 I welcome members of the press in public to the fourth meeting of the Public Audit Committee in 2015. I can ask all those present to ensure that their electronic items are switched to flight mode so that they do not affect the work of the committee. This morning I received apologies from Stuart McMillan, so I would like to welcome Sandra White, who is attending today as the Stuart McMillans substitute. I move to agenda item number one. The question is, colleagues, that we take agenda items number six and seven in private. Are we all agreed? Gend item number two, colleagues, is that we have already agreed to report on the evidence that we have taken from 2013 and 2014 audit of NHS Highland. Are members agreed that we consider this draft report in private and future meetings? Gend item number three, is the evidence from the Auditor General for Scotland's report on the report entitled, The Scottish Government's Purchase of Glasgow's Pressweek Airport. I am delighted to welcome this morning, Caroline Gardner, the Auditor General of Scotland, Brian Hearth, assistant director, Graham Greenhall, senior manager and Ursula Lodge, audit Scotland. I am most welcome to understand, Auditor General, that you have a brief statement to make in respect of the report. The report that I am bringing to the committee today looks at the Scottish Government's purchase of Glasgow Pressweek Airport in November 2013. The Government bought the airport through its Executive Agency Transport Scotland to protect jobs and safeguard what it considered to be a strategic infrastructure asset. The Government established a company, TS Pressweek Hold Co Ltd, to oversee the airport on its behalf. The Scottish Government is now providing the airport with loan funding, on which it is charging what is known as an EU reference rate of interest, broadly equivalent to the interest rate that a commercial lender would charge. The airport will start repaying the loan funding once it can demonstrate positive operating cash flows. My report assesses if the Government's approach to the purchase of the airport was reasonable, including the quality of business and financial planning, which informed its decision to buy. The report also considers the future plans for the airport's development and the governance arrangements that have been put in place since the purchase. It is important to note that the Government is still assessing a number of potential future developments for the airport. Those will take time to put into effect, and we will continue to monitor developments and follow-up this work at a later date. Convener, I would like to briefly summarise my findings under three headings. First of all, the Scottish Government's purchase process. Overall, we found that the purchase process was reasonable, given the tight timescale of just six weeks, to undertake the required due diligence and negotiate the purchase. However, there are two areas worth noting. While the Government did identify the risks associated with the commercial viability of the airport, due to the time constraints that it was working under, it did not model the impact or the likelihood of those risks or include their potential impact in the financial forecasts. The positive financial return on the investment, as set out in the purchase business plan, is based on optimistic assumptions for future passenger growth. Our own financial modelling has shown that, with less optimistic future passenger growth assumptions, the Government could still have reasonably expected to receive a return on its loan funding at the time that it was considering the purchase. However, it is worth emphasising that the eventual return achieved will depend on future developments that will affect the airport's sale price, passenger numbers and other assumptions. Secondly, in relation to the governance arrangements for monitoring the airport's performance, we found that the Government has established good governance arrangements to monitor the on-going financial and business performance. Those include clear risk management processes, effective reporting on the airport's business and arrangements for scrutinising the airport's operations. Thirdly, on current plans for the future development of the airport, the latest available plan for the airport, dated May 2014, estimates a total loan funding requirement of £39.6 million up to the financial year 2021-22. Some £11.6 million of that funding is expected to cover losses from core trading activities, with the rest needed to clear an essential maintenance backlog and to cover capital investment. As that January this year, the Scottish Government has provided the airport with a total of £9 million of loan funding and has committed to provide a further £16.2 million to the end of March 2016, if required. The total amount of loan funding that will be needed is still uncertain due to a number of possible development opportunities for the airport that the Scottish Government and the holding company are currently exploring. It may be some years before the Government can achieve its aim of selling the airport back to the private sector. The report makes some recommendations for the Scottish Government. In particular, we think that it should now develop robust business and financial plans, including clear assumptions and forecasts of the loan funding that will be required, together with a well-defined and regularly reviewed exit strategy. We have also developed a checklist for use by public bodies in considering future investment decisions, which is included in the report. As always, convener, my colleagues and I are happy to answer any questions that the committee might have. Thank you very much for the opening statement, Mr General. Can I first come in a couple of questions in connection with the report and can I refer you to paragraph 2, where there is detail in respect of the challenges that face the Government in respect to that six-week period that is referred to and some of the forecasts that could not be carried out because of the time constraints attached to that. I am just wondering if you will look at this from another experience in the private sector, where, obviously, there are takeover operations in place every day as we speak. This six-week period, why were not the Government able to carry out these forecasts in that period? Surely the resources that would have been provided to the Government to allow them to do this should not have prevented these forecasts being carried out, so in your experience why was this not able to happen? I will ask Brian to come in a moment and talk to you more about the detail of what was done and what was not, but I think that the broad context is important to get clear with the committee, first of all. In a sense, this was not a commercial takeover or acquisition decision that you might see in the private sector. It was a policy decision taken by the Government to prevent the imminent closure of the airport and, from my perspective as Auditor General, that is a policy decision that is outside my remit. My interest is in having taken that policy decision how well they went about it. My overall assessment is that the process was reasonable. Brian, do you want to add to that on the constraints which prevented the full modelling of the particular items that we have identified in the report? Yes, thank you very much. I think that we were, in looking at the activities that place in the six-week period, there was an extensive amount of work that went on by the Scottish Government in preparing the business case, a supporting financial plan, a due diligence cheques in a number of the key areas. The amount of work that was carried out seemed appropriate in the six weeks. It was reasonable in comparison to what we see other short-term deals in the public sector. The compliance with the HMT treasury guidance on completing business plans was pretty well adhered to in the time constraints of six weeks, when, I think, usually we would see much longer periods allowed for those kinds of decisions to be made. I appreciate that, but in terms of what prevented the Government from being able to take that forward and considering that it is a significant sum of public money that is being committed here, what prevented them from being able to do that work in terms of being able to carry out those forecasts during that period? Was it a resource implication in terms of the information that we have provided? Was there information that was not available during that period? I mean, what exact information prevented them from doing that? I think there were some elements that we referred to in our report where the Scottish Government representatives did not have sight of some of the detailed financial information, although it had been prepared by financial advisers during the period. That did not become known to some of the Scottish Government officers until after the decision period, so that is the reason why some of the information, some of our comments on the absence of evaluation that we might have expected happened during the six-week period. I encourage, in terms of how we take this forward, that it is important to recognise that this is a significant sum of public money that has been spent here. What we are saying is that this information was not made available to the Scottish Government during this process until after the acquisition took place. Considering the sums that are involved here and the potential implications of ensuring that this money can be returned and the public pass can benefit from that, is that, I mean, surely that is unacceptable that such information was not provided? Was it information that was available that was not provided or was not information asked for in the first place? I think that the information that we are talking about is around the detailed spreadsheets that supported the financial plan. What was made available during the period were PDF versions of that, so there was some re-information that was made available during the decision process, but the detail behind that officers were not able necessarily to be able to drill into some of that detail behind it, that we were able to do as part of the audit activity after the period when the information was made available. I think that the context again is important here, convener. At the point of purchase, the purchase price was £1. Clearly beyond that, there is a significant amount of public money committed at the moment and potentially required up to the expected date when it starts to generate positive cash flows. However, I think that the process of getting to the decision about purchase was an important one. The need beyond that to drill down and make sure that those assumptions stood up and that what was needed to return the airport to financial sustainability was understood and did not need to be done necessarily in that six weeks. That is why we are focusing now on the detailed