is taking place. I didn't expect you to be mystic mech, but I do expect you to be reasonable with the questions that I'm asking. Indeed, well, I hope that I'm always reasonable. I have confidence that those are credible projections. We are confident that the vision for Prestwick is credible and achievable. Whether it will be or not, I think, is a fair question to say that it remains to be seen. To come back to the point of purchase of the airport, before the Government started negotiating the purpose, what options did the multi-agency group look at prior to that? Why were they not considered viable? Perhaps John Nicholls, who I know is a regular attender at the multi-agency group, could say a word about that. Certainly. The multi-agency group was convened initially about a year before the acquisition of the airport. It was led by South Ayrshire Council and included a number of agencies, including Transport Scotland and Scottish Enterprise. The initial strategy for the multi-agency group was to try to secure a good investor in the airport, a credible purchaser from the private sector. That was part of our activity all through the process. There are various Government support that we identified that we could offer to a good investor. We also looked at options around supporting the current owner. Those were quite similar to those for supporting a new investor. The other options that we considered were looking around some joint venture between the public and private sector. We also considered various options for public ownership, including local authority involvement, as well as outright Government ownership. The reasons why those other options did not transpire is that Infratil, the vendor, was unable to find a private sector purchaser on the terms that were acceptable to the vendor, and they had made a strategic decision to divest themselves of their various airport interests in the UK and Europe. Those options were ruled out. The other options were not on examination, so that did leave the multi-agency group and Scottish Government with the remaining option, which was the one that was taken up in the end. At the time of the purchase or before the purchase, there was no great quantifying of the economic benefits to the area around about and to Scotland. Has there been any calculation done on that up to now on the economic benefits of continuing the airport? I think that the economic benefit was certainly described and considered in the business case in the sense of the number of jobs involved in various levels and, as I think the Audit Scotland reports, the gross annual value to the economy locally. John, is there anything further to say about the economic benefits in the area? What we do know, as David has mentioned, and as the Audit Scotland report identifies the significant number of jobs associated directly and indirectly with the airport and an underlying above average unemployment rate in Ayrshire at the time of the acquisition, is that the multi-agency group has been reconfigured into another stakeholder group, which again is led by South Ayrshire Council, as well as including the Government agencies, the public sector agencies and the other Ayrshire local authorities. It also includes the airport itself and a number of private sector bodies associated with the airport. That group is undertaking a body of work aimed at putting Prestwick in the right place in terms of the overall economics of Ayrshire and Scotland as a whole. The airport business itself is undertaking its own work in terms of economic contribution and viability, as was being discussed with the airport yesterday at its most recent board meeting. Obviously, some of that is commercially confidential and is yet at an early stage. In the run-up to the acquisition, it was clearly identified that the GVA numbers for the airport as a whole were substantial around £61.5 million to the Scottish economy as a whole. There were some work done prior to acquisition on that. Given that it is quite a unique situation taking on an airport, was there any post-purchase evaluation of the process used to determine if there are any lessons for us to learn in the future for any similar large acquisition? Should it come about? The Audit Scotland report provides some context to that. I am glad that the Audit Scotland report, whatever comments it offers, has nonetheless said that the process was reasonable and that the Treasury's checklist of issues for the business case was generally followed. Given the short period from the decision to acquire, to completing the acquisition, I think that we feel a certain degree of satisfaction in the amount of process that was undertaken. Sharon, you could outline a number of the tasks that had to be completed. Those are some of which might be relevant to other investments but others of which are relevant purely to an airport, which has particular characteristics. To put into context the work that we undertook in that six-week period from the time of the then Deputy First Minister's statement, we procured and mobilised the advisers, we completed the due diligence, which was financial, legal, real estate, tax, insurance. We developed the business plan, the acquisition business plan, and we developed the business case alongside that. We undertook the overall negotiations with the seller on the high-level aspects of the sale, particularly with regard to the significant debt write-off that they undertook as part of the acquisition. We then undertook the legal negotiations, which is around the sale and purchase, including areas such as indemnities and liabilities, and then covering the debt write-off. We undertook the negotiation of the tax covenants, the interim operations to enable us to continue operating the airport without a blip, transitional arrangements with the other airports. They had a number of arrangements across several airports that we had to work with in transitional arrangements. We also secured all of the operational issues, so we ensured that the airport was properly insured from the point of acquisition, that there were bank accounts set up and running with money in there to make the payroll the day after acquisition. We did all the negotiations with the Civil Aviation Authority to enable us to continue to operate the airport without it having to stop for any period of time. We ensured that things like gas, electricity, contracts etc. were transferred so that the airport could operate throughout that period. That was the body of work that we undertook in a six-week period in order to secure the acquisition. It would be fair to say that I do not think that anybody in an operational sense would have noticed the handover from the infertile owners to our ownership on the day of acquisition, because it all ran completely smoothly throughout that period. It is an impressive list. How big was the team working on that? In the Scottish Government, it was relatively small, but we had a body of advisers that we worked with. We had a firm of financial advisers, legal advisers, advisers helping with the business plan, and we had insurance advisers on board. The financial advisers provided tax advice alongside that. We had a small internal team, but a significant resource attached to that. Before I bring Colin Keane in, can I just clarify, because you have set out quite what you have termed as an exhaustive list of the processes that were followed. Do you accept the Auditor General's report that is before you today in terms of recommendations and findings? The Scottish Government's purchase process was reasonable, but the business case could have included further evaluation. Do you accept that as well? The question that I asked earlier was what could do anything further been done. You have advised us now that you have accepted the Auditor General's report, but the Auditor General advises us here that further evaluation could have been carried out despite the exhaustive list that you have set out. I think that if we had had more time, we could have carried out more evaluation, but, as David mentioned earlier, we undertook the evaluation that we needed to take to provide us with the information that we needed to make a decision. We did that, and that is why the report confirms that our process was reasonable, because we had the information that we needed to make a decision. Can we clarify that there is a significant risk attached to taking a decision in such a short time? Not carrying out further evaluation was potentially placed in the public process at substantial risk. However, I am making that point, but I am also asking that, at the same time, if you accept the Auditor General's report, you have to accept the fact that further evaluation should have been carried out. I am just asking a straight question for the Accountable Officer, Mr Middleton, to accept the Auditor General's report. If you accept that further evaluation should have been carried out, you do accept it, but if you do not, you do not accept the report. We do accept the report. If I read into the Auditor General's report, certainly when she outlined certain aspects of the business case, it said that it should be clearer. I think that there are issues in the business case that could have been spelled out to the Auditor General's satisfaction. I mean that I am accepting that as a fact, and we could have said more about this and more about that. Do I accept anywhere that anyone has suggested that there was something that we could have evaluated that would have led us to take a different decision or to see the decision in a different light? I do not think that that is what the recommendations are saying. There are aspects