 Rwy'n meddwl i'n meddwl i'r 18 of the meeting of the local government and the communities committee in 2018, for everyone present to turn off mobile phones and as meeting papers are provided in digital format, tablets may be used by members during the meeting. We have a full house of MSPs today, and all apologies have been received, and we moved on to agenda item 1, local government and Scotland's challenges and performances in 2018. The committee will take evidence for the council commission on its support i cychwyn i ddaddisation gyngor. Felly, mae gridrwch iawn i ddechrau'r ddau. Gweld ddatblygiad Grim Sharp, chael Arciw Llywodraeth Cymru. Ferdigol unioniaeth, rydyn ni'n gwyllashesgwr yn èw. Felly, wrth i ddechrau'r ddau, efallai, rydyn ni'n gwellaeth. Fraser McKinley, pan ddau i'r canllid gysfodd erbyn, Roryn Nicolaas, bywyd Cymru, rydyn ni'n cael ei ddau, ac Ashley Magitydd, bywyd Cysryr, rydyn ni'n cael ei ddau, oedd ymgyrch wedi bod i anodd试wn hyn rental iawn ynghylch i ni rows 여러� go broadcasting learns ond hefyd, ac rydyn ni'n flashing i'n gwybod gyda Comisi,但 gysylltu i ar ampron 말� sectione am gyfer hwn o gymerwyr Cementart yn Lleidawn is increasingly complex with increasing levels of uncertainty. The UK's withdrawal from the European Union is expected to have profound implications for councils. The Scottish Government's commitment to a significant pace of public sector reform means that there are some major changes for local government at key stages of implementation. These events are taking place at the same time as substantial reductions in public spending and increased demand on many local public services. Implementing transformational change is becoming essential to councils as they respond to those challenges. Forecast funding gaps are higher than current levels of reserves for some councils, meaning that the delivery of savings is becoming increasingly crucial. The proper scoping, resourcing and management of transformational work is key if councils are successfully to deliver sustainable service change. Cohesive, decisive leadership is also needed to bring officers, councillors and their communities together to address the major challenges that councils face. Councils are engaging with the increasingly difficult task of managing the competing priorities of reducing costs and maintaining services for an ageing population. Current arrangements mean that some councils can expect to receive less government funding as their total population declines, while an increase in their older population means that demands on key services such as social care increase. At the same time, the implementation of significant policy and legislative changes will increase expectations and duties of councils, and in many cases will have additional resource implications. The detail of some of those changes is yet to be finalised. Despite continued budget reductions, national indicators suggest that councils have maintained or improved performance in a number of areas. However, customer satisfaction levels have fallen and some services are not keeping up with demand, suggesting that budget cuts are having an impact on services. Smaller service areas have so far borne the brunt of funding reductions. The recommendations in our report are directed at both senior managers and councillors, whose role continues to become more complex and demanding. We highlight again councillors' need for training and development and good information about finances and services, including long-term financial plans. There is substantial change in the environment within which councils operate. The commission continually considers how its work reflects that changing environment, and this annual overview report has intended to be a helpful summary of evidence from the wide range of local government audit work carried out. It cannot realistically cover everything and it is not a comprehensive review. However, it highlights the key challenges that councils face and looks at some of the main ways that councils are responding to increasing demand and reduced financing. I thank you very much, Mr Sharp. I appreciate that introduction. I might start on some of the numbers in relation to the finances that are available to local authorities. That said, I think that I should point out what to get eventually beyond the numbers, look to see how local authorities are dealing with the challenges irrespective of the figures, but, just to get a better understanding of those figures, there is no doubt in the challenges facing local authorities. At section 17 of your report, you say that between 2010-11 and 2018-19, revenue funding has fallen by 9.6 per cent in real terms. There is no denying that. Of course, this committee has sought to probe those numbers further during budget scrutiny. I do not have a direct crossover for those numbers, but if you look at the years 2013-14 through to 2018-19, there would be £355 million of integrated joint-board monies for health and social care provision, which effectively goes to the social work care side of things, core business of local authorities that would not be accounted in those stats, and another £150 million of other grant money. I had £505 million in total, not included in those figures if I got my sums right. I may not have, Mr Sharp. I am happy to accept that I am wrong here, but it has been put to me that that would be a 2.1 per cent real terms cut. Still a cut, still significant and still challenging, but what I want to get beneath is—I have asked these questions before to the