work that needs to be done to take it forward while recognising that there were things that could have been improved in the original purchase decision. I will ask finally before I bring in the next question. Obviously, for the Government to understand the tasks that are ahead of it in terms of the potential expenditure on this project, surely it should have had some idea of the forecast and the information that should have been provided to allow it to take that decision. Surely it should be in that position of committing yourself to the future of Presswick Airport and understanding all the challenges that face the Scottish Government in securing the 3,000 jobs that are attached to that. However, at the same time, the Government needs to be completely aware of the responsibilities that are taken on board, so show that information should have been either sought or provided in some context. I absolutely agree with the principle that you are making. That is not a trivial decision by any means. It commits significant amounts of public money. However, as you will see in one of the exhibits in the report, we think that the process that was gone through at the point of making the decision was reasonable. We have identified a couple of places where it could have been improved and included that in our checklist for the future. The challenge now is to make sure that the planning to return the airport to financial sustainability or to exit, if that is the right thing to do, is detailed and robust going forward. I certainly welcome the clarity in the report, but following on from the convener, I would like to look towards the summer years before selling back to the private sector, and I would like to look at the financial viability and, indeed, some of the figures that have changed from the convener's question looking forward. If we go to paragraph 52, the revised business plan forecasts the total loan funding requirement of £39.6 million compared to £21.3 million in the purchase business plan. We almost have a doubling from £21 million to £40 million of the forecast total loan funding requirement. I find that quite concerning. I also find, Exhibit 3, that annual passenger growth has been revised from 10 per cent to 6 per cent. I appreciate that that information is commercially sensitive, but I do nonetheless think that it is worth putting on the record that it is a significant reduction in projected passenger growth. If we look at actual passenger numbers, they fell by 15.2 per cent in the period 2013-14. That is the bad news. The good news is that the freight increased by 26, which is still short of Glasgow's increase at 34, but nonetheless a significant increase. The convener's question was looking at the purchase of Prestwick airport. What I am concerned about is the increase in the loan, the significant decrease in passenger numbers, the reduction in the projected growth—I appreciate it—is commercially sensitive and looking forward to the exit strategy. When do you think Prestwick will be financially viable? We are talking about a very competitive market here. My understanding is that they depend on one significant carrier that has already significantly reduced the flights in and out of Glasgow. I am really looking for a bit more projections on going forward, given that we have had significant uncertainty in the last year or two since the purchase. When do you think that the exit strategy will happen and when will it be financially viable? I will have a first go and I am sure that colleagues will want to chip in. Your first question was about the increase in the total loan funding required between the purchase business case and the revised business plan in 2014. Your right, it has increased significantly from around £21 million to nearly £40 million. Most of the difference there reflects the estimated capital investment required to reverse the essential maintenance backlog that was inherited with the airport and, importantly, to invest in the development opportunities that the Government and the holding company believe are key to returning the airport to financial sustainability. Are they related to the developments that the Government is looking to pursue as part of that strategy? Was the essential maintenance backlog made known to the Scottish Government prior to purchase, or was that just discovered following the purchase for £1? The original estimate at the time of purchase of the total cash flow support that was needed included estimates in the business plan for external backlog capital maintenance expenditure. Those were revised in the later business plan, which took place since the purchase. There were a couple of very minor issues within the original business plan about whether inflation was or was not included in some of the capital maintenance figures. I had a look at some of the detail of that increase between the original business plan at purchase at the time of purchase and the later revised business plan that occurred later. The main issue for the almost doubling of the loan funding was the essential backlog maintenance. That was quite a significant revision between purchase and reality. The total increase is mainly capital investment. Some of it is the essential investment in the backlog, but some of it is the investment that is required to return the airport to financial sustainability, so investing in some of the projects that are required to bring the airport up to a standard where it will be able to generate positive cash flows in future. Both of those are part of what is in the change from the 21.6 to the 39.6. If I could maybe just chip in there with a specific example, part of the audit that we went down to to see the airport, one of the things that they are doing is revamping the retail area of the Peswick airport. The part where, as you are moving towards the aeroplane, you go through the retail outlets and so forth, and they are spending that money on revamping that area, because they think that it will help to generate additional income in the future. I will move on to the other parts of your question. You were focusing, particularly on the passenger forecast. We did identify, as I said in my opening statement, that one of the things that we felt could have been improved in the purchase business plan was that the passenger forecasts were optimistic. They were higher than the Department to transport forecasts for the UK as a whole and optimistic in the context of what had been happening at Prestwick previously. We did find, though, that remodelling those with less optimistic forecasts would not have changed the purchase decision at that point. There is a particular complication for Prestwick currently, with its reliance on a single passenger carrier, which means that you have got a risk of large reductions in one go, which would be much less of a risk if the number of carriers was greater and more diversified. We recognise that point absolutely. It is worth noting, though, that Prestwick is an unusual airport in that only about 50% of its income is passenger-related. It does have a heavy freight business, as you have identified, which, in the year since purchase, grew more than most UK airports did. The future business plan, which is summarised in Exhibit 15 in the report, is focused not just on growing passenger numbers but on growing the freight business and on other developments around aircraft repair and maintenance and similar things. The business plan is diversified, reflecting the existing business of Prestwick. That is not to say that there is not a good deal of uncertainty about all of those initiatives, but they are unusual compared to many of the airports in the UK, and that affects the forward potential of the airport. We think that 21-22 is a reasonable estimate for when the cash flows may turn positive. That is very much in line with the estimates that were made at the time the purchase was made in November 2013. However, I have to stress again, as the report says, that there is a lot of uncertainty involved in that, and that uncertainty is related to the future capital funding that may be required to get to that point. O'r generalmer, I congratulate you on a particularly positive report. It would appear that the whole process has been very well handled. You have already stated that the purchase process was reasonable, given the time scale. Six weeks is not long at all to conclude the transaction. Can I just ask you, leading on from a question that was asked before, was there any significant information that was not available to the Government at the time they were considering the purchase during that tight six weeks, which might have affected a prudent approach to that purchase? As we have said in the report and said this morning, we think that the approach was reasonable. Exhibits six sets out the areas where the business case fell short of best practice. The two broad areas that we have identified were, first of all, the risk of Ryanair pulling out of the airport, and the risk of the overall economic outlook were identified, but not quantified in the modelling. Secondly, we think that the passenger forecasts were optimistic. In the context of this being a policy decision, which was taken to prevent the imminent closure of the airport, we think that the approach was reasonable. Equally, we think that given the substantial sums that may be required to return the airport to positive cash flows and the uncertainty around it, it is now time to prepare detailed plans together with a comprehensive and regular reviewed exit strategy. At the time of the purchase, there was no significant piece of information that the Government did not have in front of them. I think that the caveat to that is the background information that Brian has given you that they had the high-level analysis carried out by their advisers, but at that stage, it is not the detailed numbers that underpin them. In six weeks, as you say, it is reasonable. Moving on to page 6, page 5 at the top there, you said that good governance arrangements are in place to monitor the airport's on-going business and financial performance, including risk management and effective reporting. Were those in place anyway, or are they something additional that has been put in place subsequent to the purchase? I am talking specifically about the Orat and Risk Committee and so on, which is quite important. The overall approach is a new approach, as the Government has put in place, the holding company to keep the airport at arm's length, recognising, as Ms Scanlon said, that it is operating in a competitive commercial environment and that, to meet the state aid rules, there needs to be that bit of distance. Graham, I think, can give us some information on how much of the detail within that is new. Yes. The holding company was established at the time of the purchase, so it was not actually functioning during the purchase process per se. Instead, there