of the writing up that could have been different. We have to be clear here. You are not here to interpret what the Auditor General's report actually says. You are entitled to your opinion on it, but I think that it is for the Auditor General to clarify that. If he accepts the report, the report says that further avail issues should have been carried out. I am not trying to lead you down a particular path, so I am just asking if he accepts the report. I think that it will be important for the committee's work to clarify whether you think that further avail issues should have been carried out. Yes or no? Yes. I accept the report. Colin Kear? Can I ask one more thing on that? It is really in case of the time aspect that you had from the point where you were tasked to look at the business case or for taking over the airport. Given the fact that it is six weeks since Colin Beattie, who obviously has a background in finance, is a little bit more than I do, it did seem considering the amount of work that was done. It was done in incredibly quick time compared to the acquisition that said that the Edinburgh airport, for instance, went through, which was done over a period of many more months than this. Is it reasonable, without going too far into this, that the work that was done up against a time limit from Infrotel, from what I can gather? Was it as much as you could do, in terms of getting the information and the work process started, the due diligence, etc. Crammed into that six weeks. Was it enough time to do that, or were you hamstrung with the fact that Infrotel had given you a time limit? You had enough time to get the information that satisfied us, but Sharon did a lot of those commercial negotiations, and I'll ask her to elaborate. One of the advantages that we had with this acquisition was that the advisers that we secured to complete our due diligence had been working on the acquisition of the airport for some time for other parties. They weren't coming in at the start of the six weeks cold, they had already done a very substantial body of work around the financial and legal aspects of the business before we came into the process. They had actually been working for a number of months, and we were just able to take advantage of all of that work. You were absolutely right, in the normal course of business starting cold, that you would need more than six weeks, but we were fortunate that a significant body of work had been undertaken by the external advisers on the business, including the advisers that were helping with the development of the business plan. They had actually been working with the airport for some time anyway, so we were able to take advantage of that work. In terms of the business case that was put down, looking forward, in particular about the reliance on passenger numbers with Rye area, we know that it is an incredibly competitive business, the aviation industry. Obviously, the two main competitors, if you like, are the two heavyweights in the area of Glasgow and Edinburgh airports, as competitors. When we are coming down to the projections and knowing the fact that Edinburgh has just been a couple of years into new ownership, Glasgow has found itself in new ownership and there is now going to be a health or leather battle to get new routes into both of those. Was that taken into consideration in terms of the business plan for Prestwick? Obviously, geographically, that is a disadvantage, hence the reason why we are where we are at this moment in time and the reliance on one operator. Obviously, you are not going to be able to tell us who is being talked to to perhaps bring new routes in. That is obviously commercially sensitive, but in terms of diversification within what has actually done at Prestwick, how confident are you at this moment in time? I know that there have been some good announcements that you made earlier on about the people who are starting to go in, but how confident are we of seeing a stabilisation for one thing of the business and moving it on to a stronger footing? I might be asked John Nicholls to say a word about that in a minute about looking to the future, because, as John mentioned, he was at a board meeting yesterday. I think that I can only repeat. We have seen some good signs, for example the freight tonnage. We hope that once the team is fully in place of non-executive directors, the management will be motivated. Prestwick is of different size of an operation to Glasgow and Edinburgh. There is growth in the wider market, so it does not all have to be even some game. We believe that there are areas that Prestwick can pursue because of its unique characteristics. As I said earlier, there is a challenge. As the Deputy First Minister, the then Deputy First Minister said on a number of occasions when reporting about Prestwick, there is no quick fix. It may take a number of years, but we are confident that there is a credible path for Prestwick if some of the key unique opportunities for it can be exploited. John, would you like to add? Certainly. As has been said previously, Prestwick is not a typical airport in the sense of Glasgow and Edinburgh. There is quite a range of activity at Prestwick, as well as the passenger operation and the freight that we have heard about. There is also the search and rescue. There are fixed base operations, a lot of military activity that is catered for, and there is quite a lot of non-operational land, which is also a potential source of revenue. That said, it is a challenge and, as the Auditor General's report recognises, there is going to be some years before there is a turnaround. However, in terms of how we work towards that, as was referenced earlier, the airport management team produced the strategic vision document on 31 October last year, largely based on the stage 2 business plan. The Auditor General has mentioned that that is a reasonable document. At the Prestwick board meeting yesterday, I should clarify for the committee that I remain a non-executive director of the holding company at Prestwick. The board continues to work on the implementation of the strategic vision and the management team are energised towards delivering that. We also have approved the budget for next year, and that includes a lot of detail on the revenues and costs associated with the business going forward. Over the next few months, the airport team will be developing their corporate plan, which will cover a longer period and will, again, a number of years, be looking at the various opportunities that exist to generate additional revenue and where possible, to increase efficiencies. There is a plan in place, as the Auditor General mentioned. It is important that we tie all of that down and have a good strategic approach to the challenges that lie ahead. We are satisfied at this stage that there are good governance arrangements in place and the plans are being developed to take the business forward. I was just really confident that the loan agreements are agreed over the period mentioned in the Auditor General's report that the business plan is robust enough that there is not going to be a default in any of those loan agreements. We are confident of that position at the moment, yes. Davish Scott. I wonder if I could go back to the earlier point about the reason for the purchase process, which I accept in terms of Audit Scotland's findings. One of the aspects that Audit Scotland found is that the business plan did not model the impact or likelihood of the reliance on Ryanair as its single passenger carrier. Would you like to give some context to that particular point, please? I accept that that is a comment and we accept it. I think that it is still difficult to see what modelling would have told us that it is not quite obvious in the sense of, as I think Mr Dgeon and others have said in Parliament, it was quite clear that it was either we purchased it or the airport would close. That was a stark choice. Now there may have been a better way to have modelled it in that sense. Clearly, the reliance on one operator was an aspect of that, but we could perhaps have set that out differently, but I think that we were very clear on the circumstances and were very clear on the choice before us. Totally. Did that make the point or doesn't that make the point that the convener was driving at earlier on that the business case, it would have been stronger as a business case had it explained what which other options were considered and the reasons for rolling it out for that very reason? If we could have explained some of the issues, I think that, in a sense, there were perhaps aspects that have been considered in the MAG process prior to the acquisition process, so I don't think that they were unknown. Clearly, if it is an aspect of explaining and writing up then that could have been done, I accept. I accept the point about Ryanair, but that would illustrate the degree of risk that there was by taking the decision to nationalise the airport in that sense because of the reliance on that single carrier. This is where I would never seek to distance myself from the reporter and reply, I'm not accepting the report and I've been chided already in interpretation, but it's not that we were unaware of the risk. If we have lessons to take on board about how better to articulate the risks and better explain the risks and put them in a context which others will find helpful, then we will do that. I don't think that there was any suggestion that we were not aware of risks and that the risks were not quite stark and quite clear, which is really what I'm trying to get at. Absolutely. Thank you, I think that that's very fair. Could