council commission—is that when we look at that 9.6 per cent real terms cut, are we looking at the bigger picture or are we not looking at the bigger picture? If there is £505 million for the years that I gave that goes to fund local government services through integrated joint boards, surely that has to be taken into account? Well, you have correctly identified an area of difference between the way that data is presented by different bodies. From our point of view, we have looked carefully at the rationale for the difference amounts of money and we are content that this is the fairest way to present it, that the position of the funding of joint boards is not necessarily treated the same way across the board, but I am happy to open that out and, Fraser, you might want to further expand. Yes, not much to add, convener. As you know, the report that we presented to you previously—this is obviously the report that we have in front of us today—focuses on the wider performance of councils. The one that the commission publishes in November is the one specifically about finances, and you are absolutely right that you have asked us that question. In that previous report, we tried to better split out the different bits of local government funding, as you say. We continue to be of the view that, because that integration money is funneled through the health budget that is reasonable for us to take the revenue settlement from Government to local government, as what is in the local government bit of the budget, if you like, and that is what this is referring to. We also recognise that there are other bits of funding for specific purposes. We continue to—and, obviously, the SPICE did a very helpful briefing recently about local government finance, and my team was involved in working with the SPICE team on that. As we look ahead to the next financial overview, which will be in November of this year, we will continue to try to present all that in a way that is easier for everyone to get their heads around. That is very helpful, and I would agree with all of that. I merely make the point—I want to explain a little bit further, go beyond the numbers to actually see how the monies are being used—that £355 million over a six-year period will directly support social care initiatives in local authorities has to be relevant when you are talking about the spending power of local authorities and a revenue grant. My feeling is that it should sit beside it to give the bigger picture, but I do not see that within the report. That is actual money that is spent on the ground supporting services. The Accounts Commission talks about changing demographics and ageing population—the perfect storm, if you like—of a decreasing population but an ageing population at the same time, so a smaller base, perhaps triggering less monies from central government, but a population with complex health needs and multimorbidities needing greater social care and support. That is why I think it is pretty relevant to talk about the integrated joint board monies in relation to how some of this is supported. We have done a mapping exercise between the monies for integrated joint boards to meet those demands that you directly mentioned in your report. You say in your report that a big challenge that we have is a declining population but an ageing population. That might affect the revenue grant, but the other side of the coin might affect the integrated joint board monies that are available to meet that demand. Have you matched those two together so that we are comparing apples with apples? We have not matched it together at an individual council basis, but I think that there are two points there. One is about how you treat the monies that you have correctly identified at the beginning. Part of our rationale in determining how we look at it is looking at decision makers and who is responsible for the money. Obviously, if the money is going into the integrated joint board, it is the integrated joint board responsibility. The councils work in partnership with the IJBs and, indeed, with other partners to provide many services. Here, we are focusing on councils. You can always expand the scope further to bring in more partners if you are looking at specific areas. At the end of the day, you also want to have a view on councils. In terms of looking at it and breaking it down into specific council areas, this is an overview report, so we are not considering individual councils and we would do that in our individual best value assurance reports on the individual councils. The point that we are making here is that about 25 per cent of councils are in a position where, under current funding arrangements, their funding would go down as their overall population goes down. That is just the way that the formula works. However, in terms of the mix of their population and the potential needs of that population, you would anticipate that that might well increase as, in particular, the older population increases. It is that disconnect between the direction of overall funding and demand, so resources go down as demand goes up. It is a general point, and you are quite right in terms of looking at an individual council at a best value report. We would look at all those issues and we would look at the IJBs as well. That is helpful. I support it. I just want to clarify one thing and then to other members if they want to explore the theme further or move to a new theme. I am looking for members to catch my eye at this point. If revenue funds from local authorities