was Exhibit 5 demonstrates the governance arrangements that were in place for overseeing the purchase process itself, but once the ownership of the airport passed into the Scottish Government's hands, Holdco was set up and began running from that point. Obviously, its function has developed over time, but, as the report says, we are content with the governance procedures that are in place and that they will be able to oversee the performance and the risk of the airport going ahead. However, just to be clear, the good governance arrangements that you highlighted were put in place by the Scottish Government subsequent to the purchase. Looking at paragraph 16, you make a comment that there is a good example of a number of public bodies working together to achieve a common goal. Obviously, that has been running for some time now. How much did you actually look at how that—you obviously commented that it was a good example. How effective has it been? I think Ursula will pick up the detail of that. What we are focusing on in this section, paragraph 16 onwards, is the phase before the Government was considering purchase directly when it was still hoped that another private sector buyer may be found after Infrasil had made its intention to withdraw from Prestwick known. Is this group still in place? I do not think that it is. I think that this was the group in the period running up to the autumn of 2013, when Infrasil had made it known that it was considering withdrawal from Prestwick, and the multi-agency group shared by South Ayrshire Council was pulled together to look at options for keeping the airport operating on a commercial basis. Ursula will be able to tell us more about that part of the process. Yes, when Infrasil put the airport for sale and it became clear some nine months after that there was no interest or interest that would be—the private sector buyer—that would be acceptable to Infrasil, the South Ayrshire Council, along with Scottish Enterprise, Scottish Government, etc., pulled together the multi-agency group, and it started working with Infrasil to support private sector buyers. We have looked at that process, we have looked at the minutes of those meetings, etc. The main point to make here is that multi-agency group was in place to support any private sector buyer. The main aim to achieve was to secure the private sector buyer for the airport, and the multi-agency group looked at the possible ways that they could support that private sector buyer. I suppose that you could say that private sector buyer was not secured at the end, but it was a good example of those public bodies working together to achieve the common goal. On paragraph 31, you said that the Scottish Government's business case for the purchase generally followed HM's Treasury guidance. I am clearly looking down here. It looks like a fairly robust process. Which areas didn't they follow? Was there reasons for that? I'll summarise which areas didn't. Brian and Ursula will be able to give you more detail on reasons if you want to explore them. Exhibit 6 sets out what the HM Treasury guidance sets out as good practice, and then in the third column, what happened in this particular case. In relation to the strategic case, we found that there wasn't a clear link between how the purchase of Glasgow Presswick Airport would contribute to the relevant national and local economic strategies that it was intended to support. It said that there was a link, but it didn't demonstrate how that link operated in practice. Moving on to the economic case, the risks were identified, but there was a focus that didn't cover all of the price inflation in terms of excluding it to make sure that there was a like-for-like basis. The commercial case, we think, was in line with the guidance. The financial case worked through the implications for the Scottish Government of doing it, and the management case was also adequate. The areas that weren't fully worked through were the ones that I identified in my opening comments around the risks being identified but not quantified in the case of the withdrawal of Ryanair and the broader economic outlook for the airport, and the passenger number forecast being optimistic compared to wider information that was available. Brian Ursula, do you want to add anything to that? I think probably just a couple of comments about the optimism. I think the absence of some of the detailed supporting documents supporting spreadsheets from the financial plan probably didn't help Government officers look at or see that perhaps some of the explanations were optimistic in passenger numbers. I'll kind of illustrate, I think, for you what I mean by optimism in there. It's very easy, I think, to take the figures which are in Exhibit 3, where the current passenger numbers in 1213 were about 1.1 million, and if you apply the annual percentage increase, the growth rate, which is in Exhibit 8, which is 10.2 per cent, in the baseline purchase business plan, by the time you get to year 6, you're looking at passenger numbers of 2 million. That's just in the baseline case, there was a more optimistic case than that, so that helps to try and explain, I think, why we felt the assumptions on passenger numbers were optimistic. Partly due to time, I would say, partly due to the time of the six weeks and partly due to the lack of some of the backup information made it difficult for officers to see that there were some issues or errors or mistakes within underlying detailed business plan. Caroline has touched on inflation as being one of those issues where the HMT Treasury guidance says that inflation should generally be excluded when you come to calculate the net present value of these business plans. That wasn't done largely because officers weren't aware that that general inflation figure had been in the plan and weren't able to, if they were aware of it, weren't able to eliminate it in terms of summarising the data for the business case. I've got one just last clarification. Paragraph 52, we talked about the increased amount of funding that was going in there, going from 21.3 to 39.6. The order general did make the comment that a good part of that was capital expenditure, which is required to ensure that the airport moves forward and achieves its goal of profitability. Do you know how much of that 39.6 is capital expenditure for that purpose? Of the total 39.6, 11.6 million is to cover losses on the core trading activity, and the remaining 28 is all capital. The team may be able to give you more information on how the 28 million for capital breaks down, but there clearly are some considerations of commercial sensitivity around this as well. I'll see what more we're able to say. I think we might come back to you with a note on that one, because obviously specifics of capital expenditure and streams will be commercially confidential. There is detail within the business plan that separates the other element that Caroline's talked about, into capital and maintenance. As against going into the details of the capital investment programme, I've talked about it down in Prestwick. I just throw this around simply because of the fact that it's come up in numerous occasions in the cross-party group in aviation, which I chair. It's around the fact that every airport in Scotland is having to upgrade quite dramatically. Is it not within the realms of probability, shall we say, that even to mark time with other airports, this capital investment has to be factored in because it has to happen. Otherwise, Prestwick's customer experience, so to speak, would be diminished in the eyes of passengers and carriers alike and just see a terminal decline if they don't do it. There's no question that capital investment is needed to return the airport to financial sustainability if that can be done, both because the maintenance is absolutely essential in an airport for obvious reasons. As you say, this is a competitive environment and attracting passengers within the market, as well as from the growth, must be part of the approach for Prestwick. Within the remit of the present management group or any future management group, this stuff has to happen because of the age and the way the airport has been handled in the past. So really, in terms of the details that have to go through, is it not fair to just accept that this is going to have to happen anyway, regardless? To keep the airport at least at a functioning level, the present management has to consider this. I think that we recognise that absolutely. Our concern is to make sure that the Government has got a full and clear view of what that capital funding is likely to be, what the consequences are for the loan funding required and the extent to which it is having the desired effect on returning the airport to financial sustainability rather than being an open-ended commitment. Sir, could you just ask a very brief question before we bring in Tavw Scott, because it keeps coming up during the conversation. The six-week time scale referred to who set the time scale? The time scale, I think, was a direct result of the decision by Infratil that it hadn't received an acceptable offer for the airport and would close it within six weeks, at the end of the six weeks, if a different solution wasn't found. So they set the time scale and they said that the airport would close within that time scale? Thank you. Can I start with the point that you just made, to the general about Infratil? They didn't receive any other acceptable offers. Did they receive any offers? There was a process of offers being discussed. I think that Ursula is the expert on what we know about that period running up to the decision. But in short, all I really wanted to establish is no other private sector business wanted to take on Prestwick. There was interest, but Infratil didn't receive an acceptable bid within the time period that they had set. But they accepted £1 in the Scottish Government. So what was it, £50.25? They didn't receive a bid from a commercial operator in which they felt was acceptable. Do we know the reason for that or what that was? What was the definition of acceptable? That would be a question for Infratil and not one for us, I think. We've no other information on that. They have received a private sector bid and it was brought almost to completion. But just before that, for a variety of reasons, the private sector bidder pulled out. At that point, the Scottish Government started looking at what Infratil said. That said six weeks. That's fair, but as part of the audit, did you look into the reasons as to why no private sector alternative became the way forward for Prestwick? In other words, did anyone actually believe all the projections on Grawls and that kind of thing? We didn't look at that. I think because, as I said in my opening remarks, this was clearly a policy decision by the Scottish Government that it felt that buying the airport