you detail for the committee the exit strategy for Transport Scotland and the Scottish Government, or is it too early yet to have a clear idea of what that exit strategy looks like? I assume that it is the intention to pass the airport back to our commercial operator. That is the intention and I think that ministers have said that in Parliament on a number of occasions. The hope is that this can return to the private sector. They have not put a timescale on that. We hope to see the vision realised, we hope to see Prestwick exploit its unique opportunities, we hope to see it become profitable in its own context, in its own particular niche in the market and at some point in the future, once that's been established and I'm not going to put a timescale on that, ministers wouldn't put a timescale out, we're not going to do it, then the hope is that it would return to the private sector. The business plan going forward that Mr Nichols mentioned earlier on in the context of the board doesn't yet have a number or sorry a year at when you expect the airport to break even and therefore ministers would have that option available to them? I don't think that we'd like to put any particular timescale, whatever may be contained in commercial confidential plans, it is a challenge and there is a hard road to walk, we understand that. Therefore the financial exposure to you as Transport Scotland to the Government is at this stage, I don't want to put pejorative language on the table but it is open-ended that sense because of the answers that you've just given. Well open-ended is maybe a pretty word in my mouth on this occasion, I think we've quantified the investment needs in terms of bringing certain things up to scratch and we've looked to potential investment needs in terms of exploiting Prestwick's particular assets. I don't know whether Sharon Ordon wants to comment further on the totality of potential loan investment. I don't think that we'd like to use the term open-ended or we do recognise the extent of the commitment that is implied. I think that we're very clear that we need to continuously review it so that when each budget is set that we are aware that it is based on forward projection business plans that continue to meet the needs and also meet the market economic investor principle that we are undertaking with this airport, so that is continuously under review. So the final level of loan funding that will be required before it becomes self-sustaining may well change from what's in the report but we will be continuously monitoring that to ensure that it is viable and justifiable. It is public money and it is audible by definition. I mean you will correct me if I'm wrong with the Government's commitment to provide £25.2 million on loan funding so far but, again, from Audit Scotland's report, there's no limit on the overall loan funding it may have to provide. I'm just trying to gain some kind of understanding as to what the potential commitment of the taxpayer is to the on-going ownership of this airport. I think that a total for the potential loan funding up to 2020-21 is what's been provided. I'd walk figure that with that. Will you forgive me? That's the number that you've quoted. £25.2 million up to 2021. By that point, we would be expecting the airport to be becoming profitable, to be breaking and then becoming cash profitable. You would be able to sustain it soon. I just want to put that on the record. I appreciate that. If I ask one last question because Colin Keer made me think of it in his early question, have Glasgow and Edinburgh airports made representations to Transport Scotland about I think Mr Middleton said earlier on that the airport was trying to track new routes, new development, and I understand that. I'm not asking you to say what those are, but have the private sector airports asked or made representations to Transport Scotland about that? I think that both airports have made concerns known to ministers. To a degree, they're in the public domain. Clearly, if they believed their own businesses, their highly competitive businesses were already being highlighted, and clearly, if they felt their businesses were being affected, then they would consider their own positions. I think that they understand ministers' context, although they can speak for themselves, but they nonetheless have a clear commercial interest in aviation business in Scotland. I want to go back to the brilliant question that Mary Scanlon undertook. It's really just a supplementary question, first of all, and it's to Sharon Fairweather. Mary Scanlon was asking questions regarding the business plan figures being higher as compared to the Department for Transport. It struck me in terms of the Department for Transport. It's not that I haven't looked at their reports on a regular basis, I hasten to add, but in terms of the work that they undertake, do they have any waiting placed against any of the larger airports in the UK? We would have to go back into the report and pull out through the information that they provide on how they provide their numbers. I don't have that. I'm afraid that I don't have the information to hand here. Certainly, it was yourself that brought in Heathrow Airport into the discussion ever on, and it struck me in terms of whether that would be something that they would undertake when looking at all the airports across the UK. It's possible to write to the committee with that information at the very useful. The other questions, convener, are just regarding the situation regarding the non-executive chair. The non-executive chair is the same person for Holtco and Pall. Does that have an effect on how the Holtco board is overseeing the airport on behalf of the Scottish Government? Audit Scotland has already said that the governance arrangements are good, but I will ask John Lennon, who is closer involved with this, to elaborate. Thank you. The intention is to establish a two-tier governance system. The Holtco board that was established for the purposes of the acquisition and its relationship with the subsidiary companies reflects two things. It reflects the advice that we were given around how these things were best done from our professional advisers. It also mirrors the arrangements that were put in place by the Welsh Assembly Government for the purchase of Cardiff airports a little while before. In terms of the duality of the role of the non-executive chair, that flows through from that arrangement. To be clear about the two different roles of the Holtco board and the operational board, the intention for that structure was to create an arm's length arrangement for Prestwick so that it can operate and be seen to operate on a commercial basis, without being under the direct day-to-day commercial direction from central government. The Holtco board is there to make that connection between the strategic approach that the Government takes, but to stay away from or keep a separation from the commercial and operational aspects that the operational board undertakes. The non-executive chair will be common to both, but the new non-executive directors that we are recruiting will sit solely on the operational board and not on the holding company board. That follows the advice of the senior adviser who produced the stage 2 business plan and also looked at the corporate governance arrangements and those recommendations that he made have been taken up and followed through in the way that I have just described. That is very helpful. In terms of the situation in Scotland and Prestwick, it has been a fairly recent development. However, you mentioned Cardiff airport. Is that the structure still in place at Cardiff and has there been any changes there? I am just thinking in terms of what happens at Prestwick and how that develops going forward. I would not like to comment on Cardiff structure. John, do you have any knowledge of Cardiff? I do not have any first-hand knowledge immediately of the Cardiff structure, but I know that Andrew Miller, the non-executive chair of Prestwick, has had several discussions with his counterparts at Cardiff on their experience, so there is some learning to be had there. A couple of other questions. First of all, in terms of the business case going forward, Mr Middleton, in his opening comments, listed a number of positive aspects—turnage and Bristol helicopters, etc. He also mentioned the issue of the space port of Prestwick being in the running for that up to now. In terms of the business case, if the space port did not go to Prestwick, would that have a negative effect on the actual business case? If it did not go there, would that affect the Scottish Government's ownership of the airport? There are a couple of questions in there. In terms of the business case to purchase, it was not dependent on the space port. Looking at Prestwick plans going forward, there are a number of areas that they want to exploit. I would not like to say that, if they did not get the space port, that nullifies their vision for exploiting their assets. John, would you like to say a little bit about how the space port figures in the future plans of Prestwick? Of course, they cannot assume any guarantees about it. Could you also deal with the fact of whether, if they were successful, as I am sure they would be pleased to be, whether that would have any effects on our relationship with Prestwick? With permission, yes. First of all, to expand on what David has just said, the space port proposition was not known at the time of acquisition, so it emerged last year. In terms of where we are now, Scottish ministers' priority is for the space port to come to Scotland, and there are three