start to suffer because of a decline in population vis-à-vis other local authorities, they will get an increasingly ageing population with more complex needs and greater support. If that is not going to be fully reflected in the revenue grant, first of all, should it be? Do we have to look again at how the revenue grant waits for that kind of thing, or alternatively—this is why I started off my line of questioning—is this a way to better identify the monies that go to integrated joint boards? Is that a better area to put the money in to support that? We absolutely have to look at both at the same time to get an accurate picture of the financial support at a local level to support some of the older, more vulnerable people in society. Do we adjust the revenue grant formula to better wait for that, or do we assure ourselves that the integrated joint board grants take account of that? What do you think it should be, Mr Sharp? Maybe a third solution. I think that we would be straying into policy decisions to give a view on that. I think that what we can identify is that, under the current structure, you have this distortion for certain councils where funding is going in one direction and demand is going in another. Clearly, there are different ways of trying to manage that. One way might be through IJBs, and then you would need to look at how they are funded and how that links up with meeting the demands of that particular population and whether all fits together. Another way would be to just look at the funding formula itself and say what are the other ways that we might structure the funding formula. I think that that is a matter for policy makers. In the last report, the financial overview, back in November, the commission suggested that Government and COSLA assure themselves that the funding formula is fit for purpose. That is the usual kind of auditor to speak for. You might want to have a look at that. For exactly this kind of reason, I think that I said last time that we are here in very simple terms. The more we continue to add specific bits of funding for specific things, it does make you wonder whether the core funding formula still makes sense. It has been pretty much as is for a long time. On my second point briefly in the Exhibit 4 of this report, the challenges and performance report, it is important to be in mind that the picture is very different across the country. I do not think that one size is going to fit all. I do not think that there is a straightforward answer to that question, particularly in terms of funding for IGBs, because of course different IGBs across the land do very different things. The scope of services that are delivered through integration in lots of places—in some places it is just adult social care, in some places it includes children—is not straightforward. In Midlothian, for example, which is on the right hand side of that graphic Exhibit 4, it is experiencing completely different challenges to do with population growth and quite significant increases in the population age of 0 to 5 young children. The challenges in Midlothian are clearly very different to the challenges in Inverclyde. I think that whatever funding formulas or way of funding are designed, it needs to take cognisance of those local circumstances. That is very helpful. I apologise to witnesses for yet again raising the theme at committee, but I still feel that we have not quite got a hold of the matter, which is why I keep raising it. I find it really difficult to get an overall picture of what is actually happening, but I would also put on record that, irrespective of that overall picture, I do not think that any of us would seek to diminish the significant challenges in local government finances. I also know that chief executives and council treasers will hate me for saying this, but money is inputs in much of this report as about how we deliver outcomes when we manage and show leadership on workforce plan, and I am sure that we will come on to all of that. There is my slight apology for that line of questioning, but no doubt it will be the same time next year, and I will ask it all over again. Jenny Gilruth Just as a follow-up question into your line of questioning there, convener, with regard to workforce planning and specifically with regard to IGPs, I have a local issue in my constituency, and it is fife-wide at the moment with regard to the closure of our services. The responsibility is being provided to MSPs because it is due to GP numbers. I would like to get a bit more clarity with regard to who you think is responsible for the workforce planning in terms of GP numbers. Obviously, we have the health and social care partnership, the IGB, on which elected members sit. We have the council, the Scottish Government. It is pretty difficult, as a constituency MSP, sometimes to get accountability at local level. Last week, the IGB voted on the closure of our services and on a public consultation, which is now going to happen. Elected members were taking part in that vote. I also note from your report that one of the strategic priorities relates to councillors having the right knowledge and skills to scrutinise council performance and decision making. As a question mark there over, do our elected members have that knowledge and skill-based to make those decisions, but who do you view as having responsibility for GP numbers and workforce planning? It is a niche question. I appreciate it. This is not me ducking the question, but we are doing a report in November about integration