to prevent its imminent closure was a reasonable thing on the basis that it would then be in a position to look at whether it was possible to return the airport to financial sustainability. What we're saying is that that process was reasonable, but now the financial sustainability question needs to be pinned down because there is a point at which the Scottish Government will either return it to private sector ownership or may have to consider closure itself if that isn't possible given the uncertainty that still remains. Indeed, and that's exactly where I wanted to go with this. In paragraph 37, the report very fairly goes through the scenarios relating to passenger growth. I think Mr Howard mentioned earlier on that in the year 2012-13 there were 1.1 million passengers through the airport. What's the current figure or the figure for the most recent year you have, which presumably you've audited? Yes. I'll get Ursula to comment on that. I mean, I think the grams. I just want the number. Has it gone up or down? It's gone down. I think you can see that from the diagram. It's ten illustrates that passenger numbers fell by 15%. Thank you. So it's gone down. So then when you say in paragraph 37 all scenarios on passenger growth, sorry, all scenarios in the business plan assumed growth in passenger projections. That's not, that wasn't an accurate exercise was it therefore? How could you possibly run scenarios where everything went up when actually the reality has been the opposite? There are two factors in that. The first is that, as we've said, the modelling didn't quantify the risk of Ryanair pulling out this particular focus in Presswick on a single passenger carrier, which is difficult to model. It's a fact and it was recognised it wasn't modelled, but it clearly has a yes or no outcome rather than a gross forecast. Within that particular constraint we found that the passenger forecasts were optimistic, but once we re-perform the modelling with less optimistic numbers, we found that it wouldn't have changed the purchase decision. That doesn't alter the fact that the process of returning the airport to sustainability remains a very difficult one, but at the point of decision making we didn't think that it would have changed the decision. No, because the decision was a political decision to save the jobs in Ayrshire, which I entirely understand and quite understand why government would, as it were, nationalise an asset to secure that. That's an entirely fair policy decision for government to get to, but what I'm worried about is that in 37 we have a business plan, which had all the scenarios on passenger growth going up, when the reality of anyone who looked at the airline industry was that was a questionable scenario to come to. There had to be some risk that they would go down, because not least of which, because the neighbouring Glasgow airport's pitching for all that business. We make the point that they were optimistic. The government has commissioned, as we say, external advice about future forecasts, and it feels that in the context of the UK-wide figures that are now being used there is additional potential for Prestwick because of the fall that it's had in the past and because of the scope for investment to make it a more attractive airport. Those are, as we say, uncertain, and that's why we think that the modelling of those options now to be clear what the business implications and what the funding requirements would be is the next step. But I can understand that now, and that's all very fair, and what you just said is entirely logical, but what I'm driving at is that the time of purchase, or the time these business plans, where this business plan singular was being considered, all the scenarios on passenger growth were up when there surely had to be a scenario where it went down because of the, not least of which, because of the uncertainty of the future of the airport. So when Parliament was told we were going to invest in this, fair enough, policy decision government makes, but all the scenarios are up, should it not have at least considered the potential for it to go down, and therefore the exposure to the public purse to be higher, which is what, of course, has now happened, than was the case when it was brought to Parliament's attention. We've made the point that the passenger forecast were optimistic. I think it's important for me to state again that we didn't find that that would have changed the purchase decision, but it does make the planning from here all the more important because of the uncertainty that remains. Thank you. I totally accept that point. The report also says that roughly 50% of the income for the airport comes from passengers, and therefore the other aspects are freight and the auditor general's detailed those in an earlier answer. Do you consider now that the freight side of the business and some of the other options are much more likely to make this airport sustainable than passenger growth? We aren't aviation experts. The government has commissioned experts, we think, in an appropriate way to inform both its own business planning and the work that's being done by the holding company. If you look at exhibit 13, I think that sets out the areas which the current business plan envisages as being the areas for growth, and they are around the spaceport, around freight, around property, and around other aircraft maintenance-related activity, as well as the possibility of air passenger duty changing the dynamics. As we say, they are all possibilities, and as far as we can tell, the process that's been gone through is reasonable, but they have a good deal of uncertainty associated with them. You can see from exhibit 11 that actually freight did increase quite markedly in the year after purchase compared to other airports, not quite as much as Glasgow but elsewhere. I think that suggests that freight is likely to be one of the ways for the future. We're not in a position to say that passenger growth isn't going to happen, but that is clearly a question in a very competitive, lowland Scotland environment that needs to be kept under close review, and that is one of the reasons for our recommendation that those plans need to be more detailed so that the funding requirement can be estimated more closely. That's fair. On the spaceport point, is Prestwick the government's number one location for that particular exercise, that particular bidding? I think it's one of eight sites in the UK that was identified by the Department of Transport as possibilities. I don't know if you know that as one of the team. I don't think you've reached that stage. The Department of Transport is due to respond in the spring of this year with an initial evaluation of the criteria. It's simply been identified as a possibility at this day. It's just I'm making the observation that the Scottish Government owned this airport by definition. You'd think they'd be pushing this more than anything else. Is that what you found, or did you ask that question? We didn't push that. No, okay. Just finally on passenger numbers, the 50-50 split between income from passengers and the capital investment point that you were answering in relation to Mr Beattie's points earlier on, these experts are looking at it in the context of Glasgow Airport, who have had 22 consecutive months of passenger growth. Surely part of that assessment, which I assume you will audit, will be that maybe the capital investment needs to be on the freight side on some of the other aspects of growth potential oppressor, which I think is where the airport can grow, rather than in the absolute cutthroat business of providing passenger services for Ryanair or any other airline who may or may not choose to base themselves down there. Is that not where the capital investment priorities need to be considered? I think that the detail of that is a question you would need to pursue with the Government because of the commercial sensitivity that we're working with. The capital investment that's required over and above the maintenance backlog is across a range of projects, as Brian has said, sorry, as Graham has said, part of that is around improving the passenger experience, but it's not only that. There is investment foreseen on the other projects that were set out in the strategic vision that was published in the autumn of last year by the Hold Income Act. Final question if I may convene, do you think 40 million is the top number or will we be back here another year's time and there will be more money into this? Secondly, how long is this going to be? You said earlier on there's no timescale given by the Government as to when they come out of this, there's no exit strategy. We're fingering the air here, aren't we? We could own this airport forever more, couldn't we? The current business plan that was published in May of last year sets out a forecast funding requirement of 39.6 and a return to positive cash flows in 2021-22. We think that process so far has been reasonable. We've also said very clearly there is a lot of uncertainty about both of those numbers and it's why our recommendation is about making the plans more distinct and having a very clear exit strategy that is regularly monitored and regularly reviewed with transparency for parliamentary accountability around it. Thank you. Mr Scott's point around the issue of the passenger projections being optimistic, but there was other information available in terms of the Department of Transport projections. Do you have a—just to help me to answer—surely if you're taking a risk to invest in something, you would take the worst case scenario available to you? I mean, I can understand that there might be information that you didn't know and you couldn't project around, but these Department of Transport figures were there. For what reason were they not used? Brian, I know it's itching to get in on this. I'll give you a first answer and then let Brian give you more detail. I think the Department of Transport figures are UK-wide and clearly the impact in individual airports will vary. There's judgment involved in weighing up on the one hand the fact that there had been a trend of reducing passenger numbers at Presswick over some time and on the other hand the sense that with the right investment it might be possible to turn that trend around. A judgment was taken, we think it was too optimistic, but actually with remodeling it on less optimistic numbers it wouldn't have changed that decision. Brian, I think you can give you more detail on it. Yes, I think that the key point that was made to us is that the Department of Transport's estimates of between 1% and 3% growth nationally was extended in terms of the assumptions made for Glasgow Presswick because of the capacity for growth was the argument that was used. I mean, I think if you look in the report at one of the early exhibits you can see in exhibit 3 that the starting