remaining Scottish airfields directly in that short list of which Prestwick is one—Cambletown and Stornway—are the others, with a role for Lucas envisaged possibly by the UK Government. Clearly, it is for the owners of those airfields to decide whether they wish to go forward with a bid to the UK Government. That bidding process is now under way, and the UK Government has indicated that it is going to make decisions around it in October. There is a bit of process to be gone through as part of that, in that the UK Government is going to be having some briefing sessions with the airfields who have expressed an interest. Of course, there are two others in Cornwall and Wales who are part of that. It is probably a little bit too early to say exactly what the economic impact of the space port will be to any airfield that is successful in becoming the UK space port. That is something that the airport management team at Prestwick are looking at in conjunction with colleagues from the stakeholder group, which I mentioned earlier on. Until we get a little bit further down that road, it is difficult to give any firm assessment of what the impact will be. What the UK Government has said is that it would provide an anchor tenant for the successful space port bid. The anticipation would be that there would be a substantial impact over the longer term, a positive impact in terms of what that would mean for the airfield that was selected as the space port. The business case is not dependent on the space port going to Prestwick. However, there is one final question and it is a point that was raised earlier on as well. It is not every day that somebody takes over an airport, particularly a Government that does not happen on a regular basis. With that being the case, in terms of the expertise that the Scottish Government actually had at the time and also has now, was there much in the way of expertise there to assist and facilitate the purchase of Prestwick Airport? Since then, has there been an increase in people being brought in with expertise to ensure that Prestwick Airport is successful? A lot of the expertise required for the process of exposition was not necessarily aviation-related. I think that Jarn, of course, is a charter accountant with external private sector experience in commercial deals. In terms of acquisitions, we had some expertise and where we needed legal and financial expertise to carry out aspects of that, we were able to buy that in. Similarly, we were able to access aviation advice that went into the business plan. Yes, you are right. It is not every day that we do that. We have transport modelling experience and project management experience. We were able to draw on some of our extensive project management experience and put together the team that worked on the acquisition. That was one reason why, very early after acquisition, we sought the input of a senior adviser who knew more about aviation and that is why we have since recruited a chair and are currently recruiting non-executives. However, it was clearly, in the broadest sense, a learning experience for many of us. Thank you very much, convener, and thank you for allowing me to attend this committee. I welcome the fact that the Audit Scotland report recognises that Prestwick is a strategic infrastructure asset that supports 1,800 jobs locally, which contributes £61 million to the Scottish economy, supports the MRO hub around it, as well as having defence capabilities and its importance to NATO. Can I just ask of the diversification options open to Prestwick? Which do you see as the ones most likely to succeed and which would you recommend constituency members such as me to pursue in terms of our representations when we travel around the country? For example, the spaceport? I think that all the ideas have their own particular story and I certainly wouldn't like to rule any in or rule any out at this stage. John, from your experience of the board, do you have any thoughts of where they would most welcome Mr Scott's input? I know that Mr Scott's interest and input has been appreciated by the various parties over a long period of time, so I think that more of the same would be my response. It is important that the stakeholders and elected members continue to be engaged with the airport senior management, which is probably the best place to advise you on exactly how your input can assist. I am conscious that there have been a number of briefing meetings between the airport management team and local elected members, and I would suggest that those continue. I just want to pursue Tavish Scott's question regarding your exit strategy, which, in the Audit Scotland, should be well-defined and regularly reviewed. I wonder, quite specifically, if a buyer were to emerge on the medium term, would the Scottish Government still consider accepting an offer from such a buyer or is the airport no longer for sale? I do not think that we anticipate buyers because I think that the nature of the market and the nature of the challenge around Prestwick would be against the run-of-play to expect someone. If someone were to emerge, I cannot imagine that ministers would expect us to turn anyone away from conversations, but I think that the issue to clarify in any conversations is what the intentions of the buyer would be. Clearly, there is no point in selling it if a buyer was going to exploit the assets in a different way and did not retain the core business. I think that I would say never say never, but it would seem unlikely until we can reach a different position with Prestwick, which is what we are all working towards. It would seem unlikely that that scenario would unfold. Over the course of the last evident session and this one, there are a couple of things that we all have in common, and that is an understanding of the huge significance of the Ayrshire economy in terms of jobs and the potential of Prestwick airport as a strategic asset for the Scottish economy as a whole. However, in the context of the loan amounts, I wonder if you could maybe just talk us through some of the timelines of that and where they have changed and why, what the reasons might be behind changes to the amount. I wonder if I could also just clarify in terms of the commitment or the need for loan. I think that Sharon Fairweather said that I wasn't clear if it was the commitment or the need up to 2021, but it was 25.2 million. However, the Auditor General in her report at paragraph 52 says that the loan funding requirement is 39.6 million. Are you saying that there is the difference between those two figures that there is going to be loan from someone else or that the loan that you understand is going to be required but no one is committed to it yet? No, I think that I'll ask Sharon to explain. I think that there may have been a figure put in a question. We need to go back over the record, which I think alluded to the 25. I think that Sharon at that point confirmed that, but it may be that, in fact, you're correct, Mr Smith, that the numbers here are perhaps the ones that we should be speaking to. However, I think that rather than getting into the difference between figures, it might be simpler just to let Sharon say a word about the loan issues overall. Yes, thank you. The loan is required to cover several things. I think that the Auditor General has very usefully set some of this out in the letter subsequent to her appearance a month ago to cover on-going losses until such time as the airport becomes revenue neutral, revenue profit producing, to cover backlog maintenance. There was a need to do a different level of maintenance at the airport to bring it up to a better standard and to do some capital investment to generate further returns going forward. The anticipation is that, over the next few years, as the position of the airport improves, it becomes first of all profitable and then it becomes self-sustaining. It generates enough cash not only to cover their costs but also to cover their capital expenditure, at which point there would then be the position to start repaying back the loans. The acquisition business plan and the subsequent business plan set out the projections for the timescales for that loan funding. The loan funding will peak over the next three, four years and then we would expect the requirement to reduce and then it will become cash positive and they will be able to start repaying the loan. That is certainly what is anticipated. As we were saying with the business plans going forward, the requirement for funding is continuously reviewed to ensure that whatever further loan funding that we are putting in, we are still comfortable that we will get the loan funding back in the log of term based on the business plan. All of this is public money, so I think as Tava Scott said, we need to follow the public pound in that sense. An element of that money in terms of covering the operating loss has made the decision to run the airport. That is not too controversial, I do not think. It is essential maintenance to keep the airport going. I do not think that that would be particularly controversial. Not that the third amount would be controversial, but I suppose that is probably where we would have the most interest in terms of where investments are made. We would want to be clear that there are investments that are genuinely based on an expectation that there will be some recoup from that at some point. How do we have confidence in those elements of money that that is a very robust process? There is a bit of a danger when you have public money just standing behind something that we simply say, let us explore everything, let us do everything