and progress. Those are exactly the kinds of issues. That is a joint report with the council commission and the order general, because it recognises that integrating health and social care is a joint responsibility across national and local Government. I should also say that, as well as that, the order general planning next year to do our report specifically on primary healthcare workforce. We did an acute one last year, and we are now going to be looking at primary care, which is where we will pick up the GP number. Having said all that, in strict terms, workforce planning for GPs is the responsibility of the NHS, but clearly you have to look at that in the context of the services that you are trying to deliver locally. That is where, as I mentioned earlier, the scope of the powers—forgive me, Ms Gurruth, I cannot remember what the scope of the IGB is in Fife off the top of my head, but clearly the scope of the services that are within the powers of the IGB in Fife will therefore determine how they are deciding how to shape services locally. Your point about the role of elected members as well-made, I would argue that exactly the same case is made for the NHS board members that sit on the IGB other way round, because they have to get their heads around social care in a way that they have not been used to. Those are all absolutely the kind of questions that we are looking at and will be reporting on later in the year, because we see very patchy experience of how this is working locally. I am afraid that I cannot give you an answer to the specifics of the Fife case, but, more broadly, I absolutely recognise some of those challenges. I was just looking at the Exhibit 4, which you mentioned earlier. It is quite fascinating to look at the areas where populations are decreasing and increasing and the different age groups. I am just wondering whether you think that the current funding formula, the way that councils are given money, should change on the basis of age of population and whether those various groups are going up or down? I think that that is the point that Fraser was referring to earlier. We have suggested that that is looked at. It is not for us to decide on what the formula should be, but clearly the existing formula is having different effects on different councils because different councils are finding a different pattern of movement and resources and demand. The formula is not matching movement and resources to movement and demand in that sense. That is why we think that it is worth that being looked at. Where would we look as a committee to establish the gaps? The formulas agreed between the Scottish Government and the Scottish Government, so it would be for them to consider the matter and have a look at alternatives to see if there was a better way of doing it. Certainly, we are pointing out that at the moment, there is clearly a disparity in individual councils. In fact, this is a general point. This is an overview report to give a view of local government across the board, but an important fact to bear in mind throughout this is that there is considerable variation across individual councils. That is one of the areas where that comes through quite strongly in terms of funding and demand. It is one that we have highlighted before. It is always a controversial area, of course, because when you start meddling with the funding formula, councils fall out with each other. People leave COSLA and things like that. I do not ask you to comment on that. That was just a reality. It would be great if you did comment on it, but there might be a mission drift. I think that we have that frustration as well, which is why I was wondering whether, if we do not tinker with the revenue support grant formula for local authorities, we would tinker with the IGB inputs. We have to go ahead around that as a committee to make sure that it is better to reflect on the needs of the communities that we serve absolutely. That is an important line of questioning. Monica Lennon, MSP. When the report came out in April, the section that I was most concerned about was really about the experience of older people who need adult social care. It was a section at page 36 where, for example, you say that recent local inspections have raised significant concerns about social care service ability to meet demand from older people. There are some examples from different parts of the country, for example people in Edinburgh waiting 100 days for an assessment and people having to wait a further time for a care package to be put in place. Scottish Borders, nine-week waits for top priority cases and we were told that overnight care for people at the end of their life who wanted to die at home was especially problematic. There seems to be a problem right across the country. I know that you have posed a question in the report on how your council and IGB manage demand for social care services. I appreciate that a lot of the IGBs are just bedding in. We have talked about this a lot in another committee that I used to sit on at public audit. Is there enough national guidance coming down from the Scottish Government to allow people to meet local demand but to have a consistency of service? How do IGBs and councils share best practice? We have talked a lot about the challenges, but there must be some really good work happening as well. How do we try to cascade that learning? First, as you have recognised, IGBs have taken over responsibility quite recently, so it is still early in their life. As Fraser mentioned, there