point, the high point of Presswick Airport was in 2007-08 when passenger numbers were almost 2.5 million. So the point that was made to us is that the assumptions of higher growth in passenger numbers than the DFT estimates was because it was starting from a low base point. Now, despite that argument, we did still feel that there was an over-optimism in the estimates. If you take the base case estimates over the full life of the consideration which is 30 years, the average growth works out about 3.5% every year for 30 years. Beyond that, what was even more significant in the estimates was that the growth potential was very much front-loaded towards the first six years of the operation and that's why we have the figure of 10.2% pay-year growth. As I said before, that indicates almost a doubling of passenger numbers within six years. Capacity for growth is just another way of saying that there's unused capacity there at the moment. That could also just be taken as a risk figure. There may be the capacity to growth that it may become a space port at some point and I may have the capacity to be an astronaut on it, but it doesn't mean that it's very likely to happen. At the time of the business case, you say in the report that although the risk register included the issue that Ryanair could withdraw from this airport, that wasn't then modelled. Presumably that has been done since, to what the consequence of that would be. The May 2014 business plan is based on a range of much more modelling, including those options, but also focusing not just on passenger numbers but on freight and other sources of income. Sorry to interrupt. The 2014 business plan, what is the timescale involved in that? How far ahead does it look? That's the one that forecasts a return to postive cashlides in 2021-22. At the time that before we get into potentially doubling the amount of money that we're loaning here, the credit rating was described as, this is in paragraph 41, sorry, the Scottish Government says the airport's credit rating is weak. Presumably even though we're potentially doubling the amount of loan that's going to go there, that would still be the case. Would you still consider it to be weak? Yes, the issue in the report that you're focusing on there is the decision about what the effective interest rate should be in order to comply with state aid rules. We think that decision is reasonable. It doesn't affect directly the decision to continue investing. What we think should be affecting that decision is these detailed plans about how the airport will be returned to financial sustainability and monitoring whether that's being achieved or not in practice across each of the strands that passenger growth freight, the other businesses and the airport when we know more about it. So that's a particular technical issue related to state aid rules. If the timescale is 2021, when we might expect to be getting some money repeat, what timescales are right in here, I'll put it in. We're not in a position to answer that. I'm afraid we can't answer for Ryanair. There isn't a contract or something in place that would take you five years, 10 years or so. We don't know that. I don't know what we're able to tell you about it, but Ryanair clearly are working on very different commercial timescales from the Government's decisions about investing in the airport. Is there anything that Ian would like to say about that? We understand there's not a contract in place. The arrangements are less formal than the contract. If there had been a contract, I'm not sure if a contract is the nature of the business of airline operation, but if there was, that may help to mitigate the risk of relying on one operator, but I'm not sure it's in the normal way of business to have these kinds of things. On that point, is there some way we can clarify whether that's the case? To be fair, it's pretty loose to say. We're not sure whether there is a viable contract in place. We're not sure if that's the current arrangements or whatever the national arrangements are. Is that something that we could follow up on? I don't mean in terms of the contractual arrangement there, but what is the industry norm? Is there normally a contract in place or is there not something like that? Is that something that we could get more information on before buying Dew Smith? The kind of doubled amount that we're going to loan and be predominantly taken up with capital. I don't know what you said, but he was going to be trying to provide us a bit more information. Can you maybe give us in that both the breakdown of what you said you would give us the subsidy per operation versus the capital investment? Can we also get some breakdown within capital investment? I can understand if we want to loan money to invest in a Tyrac, a Simon shop or whatever else at the airport concourse. If the long-term future of this airport is not to be a passenger airport, then that seems a strange investment decision to take now without knowing that you want to stay in the passenger business for the long term? Within the £39.6 million, 11.6 million is the amount forecast to underpin the operating loss, if you like, up to 2022. The other £28 million is a combination of capital investment, loan funding to support capital investment. We'll give you what more information we can on that, but there will be limits to how far we can break it down, because the airport is operating as a commercial entity now through the arms-length holding company. You're absolutely right that the breakdown of that capital funding needs to support the likely future of the airport, and that needs to be tested out against the uncertainties related to each strand of investment. What I'm saying is there may be a limit to how much information we can provide about that in public because of the commercial environment in which the airport is operating. Can I ask you, finally, though, if it would not be prudent that the investment that is being made would be in the essential maintenance that you talked about and the things that are about the basic capacity of the airport, rather than—I understand that we might want to invest in the passenger experience in the hope that we might get more passengers. Given that it's the taxpayer that's standing behind this, we could just continue investing in the experience forever and a day, and it could be a fantastic experience, because we still have no passengers. That's very much why our key recommendation in this report is that there has been some work done now to produce the revised business plan that contains a number of initiatives or potential opportunities that may return the airport to financial sustainability, but there is uncertainty attached to all of them and to the overall grouping of them. That's why those detailed plans, plus a regular reviewed exit strategy, is what we think needs to be in place to take us from the position now where £9 million has been invested to the potential for around 39.6 based on the current business plan over the next seven years. We think that that's what's needed to bridge that gap. Can I just forward brings Andrew Iain just for the clarity and the official report? Mr Greenhill referred earlier to the investment in the retail area has been part of some of the challenges that we've faced in those forecasts. I'm sorry, but I thought you gave the impression that that investment decision had already been taken. It was work in progress when we visited. There is a capital plan. The airport does have a capital plan which sets out its intention for forward capital investment. As Mr Key earlier said, some of that is related to essential kind of stuff, which is health and safety, regulatory requirements. Are there others that are related to things like enhancing the customer experience? I just need clarity on that in terms of the official report before we move on. When you say work in progress, is that money that has been committed to carry out of these? Point Andrew Smith's making is why do we invest all of this in retail area if we might not have passenger numbers? We need clarity. Has there been a commitment to capital investment in the retail area in the press week airport, as we speak? Part of the funding that the Government is providing is to, first of all, cover annual losses, secondly, to cover support capital expenditure. Part of the loan funding that the Scottish Government has provided to date to the press week airport is to support the kind of things that I just illustrated. So there is retail work going on at the moment in terms of improving that. So does that not slightly contradict the point that we were relating to earlier that Andrew Smith made? We are investing in the retail area to improve the customer experience when there might be some challenges concerning that being an increase in passenger growth anyway. The increase in passenger growth is part of the strategic vision that was published towards the end of last year. It is part of it, it is not the only one of it, and the point that we have made is that there is uncertainty about all of those and that is why the detailed plans are needed to identify what further funding may be required. Again, for clarity, as at January of this year, £9 million has been provided in loan funding by the Government to the airport, there is a commitment to a further £16.2 million by March 2016 if it is required and the gap between there and the £39.6 million is what is set out as the possible funding requirement up to the end of 2022. It is that process of identifying what funding will be required for which pieces of work and on what business planning that we think is now needed to make sure that it is as likely as it can be, either to return the airport to sustainability or to be clear when an exit strategy other than that is needed. Thank you very much, convener, and good morning. Thank you for the report. I think that there are some positive, very positive issues within this report regarding the financial return, which you mentioned yourself and obviously the monitoring of the airport's on-going business and financial performance, as in good governance. There are a couple of points that I wanted to pick up on. The first point, I do not want to go way back to everything, but it was regarding, I think, Mr Harris had mentioned about the Scottish Government adhering to the Treasury guidance. When we are looking at this particular issue and the convener himself mentioned the fact that safeguarding 3,000 jobs, that would be within the Treasury guidance to go forward within these six weeks in the strategic plan. I mean, a straight yes or no would be fine for me, rather than because— That could be a key part of the strategic case, yes. Yes. Thank you. I just wanted to clarify that point. Obviously, the knock-on effect of the economy, not just in the Ayrshire area, but in Scotland, a whole of 3,000 people losing their jobs would be quite massive