that we possibly can to grow this airport. With the best will in the world, the growth does not happen, but it was public money that stood behind it and it was not a hugely robust process. How would you reassure me that that is not the case? We are aiming to operate the airport as a commercial concern and therefore we are charging a rate of interest appropriate to that. However, in terms of the governance arrangements, so that we are not just passing on loan monies, we have a process of approving annual budgets and corporate plans, and John, perhaps you could elaborate on that? Yes, as I mentioned previously, the governance arrangements that we have put in place and which all its Scotland has said are reasonable are designed to continuously monitor that business performance and financial activity. As I said, that happened very recently, just yesterday, in terms of looking at budgets going forward, and we need to keep that under continuous review. I would also refer back in terms of the public money and accountability points that, as the Deputy First Minister, as she was then said to the Infrastructure and Capital Investment Committee, there have been a number of regular updates to that committee, and I think that she envisaged that that would continue over an indefinite period or certainly for the foreseeable future. Obviously, that will provide an opportunity to examine the funding streams and the loan arrangements on an on-going basis. As part of those governance arrangements, the management of the airport are required to provide the board with business cases around the capital investments that they wish to undertake, and those business cases are scrutinised by the board as part of that overall governance process, much as we would do with other internal systems. Those systems are in place. I think that that is helpful. Just to clarify that moment. If the management had an idea that that might make a difference, it would make the case to the board. The board would scrutinise that and approve or send it back. In an application that we made to Transport Scotland, and then ministerial approval of that, where would it go? I think that there is more of a dynamic in it than that process describes, which might fit a more traditional public sector model. John, do you want to see? I think that that is right. The governance arrangements that I described earlier were designed to allow a measure of arm's length arrangements, and that is designed to help us to comply with the market economy investor principle and ensure that there is no state aid going into the business. I think that it would obviously be a matter of judgment if there are very major decisions that need to be made about the future of the business. Our intention would be that the holding company, the whole code board, will set the strategic arrangements and relationship with central government, but it will be for the operational company to take the commercial decisions on a day-to-day basis. Who would finally improve the increasing amount of money available? In terms of loan funding, if there is a requirement for loan funding additional investment, then that will necessarily come back to Transport Scotland. You would decide whether to involve the minister or not. It would necessarily be a ministerial decision. You could have some element of flexibility within that. I think that if we were going beyond any of the figures that have been put in the public domain or uncovered in this report, I think that you would assume—in fact, I cannot imagine circumstances where ministers would not be informed, advised on those matters. In relation to the possibility of a space port, it was helpful that you said that the decision to purchase was not predicated on that happening, but it is something that is interesting, exciting and potentially hopeful about the future vision. Could we assume that the Scottish Government regards Prestwick as its preferred location for the space port? No, I think that the Scottish Government's position as a whole is that it would like to see the space port in Scotland. As the owner of one of the candidates, it does not view its own candidate as being its preferred solution. I think that it would be invidious for ministers to choose between different parts of Scotland in that way. I think that they would stick to their neutrality. However, the prime hope is that it could be located somewhere in Scotland. Clearly, if the decision was taken to come to Prestwick, that would be a good decision in the context of the aspirations for Prestwick, but I think that the fundamental is that the space port should be located in Scotland. Is the Scottish Government involved in either the other two Scottish locations in terms of giving advice or support of them? John, perhaps you could. The report does not focus on the report, because the report's focus is on, and it makes reference to the space port in respect of Prestwick. In other areas, I think that that would be a fun or a day potentially. I thank the panel for the time this morning and the consideration. I can briefly suspend the committee for five minutes to allow the witness change of work. Agenda item number three will take evidence from Audit of Scotland on the EGS report titled The Commonwealth Games 2014 third report. I welcome Caroline Gardner, the Auditor General for Scotland, Angela Cullen, the Assistant Director, Trisha Meldrum, the Senior Manager and Michael Ollafant, the Project Manager of Audit of Scotland. I understand that the Auditor General has a brief five-minute presentation. The report that we are bringing to the committee today is the third in a series of reports looking at the Commonwealth Games that took place in Glasgow last summer. As the committee will know, we published two earlier reports on planning for the games in November 2009 and March 2012. Those reports focused on whether the strategic partners, the Scottish Government, Glasgow City Council and Glasgow 2014 Ltd, who together made up the organising committee and Commonwealth Games Scotland, were on track to deliver the games on time and budget. Both reports considered the main risks at the time and how well the partners were managing them. Today's report is our first following the games. It focuses on the overall cost of the games and on how that cost compares with the budget set, including the financial contribution that is made by the Scottish Government and Glasgow City Council. The report also considers the Government's and Glasgow City Council's plans for tracking, monitoring and reporting on the expected legacy benefits, which were an important feature of Glasgow's successful bid to host the games. I will briefly summarise our findings under three areas, convener, the first of which is the overall success of the games. We found good evidence that the games were successful for both Glasgow and Scotland. That included higher than expected ticket sales, positive feedback from spectators, high visitor numbers to Scotland, a record number of participants and a high level of international media coverage. We found that the main reasons for the success of the games were early planning, a strong commitment from the strategic partners to deliver a successful games and good partnership working from all the organisations involved. The example of good partnership working is one that could be spread more widely to other parts of the public sector since partnership working is becoming increasingly important. Secondly, on the cost of the games, we found that the overall cost was £543 million, which was £32 million less than the £575 million budget set. Importantly, the public sector contribution was £37.2 million less than expected, with the Scottish Government and Glasgow City Council together spending £424.5 million of the £461.7 million that they set aside to fund the games. The remaining costs of the games were met by income received from private sources such as ticket sales, sponsorship and broadcasting rights. The overall cost included £88.3 million spent on delivering the safety and security operation that was overseen by Police Scotland. The games passed without major safety or security concerns and Police Scotland delivered the operation within its final budget of £90 million. Finally, on the legacy, we found that both the Scottish Government and Glasgow City Council have developed clear plans for delivering legacy benefits from the games. The games legacy covers sporting participation, together with wider impacts on healthier lifestyles, the environment and the economy. The Scottish Government and Glasgow City Council are leading on a range of national and local programmes and projects that are designed to contribute to the legacy outcomes. Those outcomes will be measured using a variety of methods, including tracking 58 indicators, an economic evaluation assessment and a longitudinal study focusing on the impact of housing and neighbourhood regeneration on the health and wellbeing of communities in the east end of Glasgow. Our report makes some recommendations for the Scottish Government and Glasgow City Council to help them to continue building on the good legacy work so far. For example, we have recommended that they ensure that the evaluation due this spring specifically assesses the impact of the investment that they have made on the legacy outcomes. Looking ahead, the Scottish Government plans to report on legacy on an annual basis up to 2019 and will continue to monitor their progress. As always, convener, my colleagues and I are happy to answer the questions that the committee may have. Before I bring Mary Scanlon, I will ask her a technical point on the evaluation