are different models across the 32 councils, so it is not a single division of responsibilities. Also, as Fraser mentioned, we are doing a report on this later in the year on looking at IGBs. Precisely for this reason, they are new. They have a very important role to play. How the IGB works with the councils is hugely important, and how it works with the local national health provision is also very important. That is an area of concern for us to understand and look at, but it is one that we will be looking at later in the year. I think that, just to add, without giving too much away, there is no doubt that IGBs, and when the commission and the order general reported at the last time round, a huge amount of focus on getting themselves up and running. Governance, some of the relationship issues on the boards, budgets have been extremely tricky and continues to be, we think, just how exactly the money is from the health side and the council side are working, both in terms of coming together to form a budget, but then even more problematically sometimes when there is an overspend and what happens to that. Lots of issues there. That is not to say that there is not good stuff happening on the ground, because there is. I think that most people would recognise that there is lots of great practice. I think that the question for us is whether that is happening because of integration, or whether it is happening anyway, or in some cases whether it is happening in spite of integration. That is the kind of stuff that we are really looking to get under the skin of in this next piece of work. We are visiting six different areas to try and get under the skin of what is happening in terms of service delivery, having recognised that a lot of the focus was about governance and about getting set up. We are now asking the question, so what difference is this beginning to make to the way that services are delivered and, therefore, outcomes for people and their families on the ground? That is exactly where we are at. What we see from the care inspectorate work, as you have identified, is that there is some good practice locally, some quite thorny systemic issues that need to be addressed, and that is exactly where you would expect the IGB to be making the difference. I appreciate that it is still quite early days for IGBs, and that focus on governance is really important, but when you look at the experience that people are having, it does give cause for concern. We know that workforce is clearly a big issue. I also note in your report that a survey of home care workers by Unison in 2016 found that 80 per cent felt that their service had been affected by budget reductions, and many staff have described that as a focus on quantity, not quality. When you hear things like that, it is hard to see that people will be attracted to working in social care. Is that a problem to recruitment more generally? The workforce planning issue is an issue that we have identified more generally, and it has a number of aspects to it. One of them, as you have seen in the report and in other reports, is healthcare. It is one of the areas that is a major employer of European workers, and that would be a factor that will affect things going forward, depending on what happens on a Brexit arrangement. Undoubtedly, workforce is an issue, but, as Fraser said, the whole structure around IGBs and how they are operating and how they are integrating with their constituent bodies is something that we need to look at. It is early days, but it is really very important. We are looking at bodies that effectively are a partnership between two quite different sorts of organisations with different cultures and different budget structures, and all that needs to, in some way, fit together to support a satisfactory service. On workforce, we know that reducing staff numbers has been one of the main ways that councils have reduced their spending, and we know that that will likely continue in councils. Are councils adequately staffed or resourced to manage and achieve transformational change? I am wondering about not just the numbers of staff but also the skills and do we have the right mix of people doing the right jobs? We have emphasised workforce, planning and, indeed, an organisational-wide workforce plan. I think that we noted that barely half of councils have an organisational-wide workforce plan, and the reason that we mentioned that specifically is because, if you are looking at transformational change, it starts with looking at the outcomes and saying how do we best achieve those outcomes, forgetting about how we do it now, what is the best way, given what is available to us, and then the sorts of techniques that one would be thinking that people would be looking at would be more flexible working within organisations, better use of digital technology both to transform what is happening inside and also how you supply services, working in partnership with other councils or with bodies outside that are not councils. All those things are part of transformational change. The workforce part is very important because you are looking at potentially a different shape of organisation with potentially different services being supplied. What you need to do is to really look at your skill base going forward and what you will need for that new shape and look at what you have now and then have a plan to get from one to the other. It may well be achievable with fewer numbers but it may well be that the skills that are needed are different and there needs to