in that particular area. I just wanted to point that one out. On page 20, paragraph 33, you mentioned the fact that the Scottish Government made good use of external advisers. Do you want to elaborate on that, or is the paragraph enough to say that it did go forward in the proper manner of looking at external advisers and getting advice in? I don't think we want to add very much to it. We give a bit more background in paragraph 33 about what the external advisers looked at. We feel that, as we say on the previous page, the approach to making the purchase decision was generally reasonable, complied with the Treasury guidance. We have identified a couple of areas where it could have been improved. We also say in our checklist that it is very important that the civil servants are in a position to be able to challenge and scrutinise that information. Brian talked about some of the underpinning information that only became available later, but overall our assessment is that it was reasonable. Thank you very much. It is very helpful and the fact that we have to remember that it is six weeks, and obviously it was the public purse that was involved. I could pick up on something that Drew Smith said in paragraph 37 when he was looking at the positive financial return and how he went forward in the business plan and how it was demonstrated. Apart from the fact that Drew Smith had picked up on the fact of higher than department for transports aviation forecasting, which he mentioned, that is a UK-wide forecast, but he also looked at the assumptions of a bigger airport manufacturer such as Boeing and Airbus, and he put that in the plan as being lower assumptions. If you take on board, I am sure that lots of people will remember that Prestwick Airport, when it was at its height and even before the 80s, was the only airport that still is in Scotland that never got fog bound, so it constantly did the long passenger whole flights. Is that reasonable to say that, although the point that has been picked up was about the Department of Transport's aviation forecast, Drew Key-wide, he also looked at the other side and the bigger air buses such as Longhall? Is that a fair assumption to put in this report? We recognise that the business case did consider factors like the generally favourable air conditions at Prestwick and the longer runway. There is no question about that. We also did conclude that the passenger number forecasts were optimistic. You are right that they are lower than the forecasts that are published by Boeing and Airbus. In a sense, I think that is not surprising that Boeing and Airbus are in the business of selling aircraft rather than buying airports, so if they were using those, we would have more concerns. They did not, they were beneath that. There is judgment involved, as I said earlier, between how far there is spec capacity that can be recouped and how far that spec capacity is likely to be surplus to requirements forever. Our judgment is that the numbers were too optimistic. We also used lower numbers and found that it would not have changed the decision. I am not sure as much we can add to that. I just wanted to pick up another one. It is obviously, I think, that it would have a direct effect on the paragraph 37. Also, there has been mention of air passenger duty. Obviously, long-haul flights, unfortunately in Scotland, you have to pay the air passenger duty to go down south to get a flight and then repair the air passenger duty then as well. If, as the Smith commission says, air passenger duty is going to be devolved to the Scottish Parliament, would that have a knock-on positive effect for Prestwick in long-haul flights? That was its business previously. We know that the holding company is doing some work to model the effects of devolved air passenger duty and different levels of duty. Their view is that it would have an effect. We are not in a position yet to make an assessment of that, not least because I think we know that under the EU rules, the air passenger duty would have to be the same across the Scottish airports and therefore the impact on Prestwick is not at all clear. Thank you. In paragraph 67, we have talked about the space project. It was mentioned about certain airports that are identified by the UK Government. There are eight potential sites, and six of them are in Scotland. I know that I thank you for the report, but you always err on the cautious nuts. That is your job, as you have already mentioned before. If Prestwick was to be the identified site, would that have an knock-on effect on the viability of Prestwick? Clearly, if Prestwick were identified as the successful space port site for the UK, that would open up different opportunities. There would be risks associated with it too, I guess, but also opportunities for income growth and for other services. It is currently one of eight UK-wide sites, as you say, one of six Scottish sites. At the point where a decision is made, it will have a big impact on the plans that need to be made for Prestwick, and it is one of those classic areas where there is still a great deal of uncertainty about it until that point is reached. That might be a cheeky question in this particular one, but if I could ask you. Yet, in general, would there be a positive impact to Prestwick airport if it received the UK space port? It would obviously open up a whole range of new opportunities. I cannot ignore the fact that there would be risks associated with it, but it would open up new opportunities. No question about it. Thank you. Thank you. Thank you, Don. Thank you very much, and good morning, Minister General. I am wondering if I could pick up firstly on the economic evaluation of what is going on, because I understand that you will find it relatively easy in your professional endeavours to order to business where you have a balance sheet and income and expenditure account. Those numbers are relatively easy, and that is what we all do very well. But I am very conscious that paragraph 21 points out some estimates of the number of jobs that are dependent on Prestwick airport. It does seem to me that what happens at the airport therefore has a very much wider economic impact, which ought to be evaluated in some sense or other, because even if the airport is, for example, simply breaking even, that surely has been positive for the local economy, positive for the government, although I am not quite sure which government. I do not want to get into a political issue about that, but can you give me some clues as to what evaluation you could make about the impact of this endeavour or any other on the wider economy? I think that that positive impact is missing from the analysis. I think that it is missing from the analysis and I think that stems from the fact that it was not quantified in the government's business case for purchase. It was clearly a policy decision and we absolutely recognise the government's right to make a policy decision, to purchase the airport, to stop it from closing, to safeguard the jobs and the impact on the local economy and more widely in Scotland based on the earlier analysis that was done. In Exhibit 6, we talk about the strategic case and the economic case that was contained within the business case at the point of purchase. Those relationships were identified, but not clearly quantified at that stage. That is one of the areas where we think it could have been improved equally. They are not straightforward things to do in ways that work it through. Brian, do you want to add anything to what we found about what was done at that point? I am not. I think that that assessment is fair. One of the criticisms possibly of the original case was that that wider economic sense, that wider economic evaluation, was not expressed within the business case. I would perhaps say one thing is that I take the point that even if the airport was breaking even, that would be a good thing, but there is an additional level here of complexity because the airport is in a competitive market. The additional complexity is that it must comply with state aid rules if it is going to intervene in competitive markets. A situation where the airport was breaking even but could not make its state aid returns to the Scottish Government would potentially have potential implications for compliance with EU state aid rules. I can understand that there may be issues about how a Government can fund it, and this maybe makes the point that it would be an extremely good idea if the Government did not do this kind of thing, except an extremist and got rid of these kind of businesses as fast as they decently can. I am still concerned that your analysis at this stage has only just looked at those as you have indicated in exhibit 6. If you were to come back to us in a couple of years' time, which I imagine you might well do on this, I am left with the impression that your analysis would still not include any numbers as to what is going on in the economy in a way that I would have thought for us to understand what is going on. That ought to be important, should it not? It is important. I think I would turn it around and say at that stage that we would expect the Government to be doing it to justify the investment they are making through loan funding. It was not quantified in the business case at the time of the purchase decision. It is one of the things that we think should be done in now finalising the plans for the development of the airport in order to return it to financial sustainability, or to conclude that that is not possible. Right, and with you. Thank you. Can I then just pick up on the issue of experts? I go to paragraph 51 where you say that the Scottish Government has commissioned an aviation expert to draw a revised plan. Now it has to come with the normal caveat. I have no idea who these experts are. What follows is absolutely no implication that they do not know what they are doing or that they are bad people or that they are unprofessional. But suppose they would not because you and I could actually put together a plan. We could probably make it look reasonably credible. Competent people can do that. Consultants work like that. How certain are you that Transport Scotland and the rest of the Scottish Government are able appropriately to understand the advice they are getting in such a way that they do see the limits and how much of this is professional judgment and how much of this is real? You have put your finger on a real dilemma. We make the point in the checklist that we have included in Appendix 1 that in this sort of situation it is critical to make sure that the public body has got the appropriate skills to appoint the right experts and to test and challenge the advice they are getting. We drew the conclusion in this case that the advice that the process was reasonable, including an appropriate expert being appointed. The strategic vision that the holding company