that will be carried out in Glasgow City Council. Who would carry out the evaluation of that? The evaluation that is planned to be published this spring is being carried out by an external partner. Michael Russell will pick that point up. It is a group that has been created called the Glasgow Legacy Evaluation Working Group, or GLUG, to give it a short and snappy title. That is made up of different partners, including the Scottish Government, Glasgow City Council, academics and the NHS and so on. Can I just ask, from an obvious point in terms of carrying out an evaluation of your own participation in the games, would that be the normal process of an independent evaluation? I think that when there are so many partners involved, including academics as well, they would provide that challenge to the statisticians and economists that are involved in the group. It would be an unusual convener for it to be carried out in that way by the partners. We certainly will be looking at all the evaluation that takes place over the coming years to make sure that it is rigorous in the way that you would expect it to be. That does not necessarily mean that it should be carried out by somebody entirely independent of the partners. I just wanted to put on the record that 98 per cent of tickets sold, and although the income was £34 million, £6 million less than in Melbourne in 2006, I noticed that they only sold £85 million. I very much welcome that, that the games were accessible to people on a wide range of incomes. Auditor General, in one of your earlier reports, you mentioned the security budget rising from £27 million to £90 million. It was quite a significant increase in the budget, £63 million increase. In your report on page 22, I see that we have the breakdown of the safety and security spending. It came in £2 million under budget at £88 million, but 40 per cent of the spending, £37 million, was on equipment. I noticed that the equipment included perimeter fencing, airport-style security scanners, radio communications, etc. The £37 million that was spent by Police Scotland, was that for equipment unique and solely used for the games, or will that equipment be used as part of Police Scotland's investment for future operations? I will make a couple of points and then ask Michael to pick up the detail. First of all, you are right that the budget for security did increase from £27 million to £90 million. In part, that reflects the recommendation that we made in one of our earlier reports, which suggested that the budget may not be enough to cover the requirements and the organisation committee's ability to look at the experience in the London Olympics in 2012 and learn from that experience. The £47 million that you refer to within the budget for equipment is both equipment purchase and equipment hire that was required at the time. I will ask Michael to take you through a bit more of what we know about that. I think that in terms of some of the equipment hire, airport-style security scanners, some of the fencing that was used to fence off some of the venues and the perimeter area as well. It is not just your standard fencing, it is very high-tech with security cameras and so forth on it. Some of that is hired. There were aspects of the equipment that were purchased, some specialist equipment, including radio communications that can be used when going for Police Scotland, so it was a combination of both. Can I just drill down? It is my only question. Out of the £37 million, how much would be an investment only for the games and how much would be used? For example, the radio communications, how much of that £37 million would be a continued investment for Police Scotland? I do not have that detailed information at hand, I am afraid. Can I just ask about the same point about some of the security scanners that you are pursuing? I noticed that in £52, on-page 22, the overtime cost for policing amounted to £16.8 million. Did you have a close look at that and assess as to whether that seems a big number, given the original budget for a whole of security, which is £27 million? I will ask Michael again to pick up more detail of what we do know. Within that, we have both the overtime required for policing the games within Glasgow itself and support that was given to other parts of Scotland to reflect the fact that a number of police officers were pulled in to that central location. Michael may be able to tell us a bit more about that. The police and costs were involved, but there were salary costs for the planning and delivery team, which was in existence in the run-up to the games and during the games, but it was also to cover overtime travel and various allowances for not only Police Scotland officers but mutual aid officers that provided some specialist support coming from other UK forces. That was by and large the bulk of the figure. There was also around £700,000 worth that was described as business as usual cost, which covered overtime for policing in other areas of Scotland to ensure business as usual during the games. Did other agencies adopt the same strategy? I do not mean strategy, that sounds unfair. Did they adopt the same practice in terms of, as it were, charging the Commonwealth Games for exactly the principle that you have described, ambulance service, fire service, other blue light emergency services? We do comment further on into the report round about paragraph 59. We referred to the Scottish Ambulance Service and the Scottish Fire and Rescue Service. There was not money included within the overall games budget for their additional services, so they have an additional cost to the games that we have outlined in the paragraph. The Fire and Rescue Service estimated costs of around £2.2 million for providing services and training and support during the games, and likewise the Scottish Ambulance Service estimated costs of around £1.2 million, of which half of that was provided within the games budget. There were additional costs. I think that those costs have been finalised in terms of what was required, but those were estimates that we had at the time of the order. Those costs are quite small in comparison to the police fine. I just wondered why the police cost in terms of overtime was so, inevitably it was so large because of the number of police officers involved. Given the budget, it did go from £27,000 to £90,000 to take your point, Auditor General, we called for it, but £27,000 to £90,000 is a big, big leap by any standards, and then to spend a flick end of £17 million on overtime. That just sounds like those costs got nearly, well they ran away themselves. I think the point we would make is that the £16.8 million for overtime did not just cover the 11-day period of the games, it covered the planning and preparation and a lot of real-time updating of plans and responding to it. We talked, for example, in the report— It was not overtime, it was the point that it was just normal work, but it was charged under the overtime. Absolutely, that is right. The additional time required to do it came from a range of sources, that is the way that funding worked for it. We talked in the report, for example, that at one point it became clear that on days when all of the major venues were in use, the transport would not be able to cope, so there was a very quick response to planning how that worked and the police were central to it. The more proper question is, you are presumably satisfied that the budget moving from £27,000 to £90,000 for safety and security was justified and is wholly auditable on that basis? Yes, we look closely at that budget heading as you would expect. I think it is one of those classic situations, a bit like the year 2000 IT concerns, when something had gone badly wrong and the spending had not happened, it would be easy to criticise. Everything went smoothly, therefore the question of whether the money is needed is open to question. We do not have concerns about it. I welcome the support, because it is a really positive report. It underscores the success of the games. We already knew that they were successful. It is nice to see you coming in and supporting that fact. One of the important elements of that is the legacy benefits. They have always been emphasised. You have stated on page 25 that there are clear plans in place and comprehensive sets of indicators in place. It is encouraging that you say that there are already examples of successful legacy although you do qualify its early days. You mentioned public sector funding. Are the legacy of the games predicated on public sector funding an essential element to make sure that the legacy benefits are achieved? I will kick off by saying that we always try to make sure that our reports are fair and balanced and give credit for good performance, as well as identifying where there is room for improvement. You are right that we make the clear point in this report that the planning for legacy has been good so far. We identify some challenges in making sure that that can be demonstrated over time. It is difficult by its nature to show the link between the investment that is made and those types of wide-ranging legacy benefits. We have identified a risk that, with the continuing pressure on public sector budgets, there may be other things that happen that make those benefits harder to achieve, such as reduced opening hours for sports facilities or higher ticket prices, for example. The point that we are making is that the games would not have happened without about £420 million or so public sector investment from the Government from Glasgow City Council. The success of the bid was based to a large extent on the benefits