be a plan as to how you transfer those skills or acquire those skills into the workforce, so it is a very important issue that is an integral part of transformational change. Just briefly I think that part of the challenge and obviously as well as the overview report I report to the council commission on individual best value audit reports and one of the things that we look at there is the extent to which councils are investing in teams to help the transformational change, exactly as you say. That is quite a difficult thing for councillors quite often because you could argue that they are not seen as front-line staff and actually trying to invest in a team that is going to help deliver the change that Graham has just described is quite difficult. Our sense is that you do need to invest in it though and you do need to resource it properly because that is the only way in which they are going to manage to make the kind of changes that we think that they need to make. I wonder if you have come across any examples in local authorities where I know that approach is going to be beneficial but they are resisting it in the short term because of funding pressures or are there examples of leadership teams within councils that maybe do not see the value in it? Yeah, I think that we see a mix of those things so we have definitely seen recently councils that have invested in those teams. I think that it is probably no surprise that the bigger councils find that a bit easier to do. I think that some of the really small councils really do struggle to resource, if you like, at the corporate centre, a team that is going to help the transformational change. I think that our argument, the commission's argument, would be if anything, those are the councils that most need to do it because that is where it is most required in some cases. I think that my sense is that it is not a resistance to change thing. It is a genuine trying to make the books balance, trying to invest and protect the most vulnerable in communities and in that context it is quite difficult to be seen to be investing in the corporate back office centre. I think that we are continuing to encourage councils to do that. My sense is that people are absolutely not beginning to realise that the status quo needs to shift. I would add to that that where we have looked specifically at councils that are small and may be challenged to carry out the transformational change programme, we have very much encouraged them to look outside and seek assistance from other sources to supplement their own in-house skill base because it is easier for larger councils to put together a team of people to go round and look at it and transformational change itself. Even after you have designed it, the implementation is hugely important and difficult. It is probably about 50 per cent of the difficulty in doing it. The importance of people who are able to carry that out cannot be underestimated and the smaller councils may need to acquire that from outside. Just a final question from me on that point. Going outside of the council, are you meaning buying in consultancy services or are there other opportunities to work with perhaps other public bodies who are doing some of this work for funding already? I appreciate for smaller councils that it is maybe hard to set up a full team on that. What could that look like? I think that they can access various different sources. They can speak to their peers and other councils to get advice. They can get support from COSLA and get support from the Improvement Service. They can go outside to specialists in particular areas. If it is something around procurement, they can go to procurement specialists. I think that it is identifying the different skills that they need and looking at where they can get assistance. However, they need to draw in all those things if they do not have the resource in-house, because it is not really an option to make it up. You do need expertise to do it properly. I will get some further lines of questioning, but Mr Simpson was a supplementary who had the relation to the line of questioning, because I was going to bring Mr Stewart in next. I think it probably is, convener. Yes, because he mentioned small councils and their ability to change. I was just looking at the figures on sickness days, noticing that CLAC manager, which I think is the smallest council, is consistently the highest for sickness days. If you take non-teaching staff 16.5 days a year, that is the highest. It compares to 8.8 days in East Ayrshire. If you close that gap, it could be 730 full-time employees across Scotland. For teachers, East Ayrshire seems to be the best 4.1 days compared to 9.8 days in CLAC manager. Is there something that East Ayrshire is doing that CLAC manager is not doing and that CLAC manager and others could save an awful lot of money if they did things differently? Have you looked at that in any detail? As you will be aware, we did have a best value assurance report on CLAC manager a couple of months ago. We said that the council had to take urgent action to address the situation that it was facing. It could not continue in the way that it had been operating for the past few years. As we always do, we followed that up with a meeting and we continued to monitor the position through our auditor. The position in CLAC manager is specific to CLAC manager. For example, the absence figures, as I recall the report, were in finding ways to save money. It was noted that posts were not always filled, so staff were running