published in the autumn of last year combined the advice from their consultant with their own thinking about the opportunities that were associated with the airport and the risks associated with them and sets out the areas where they feel there is scope. Again that looks reasonable to us and we make the very clear point that there is a lot of uncertainty associated with it so when we come back what we will be looking at is exactly how that strategic vision has been developed into detailed business and financial plans and how those plans have been tested and challenged in exactly the way that you describe. At this stage we have no reason to say the expert wasn't appropriate and competent to do what's needed but it is a continuing process of testing that both against other perceptions and other perspectives but also against reality as it unfolds, forecasting the future as they say is always difficult. Thank you convener. I think there is an awful lot in this report that really I find quite good. The identification of the problems that the airport has had over the past few years is not a state secret really isn't it? I mean it will know where it's been. We know how the important it is as an entity for particularly the Ayrshire and South West Scotland economy. The things I'd really like to know because things have changed even since the reports being made and the changes of ownership with Lazgo and Aberdeen. Let's stick with Lazgo particularly we are obviously a commercial entity who are fighting against a equally big entity in Edinburgh airport which has changed ownership so we have a real competitive fight going on here. But one thing that can be discussed and heading back in terms of the air passenger duty stuff as well would be the likes of the York aviation reports and the Price Potterhouse Cooper report that came out two, two and a half years ago and there are thereabouts does explain that air passenger duty adversely affects Presswick airport as against Edinburgh and the others. So in terms of how we've seen shall we say a more dynamic management from Lazgo and Edinburgh as against Presswick and the management setup now who obviously are going to be seeking new business quite strongly I would suspect. Are we content that the management setup at this airport at this time has the ability to look for new business particularly concerning the new competitive edge that Edinburgh and Glasgow have at this minute and time? I don't think we can give you a definitive answer to that. The strategic vision that the holding company published last autumn is based on reasonable preparation from the consultant that they appointed and their wider view of the opportunities available to the airport that they now run. The strategic vision we think looks reasonable what we're recommending in the report there first and foremost is that those that vision needs to be pinned down into detailed financial and business plans and the government needs to be very clear how it's going to review the the way those plans are achieved in practice their success or otherwise and how it will make decisions about either continuing loan funding or a different exit strategy if that's what's needed. I think the key point is that the decision so far has been reasonable and there is still a great deal of uncertainty which needs to be monitored and managed closely. I mean I'm glad you keep referring to this thing about a reasonable way of working in this case. I don't think there's anything particularly controversial. I think it comes down to a political angle that the government wish to save the jobs and the economy and I think that they had their hands down by tying behind their back. However I do appreciate the difficulties that the airport has but from what I can see in this report the general I mean I know it's been it's been discussed over here. Colin can we just clarify can we stick to questions and then we can just one final question. Okay well the one final question then is really you're obviously satisfied in terms of the management of this takeover bit and the way that's going forward. My finding in the report is that the process which the government undertook in making the purchase decision was reasonable and that it's now time to establish detailed financial and business plans together with a regularly reviewed exit strategy that looks at how well those plans are achieved in practice and whether an alternative decision needs to be taken. Just got a general point and certainly was my last thought. I mean we've had quite a lot of the conversation today talking essentially about the policy decision and conger talked about you know I think we all appreciate the devastating impact the closure would have particularly in Ershire but actually it's important to the whole of the Scottish economy and so presumably when we when we've talked about the six weeks that the government had to draw up a case and the detail that's I take that but there obviously would have been a longer term interest from the Scottish government given that this is a strategic asset which is not in public hands but would have such an impact in terms of the public purchase if people were to be made redundant or if businesses were to close etc. Are there any lessons through this process that you've been through in relation to Presswick airport that you think are worth sharing around our approach to these issues in general and hopefully they don't come up too often but does the expertise exist within the public sector to be able to deal with things given the likelihood is that when they happen the timescales are short so how do we do the long-term planning when things are not as urgent? I think that's a really good question I'll answer it briefly at two levels. First of all the checklist we've included in Appendix 1 summarises our learning of what would make this happen as well as it can do. Lots of it was done this time we've identified some areas where it could have been done better we've captured that in the checklist. Drawing back a bit though I think I'm increasingly conscious that the government is making decisions about economic interventions pretty frequently if you look at the decisions about Palamys, about Presswick, about grant support to Ineos that we can all name other examples. I'm interested in pulling back and saying how does the government prioritise those decisions one against another rather than always looking at the imminent decision that needs to be made and in considering my per future performance audit work that's one of the things that I'm considering and may report to you on that in future. I'll be very welcome. Thank you. Tabish Cotten in May's camp. Thank you can I just ask one brief supplementary to the point you've made regularly this morning about the detailed business plans. Are you confident that those business plans will be realistic in terms of the passenger numbers? The reality of the passenger numbers is not some optimistic, use your word, optimistic assessment of what they might be in some world as opposed to the reality of the numbers that you've given in evidence this morning. That's a difficult question to answer definitively. We have found that the process so far has been reasonable although the passenger numbers were optimistic. We all know that in people managing large projects like this, not just in the public sector but elsewhere, optimism is a problem you need to be aware of. It's why you have an optimism bias allowance in capital investment. We will be looking at the way this unfolds as we say in the report and we would expect the government to be doing that as well in making decisions about future loan funding. That's one of the reasons for the two-parted recommendation, the detailed financial and business plans and the government's oversight of those to continually review them and test them about further investment decisions. I just wouldn't like anyone to leave here today and assume that, because the Scottish Government owned Prestwick airport, it would be a frontrunner for space travel. As an MSP for the Highlands and Islands, I have to put on the record that Lossy Mouth has long been associated as a frontrunner for space travel. I also say that the £40 million going into Prestwick has been many, many millions going into RAF, Lucas, Kinloss and Lossy Mouth as well as Campbelltown and Stornoway. If an economic case was there, I think that they would be fighting their corner. Auditor General, just to say for our private discussion, will you be coming back to this? Will you be keeping an on-going watch and an analysis? There's been a lot of uncertainty since the Government bought this airport for a pound. There have been lots of changes in forecast and so on. When will you be coming back to us? What are your future plans regarding monitoring and analysing Prestwick airport? We will continue to monitor it. Brian here on my right is the auditor of Transport Scotland, and this is clearly one of the issues in his audit work every year to consider. I don't want to make a commitment for when I will come back at this stage. I think that it depends on the way things unfold. I'll come back to you when there's something to report across the board. That doesn't just mean when there's a problem, when I think that it's something that will add to the committee's deliberations, you have my commitment, I'll come back to you. Before we finish, I just asked one other question just for the record. In terms of the previous owners, are they still in business and are they still operating in other airports? The team will keep me straight, but I think that Infratil's decision was based both on Prestwick's performance but also a wider strategic decision about withdrawal from a number of airports outside this particular one. Yes, they also owned Mansden airport and Lubeck airport in Germany. They've sold both of those airports, but as far as we are aware, they are still trading, but they have refocused their efforts in New Zealand, which is where I think they originally came from. Just also to clarify for the record, in terms of their exit strategy, there could have been costs associated with contractual obligations that they would have had if they did want to receive a ship at the same time. I know that the Government have purchased the airport for a pound, but that can be advantageous to the seller at the same time, because they may have kept contractual obligations that they would have to have met that, of course, could have cost much more. Part of the due diligence work would have been to look at those kinds of issues, whether or not there were any contractual obligations that the airport would be required to meet. I think that it's also fair to say that, in accepting one pound, Infratil also wrote off the debt associated with the airport. Okay, that's very helpful. Okay, can I thank you very much for your evidence, and I'll move the committee into a brief