that were intended to come from that investment. Although we recognise that it is not a straightforward thing to do, continuing to keep the link on the money that was spent and the benefits that are achieved seems to us important, both in the evaluation that is due this spring and over the longer period of time, in particular the evaluation of the Go Well East for the particular benefits for the community in the east end of Glasgow, where the potential to really transform people's lives and their environment is there, but we will need careful attention to make sure that it happens in practice. I am still on page 25, the first paragraph that you say that there are clear plans for realising legacy benefits on the games at local, city-wide and national levels. This is curiosity really. Across the page on page 27, paragraph 65, you are talking about projects in England and Wales as well, legacy projects in England and Wales. Three of them in Wales were in England. I am surprised. I will ask Patricia and Michael to talk you through the background of that. Legacy 2014 is a brand, if you like, so a number of projects meet the requirements of to be classified as using that specific branding that was associated with the games. That is where some of those projects come in, that they are not just specific to Scotland, they have wider benefits across the UK. If I can just add, the big lottery fund is a key funder in a lot of those projects, which is obviously a UK organisation. It was providing funding towards those projects in Wales and England as well. It has access to the Glasgow legacy logo and so on. I do not know the detail of those individual projects, but I know that they were designed to increase participation in sport among young people in the areas that were selected. They are drawing money from the big lottery fund. I think that answers my next question, because I was concerned that public funds might be getting used for projects elsewhere, but if it is lottery money and supports the games in, that does not seem unreasonable. Thank you. On one level, the Cometh Games has a huge success, all credit to Glasgow City Council, the previous executive, for going for this, and all credit to the council and the Scottish Government for pursuing it when circumstances changed. In lots of ways, the environment for doing this became less than ideal for financial cash. You talk about the pressures on public sector budgets and the legacy, but there was also an impact in terms of people having money in their pocket to buy tickets in terms of broadcasts. There has been interest in spending for licences, money for sponsorship, and all those things. To have pulled it all off in that environment, I think that it is a really encouraging report. I suppose that on the issues of legacy, you draw attention to yourself. We could only really evaluate whether this was value for money over the long term in terms of the legacy, but that is the classically the most difficult part to do. How big a risk do you think that the on-going situation in terms of public sector support for projects is to having a real legacy? Our starting point is that the planning for legacy has been done well. From the point of the original bid, the case for putting the games on and for investing public money was that there would be a legacy and those legacy outcomes were well specified at both the local level in Glasgow and across Scotland. That is a good thing. We also outlined in part 3 of the report the framework in which that is done, the 58 national indicators, and the other things that will measure it. All of that is a great start. You are right that there is a risk now, simply that people's eye comes off the ball because we have had such a great game and it has been such a great success or more realistically because there are other pressures on budgets that will continue through the years ahead that will make some of those things tougher to achieve than we might have expected back in 2004. There is no lessening of the commitment from either the Government or Glasgow City Council particularly and the other 31 councils to making sure that those benefits are achieved. We think that the Government and the councils are continuing to focus on what they are getting is so important and why we will continue to monitor it ourselves. It is human nature almost to shift attention from what has been achieved on to the next big thing that is coming. We think that it is very important for Scotland that the benefits can be demonstrated so that, when future opportunities like that come up, there is no risk of cynicism about what we might be able to do if we put the money in so that we can demonstrate the achievements that were made and really capitalise on the success that was achieved last summer. Just to add, one of the positive things that is continuing is Vale is our legacy leads group that was established and they run up to the games to look at in legacy across the whole country. The decision has been made that there is value in that group continuing to exist and so continuing to share things like good practice across what is happening across the country in different areas and how to really roll out that good practice, so supporting some of that. For me, one of the great achievements of the games is that it does challenge our cynicism about things. I certainly spoke to people in advance of the games happening who simply said that if you were going for this now in the current environment, you would not do it, but the fact that we were able to persevere with it and do it, what are the are there any key long-term lessons you think for us in terms of thinking about bidding for international events into the future where the timescales are so large and there are so many unpredictable ahead? What are the key things to take from that in Europe? Some of the things that we say about why this was a success in the report are really important things to not lose sight of. There was a really strong and clear shared vision from the Government and from Glasgow City Council for why they wanted to do this and that worked all the way through into this clarity about what the benefits would be last summer and for a generation to come. That was not left as just a nice warm feeling. They did the hard work of saying, who is going to do what? How do we make sure that our governance arrangements are fit for purpose and that the governance arrangements continue to evolve to make sure that they could respond quickly to issues that came up as they got closer to the games? The way in which the planning and financial management was done was a really strong example of responding to differences in, for example, the cost of venues that either cost more than expected and had to have money from somewhere else in the budget or cost less and freed money up to invest in something else. All of that worked very well. You are right that the circumstances in 2014 were very different from the point at which the successful bid was announced. However, things that we had reported on as being risky like income from ticket sales and broadcasting rights came up either at the expectations or above them and that reflects that really strong partnership working. For us, the main lesson is that if you get that right, it can have a huge payoff. We rely on that model of partnership working for lots of other bits of public policy just now, from health and social care integration, community planning and other things. What lessons can we learn from that in those areas that may not have the same immediate glamour, but at least as important in terms of changing the way public services operate and the success of Scotland? There are lots of options on that. I had two particular questions for me. The first one is just on the issue of legacy. You talked about the challenge of public budgets. Do you think that there was sufficient or maybe it was not possible to do more, but in terms of the commercial elements of revenue, where is the legacy from sponsorship? Were we able to convince people to become involved in the success of the games and commit to something bigger than just the games, or did the commercial reality necessitate that people were interested in the two weeks in Glasgow? That was all that we were interested in. I think that the initial expectation at the bid stage was that the commercial income, particularly sponsorship income, would simply be another source of funding for delivering successful games. I will ask Michael and Trisha if they want to add anything, though, about whether the result of that was different than expected. Certainly the sponsorship was a very positive aspect of the commercial income. I think that what that does is not necessarily for the legacy but also for the bidding for other future events in Scotland. Does it allow the commercial partners, all the different sponsors that were involved, to realise that it is possibly something that they want to get involved in in the future? I know that events in Scotland have highlighted a number of different world championships that are coming to Scotland over the next year, so it could the success of the Commonwealth Games create that platform for commercial partners to maybe sponsor future events as well. You have a specific recommendation around the go well research project. I will take the opportunity to say a little bit about why. That is important and I presume that you think that that is deliverable. That is something that could be fairly easily done and would be worth spending the time and money to do. I think that our view is that, as well as the broader benefits to Scotland and Glasgow from the Games, the particular