with fewer members than was normal. That can sometimes lead to effects such as greater levels of absence. CLAC manager is an area in which they need to look at how they operate and carry out a change programme. We have said that publicly. As you are reading from your report, East Asia seems to be the best in managing absence. Have you looked at what they are doing that other councils are not? In this piece of work, we simply reflected the material that has come through. Although the commission published a best value assurance report on East Asia this week. Inevitably, with any of those reports, we cannot cover absolutely everything. We tend to focus on what we consider are either the key risk areas for a particular council or those activities that we think are particularly crucial to the current context in which councils are operating. We have not drilled down into sickness absence in any great detail at this stage. That is a real crux of the matter. We all appreciate that local authorities are under serious financial pressure. From some of your figures, for example, on Exhibit 9, there has been a 41 per cent reduction in expenditure on collecting council tax, and yet the collection has remained the same about 96 per cent, so efficiencies have been really effective in delivering the same kind of outcome. However, we get widely disparate differentials in terms of outcomes by local authority without having been picking on Clackmannanshire. If you look at Exhibit 10, there was a 25.2 per cent increase in the cost of recycling compared with Aberdeenshire City Council last year, which had a 33 per cent reduction in cost of recycling. When you look at the percentage of waste recycled in Aberdeenshire, it was more or less the same. There was an improvement in Clackmannanshire of 8.4 per cent, but nothing like the increase in cost. That might be, I do not know, one-off costs for example, to improve that recycling rate. However, one of the concerns that I have raised before at this committee and other colleagues have raised over the years is the fact that there seem to be widely differing costs in terms of delivering very similar services and fairly similar local authorities. There does not seem to be this learning from each other, so to speak. We talk about transformational change, but surely if local authorities are going to deliver more with less as they have done in council tax collection, there has to be more working together to learn and share best practice going forward. I think that there are a couple of points on that. First of all, in general, as I think we've all been saying, there are variations across local authorities and one of the issues about looking at national figures is that they really pose a question rather than provide an answer. You then need to go back and look at the individual circumstances to find out if there are legitimate reasons for differences or not. Those differences might be to do with supply and demand, geography or even priorities of councils, because councils can legitimately have different priorities depending on how they see the critical needs of the citizens in their area. Clearly, we encourage best practice. Now that we've changed our best value regime and we're doing all the councils over a five-year cycle rather than just looking at councils on a risk-assessed basis, clearly we're going to be reviewing more councils with more best practice. We, as a body, are going to have more opportunity to share good practice among councils. It's something that we generally encourage in any event. The councils themselves, through Cosly and Solis, also seek to share good practice in various different areas through partnership bodies and whatever. I think that the only thing to add, convener, is that Mr Gibson's point is extremely well made and this committee has taken an interest over the years in the local government benchmarking framework, which is where that data comes from. As you know, the point of that thing is to do exactly as you've just described. I think that what the commission has been urging councils to do is as well as publishing the report and doing all that stuff is actually getting under the skin of, how are you doing it in that council? What can I learn from that and how can I never mind getting to the best, but even if everyone got to the current average, that would make an enormous difference. That's the thing that we are continuing to bang the drum on. It's fair to say that not everyone likes it when we produce exhibits like this, because they'll say that there's lots of stuff that you don't understand and it's a blunt instrument and all that. Of course, I understand that. Our point, though, is that it begins to ask some questions and the phrase that he uses is a bit of a can opener. That's exactly how we would expect that kind of stuff to be used to encourage whether it's on sickness absence. We've got another chart in here about educational attainment across the board. The commission is not suggesting that everything should be the same because there can be lots of perfectly good reasons why either spend or performance is different in different places. What we have an issue with is unexplained variation. If they just don't know, then we think that's not good enough and they should be able to explain why something is as it is in terms of a cost or a performance level. If they're content with that, as Graham says, it might be a prioritisation question, then that's okay and they need to explain that to their local communities. Too often, I