suspension for five minutes. To agenda item number five, we will consider response from the Scottish Government to a report entitled, Report on Accident and Emergency Performance Update. There are two areas where the Scottish Government have committed to come back to the committee with further information. Members also have a letter from Audit Scotland confirming that it is preparing an impact report on the previous report on A and E performance. This impact report will be published after the summer recess, and it will comment on the areas identified in paragraph 38 of the report. Can I invite questions and comments from colleagues? Mary Scanlon? I do not in paragraphs 3 and 4 that the Scottish Government will provide further updates, and I welcome that. I find it quite incredible that we have to wait three months to find a definition of self-referral. There is only one person who can self-refer, and that is yourself, and if we have to wait three months to get a definition of ourselves, I find that slightly odd, but there you are. I have only been around for over 60 years, but I look forward to getting a definition of myself so that if I do self-refer in the future, I will know who has done it. I look forward to the definition of self-referral in three months' time. I think that I had my sceptical heart won't convener when I read this, because I have responded to the report by recommendations mainly to committing to reviews, collaboration, sharing good practice and lots of other civil service and government jargon, as well as commitments to other updates. I suppose that if we have alerted them to some of the issues and accidents in the emergency that were covered on media this morning, then that is good, but to be honest, I feel a little bit fobbed off and a little bit kicked into the long grass. I seriously wait a definition of myself. I look forward to three months' time when we hear more about accident and emergency updates. I hope that some clarity will be forthcoming then. I think that this is very much a work in progress. I think that this committee has done good work in highlighting some of the issues that the NHS faces. To be fair to the NHS, I think that they have picked up on that. Mary Scanlon mentioned specifically about definitions of self-referral and 999 emergency services referral. What is clear from what Paul Gray is saying here is that it is a question of consistent interpretation. That is a problem that we have had with data before. Consistently, over the years, there has been a problem in comparing data between different areas of the NHS. If that is going to bring some consistency and clarity to it, it is a good thing. I can understand that it takes two or three months to get that in place. I think that the committee is doing its job by focusing on those things and getting them to focus on it. If we are looking at the conclusion on that, I think that possibly the fourth bullet point might be the way to go to get a progress update on any recommendations in the next Scottish Government progress report, which is May 2015, which is a reasonable horizon to look at. I am concerned that there is a risk that, as MSPs, we get into a lot of detail, which we would like to, but which would be appropriate to another committee. There is a risk that we start doing the health committee's job for them. I feel that we have examined the issues. We have produced a range of things that we think need to be looked at. The Government has given us a substantial response to those. My instinct is that wearing the MSP on an audit committee's hat is that we should just leave them to work this through and make sure that we go back to it on a sensible timescale. If they have told us that they are going to give us things in three months, that is fine, let's have those. Otherwise, should we not just refer this to the health committee and to the extent that they have not already picked it up and see where they want to go on it, rather than do their job for them? I was not saying anything, but I so disagree with that. The whole purpose of committees being consistent in their pursuit of evidence and what they take and then follow on from Colin Beattie's very fair observations is to look at it again. The health committee won't have a clue about this particular area that we have looked at. They will be looking at lots of other things and it will be a huge amalgamation of vast amounts of other information. We should do the job that we are paid to do, which is to be consistent about the things that we look into and take the three-month report, as Colin Beattie rightly says, and keep doing that, so that we keep our eye on the issue and not drop it, which is what committees normally do. I just feel that I appreciate that we have quite a few new members on the committee, but we have excellent evidence sessions over accident and emergency. Self-referral was a significant issue and there were huge increases in self-referral. I think that everyone agreed that we need to understand that. Does it mean that people can't get GP appointments? Is there something else not working? Why is there such a huge increase in accident and emergency? In order to look forward—I do find the Government looking forward to the seven-day working, et cetera, which Hugh Henry asked a lot of questions about—in order to understand why there has been a significant increase in self-referral at accident and emergency, we need to understand what is behind that before putting forward more resources. I am with Tavish Scott on this one. There is nothing here that we need to ignore. I think that we are doing our job right. I do not think that that should be referred back to the health committee. We have more than enough to do. Self-referral is an important part of our work and is an important part of the evidence sessions and is a critical part of our audit because it is a complete change in the patient behaviour. I can understand that there is concern about micromanaging. It is not our job to micromanage the NHS, but we have a constructive job to do in pointing out anomalies and working with the NHS, highlighting the issues and helping them to take it forward. Sometimes they need a wee bit of focus brought from an external party like us to ensure that that happens. I think that they are responding. It is fairly positive that some of the stuff is coming back from Paul Gray. Yes, there is civil service jargon in there, but at the end of the day it is moving in the right direction. We have a responsibility to make sure that it keeps moving in the right direction. As a new member, I am happy to go with the wisdom of people who have followed this issue throughout. I would certainly agree that we proceed in the way that Colin Beattie said in terms of bullet 4, which I think will take the progress report with me. Can I clarify, then, that this is going back to this in May after this report and that it will be in respect of the committee's recommendations, so we will seek an update on that respect. Is that agreed? Agreed. Thank you, colleagues. I can move to agenda item number five. We have written submission from the Scottish Government to the Water General Scotland report, entitled NHS Scotland 2013-14. Members will recall that we are meeting on 14 January. We took all the evidence from the Scottish Government on that report and agreed to note the evidence and the report. Having considered the response, I am minded to, given that the AGS will be reporting again on the NHS performance at the end of this year, I am minded to note the report. I wonder what colleagues' views are on that aspect. I think that that is probably fair. The thing that I might ask through you to the Auditor General and Audit Scotland is about consistency. Colin Beattie made a point in the earlier item about consistency of data. Here we have in the halfway down this front page for simplicity. We have decided that, as of April 2015, we will use the term LDP standards, whatever the heck that is, to replace heat targets and heat standards. Where is the consistency there? It goes on to then say that heat targets on delay to discharge will be covered in the new integration indicators. That does not say that they will be the same. That says that they will be covered in that. In other words, we used to criticise the Tories, you will remember, Paul, for changing the way that they counted unemployment in the 1980s. This just looks like Government doing that exactly again, which is to change the way that they count something and then expect us to follow it. Maybe I can ask through you, convener, that Audit Scotland stop the Government from changing the way that they count things so that parliamentarians and the rest of us cannot keep an eye on what is going on. Mary Scanlon. I think that I did establish in one of our previous evidence sessions that a standard is a heat target that has not been met. When it has not been met, it becomes a standard. However, I am very content to note the report, convener, but there were just two points that I wanted to raise. I think that this constant referral to a legal requirement, I am not entirely sure if it comes under Audit Scotland, but the assumption that there is a legal requirement and yet the patient can do nothing, there is no law that gives the patient treatment within a certain time. I really do, and there is no sanction against the health board if this legal requirement has not been met. I think that just a bit of clarity, although having said that, I am not entirely sure it is Audit Scotland's responsibility. The second point, convener, in recent days has been quite a lot in the news about health boards for obvious reasons. I do get a bit fed up hearing that the solution to delayed discharge, which is also known as bed blocking, the solution to most of the problems will be the integration of health and social care. We have had integration of health and social care in Highlands for two years, and it has just as many problems as any other health board in Scotland. I say that, convener, because in the presence of the Auditor General, who is still here in the public seating, I do hope that you will look at what success have we had with already integrated health and social care and is it really a panacea to solve all the problems in the future? As a representative for NHS Highland area, I do not think so. I am happy to note this report, but just to pick up on heat targets and heat standards versus LDP standards, I think that it was this committee that triggered that change, because it was us that pointed out the anomaly, the confusion arising over the two figures. We did not suggest the name, and I am not sure what LDP stands for to be honest. Local delivery. Local delivery. I am told. But I think it is our fault. OK. Anybody else? Any other colleagues are content to note the report? OK. Thank you, colleagues, and as agreed, can I now move the committee into private session?