benefits for that community in the east end of Glasgow were a key part of the bid and a real opportunity to change lives in a place that has dragged behind the rest of Scotland for a long period in spite of great efforts over a long time. The go well initiative predates the Commonwealth Games bid, but there was a specific focus in it after the bid had been successful to extend it to get more detail about the lives of people, their health and wellbeing in this particular area of Scotland. Under the current plans, it will end in 2016, and we think that that is not long enough to be able to demonstrate the sorts of changes that are envisaged for people's lives and communities. We are recommending that it should be extended to 2026 to give that much richer information about what has happened for that particular group. Trisha may want to add a little bit to that in terms of context or our thinking. We think that the go west evaluation has a number of strands to it, so we will give some quite powerful information about the impact for those communities. For example, one of the aspects of that is face-to-face interviews with around 1,000 people within the communities directly affected by the regeneration for the games, looking at things like their physical activity, well-being and the experience of the neighbourhood and housing. There is a rich data source there, with some of the tracking of indicators and outcomes. However, if you are doing those last interviews and the last data collection in 2016, it is not giving much time to look at what has been the impact of all the work that has gone on. For example, people are only moving into the houses in 2015, so it is not very long at all. That is a decision just for the Scottish Government to make. You have not had the response in terms of publication of the report yet, but it says that they are considering that. It is our recommendation. It is a question for the Government and the partners as to whether they accept it or not. Can I go back to Exhibit 6? We note that the military personnel were provided at no cost. I am not suggesting that you would ever have got the MOD to give you a cost. Is there any kind of value? Presumably, their involvement was significant. Had they not been there, the table in Exhibit 6 would have had some other entry, which would have had some kind of number. Do we know what their substitute cost was at all? We do not know what their substitute cost was. There are costs that are included in the table that provided for accommodation and some logistical costs as well, but the personnel costs were provided at no charge. In terms of what that value would have been, had it been included, we would have got no information on that. Could I then suggest that, for the record, not for this committee's record, but for the future, you might want to evaluate man hours or something? Maybe it is insignificant. I just do not know that I was not involved, but if that was a significant number of people for a significant number of hours, then the total costs that we have got here might deceive somebody trying to do this in the future as to what that total security cost was. I will just leave that with you if I may. Can I then just pick up on the issue that Drew Smith has just helpfully brought up about? Can I simply endorse your view and encourage you to make very strongly to the Government the point that the research community will be very grateful if we have good, rich data, longitudinal studies? We are talking about health inequalities tomorrow afternoon, and that is precisely the kind of information that we need to evaluate what is going on. It is difficult enough to understand. It is difficult enough to even theorise that if you do not have data, it really does become a lot of hot air or risk. I am sure that the entire research community would want to encourage you to make that point very strongly to the Government. I think that the committee's backing for that recommendation, if you reach that position, would also be a strong encouragement. Thank you. It is a comment, first of all, and then a question. It is regarding the ticket sales. I am sure that, certainly, if the Commonwealth Games in last year had a stadium the size of the Melbourne cricket ground where the games were held, then we would have sold even more tickets, and the ticket sales revenue would have been even more as well, because that stadium was just around about 90,000. Maybe that is something for the future. The question is just that it is regarding the European Comments or the General regarding the report. It has been widely recognised that the Glasgow Commonwealth Games were a success, and the report states that as well. In terms of the international perspective of the organisation of such a successful games in Scotland, what can Scotland actually do to promote? It is not something that Scotland does very well in terms of saying that we have done something well, but it is one of the failings of Scotland that, unfortunately, it does have. Can you just ask colleagues to focus on the question that we can illustrate a point? No, I am sorry, convener, but it is in terms of telling that the wider world and offering the services in terms of expertise so that, when other big activities are taking place, people can look at what has happened in Scotland and learn from what we did last year. First of all, on ticket sales, you are right. 98 per cent of the available tickets were sold, which is hard to say. It could have been much higher in terms of sales or income, so I absolutely accept the point. In terms of the benefits to Scotland from managing the large and complex event, first of all, I think that we should not discount the intangible, hard-to-quantify but very real benefits of Scotland just being on the public stage for that fortnight last summer, and the benefits that will flow from that. The evaluation should be looking at how we capture it, but we recognise that it is not a straightforward thing to put a number on, and yet there is still a value to it. That does not mean that value does not exist. In terms of the particular expertise, I know that one of the components of the agreement with the Commonwealth Games Federation is that knowledge transfer has to take place as part of the wind-down exercise. I think that that has been completed successfully, and the organising committee has received the payment that was due on successful completion. Michael Russell might be able to tell you more about the bigger picture there and what has happened. That is a key point. The Commonwealth Games Federation expects a level of knowledge transferred between host cities so that on-going lessons learned can be applied, and in that case, to the Gold Coast in Australia. One example that has been mentioned a few times is the hand-in restructure that took place by raising the level of the playing field to include anathletics track. That has become, I understand, internationally known as the Glasgow solution, where sport stadiums can be transformed in such a way without necessarily creating the white elephants that we have perhaps seen in the past with previous games. I think that there is a positive aspect of learning from the Glasgow games to other future games, whether it be Commonwealth Games or Olympics. I was very interested in that in your response there. I was smiling because it took me back to when a new stadium was built in the Stade de France, because that is a multi-use stadium. It is not just for one particular purpose, but for football, rugby, athletics and other activities that take place there. Obviously, we did not have that opportunity here in Scotland, but it is very heartening to hear what happened last year in terms of the Glasgow solution. It is a really quick question. It is in relation to case 32 on page 29 of the report on the second from bottom employment. Variety of legacy schemes target the unemployed and underemployed young people, and there is a mention of apprenticeships. 203 people helped them to work. Is there a breakdown of the type of employment that this was? How many apprentices are those jobs short term, long term, whatever? There is certainly more detail than we have got here. I will ask Michael to talk you through what we have got now and what we may be able to provide separately. For this case study, we just wanted to give a flavour to the type of activity that was going on. I do not know if we have a breakdown of the types of jobs, whether they are short term or long term. I think that it would certainly be the nature of apprenticeships that would be short term initially. On completion, it would hopefully be that the legacy would be there that they have got the necessary training to seek permanent employment, but I do not know the actual detail behind that. I hope that the evaluation to be picking up to really get much more detail on the employment that has been created, how much of it is the short term construction of venues and how much has that converted into skills that are useful much more widely in the economy? How has expanded it? Is it a permanent solution, semi-permanent or very short term in terms of facility buildings? It is something that Glasgow City Council has probably been monitoring as the work that they did throughout the games for lots of the contracts that they awarded, they had community benefit clauses and apprenticeships and jobs were part of that, so we certainly reported on it in our 2012 report of the state of play at that time and they should have been monitoring that. Okay, I thank God the general on our team for the time this morning. I now has agreed to move the committee into private session.