think that it isn't explained and you just see the enormous variation in cost and performance. As we've heard already today about the increased demand and the falling resources, we all understand that. You also talk about that councils are increasingly relying on reserves to bridge some of that projected funding gap. Within the report, you talk about short-term and medium-term financial planning and that seems to be managing reasonably well across the piece. Most councils are managing to deal with short-term and medium-term planning, but when it comes to long-term planning, that seems to be where the biggest difficulty arises. Some councils are managing that on a reasonable level where others are failing to manage that effectively. If they're not managing a long-term financial management structure and they don't have a strong workforce planning, that is a recipe for disaster. That's really where we find ourselves with some of those councils. How can they continue to thrive and survive if they do not do both of those that you're asking them to do? We've been encouraging councils to have detailed medium-term plans and less detailed but, nevertheless, scenario-based long-term plans for some time. I agree with what you're saying. You need to have all of that in place, particularly when you're looking at transformational change, because we're no longer in a world where you can rely on doing it the way you used to do it yesterday and tweak that. It's okay tomorrow because tomorrow may look quite different from yesterday. That's a message that we've been giving quite strongly for a few years now. The position has certainly improved. It's not that many years ago—I think and Fraser would have a better knowledge base than me—that you would get heads of finance of some councils saying, well, how can we plan for more than one year when the Government's only giving us one-year funding? I think our response to that would be, well, that's really not the point. You're responsible for running the organisation. The fact that funding is more uncertain makes it more important that you plan for the future and look at different scenarios. Generally, councils have improved since then, and many more have reasonable medium-term financial plans. They're doing things differently in different councils, and that's okay if the point is that they think about it and they have a rational basis for what they're doing. We've seen already different approaches to that. I'm not sure that absolutely everyone's there yet. As they get up to medium-term, they need to go on to long-term, particularly when you're linking it in with transformational change. You need to know the shape of organisation that you're looking to have, and that needs to fit in with how you see the future of your citizens, in your particular geography, in demographics and all the rest. I completely agree with the basic point that you're making, and I think that we are improving, and further improvement is needed. I don't know if you want to. We talk a lot about the budget process, making sure that councils have enough resources, and they put forward their case and ensure that there is funding in their areas of responsibility. Within that, from time to time, we get overspends, sometimes on social care and sometimes on road maintenance, but we also get massive underspends that seem to be being used. Those underspends are then used to try and manage the situations that they find themselves in. If they are identifying massive underspends, the budget process is not thorough enough or is not being looked at strategically to ensure that they have enough funding to make sure that that takes place. I would like a view on that, on the detail of the budgeting process. Absolutely, and I think that it is partly to do with the budget process and partly it is to do with financial management and financial reporting. One of the things that we said in the November report—again, just to heart back to that briefly—was as well as an overall trend of more councils dipping into reserves. Again, one needs to be careful, because using reserves can be an entirely legitimate thing to do, so the nature of how you are using the reserves is important. However, our sense was that there were more councils dipping into reserves to support the running of day-to-day services, which is generally speaking not a good idea. However, the other interesting thing that we reported on then was the enormous variation in the extent to which reserves were being used against what was planned in both directions. About half the councils were using more, and about half the councils were using less than planned. That touches on your point about the importance of good budgeting in the first place, good monitoring of spend and good reporting of that through the year, and doing that in the context of having a good medium to long-term financial plan, which, as the chair says, has moved a long way to be fair over the past five years in councils. I think that what I would also say about the budget process, and many of you as ex-councillors will recognise that the budget process now is a much more all-year-round process. There was a day when it started in Christmas time and it finished in February. I was on one council website just this week where they have launched the consultation on the budget now for setting the budget in February. I think that that is the way forward, because if you are trying to identify, and as you have already alluded to this morning, some councils have massive variations. Some councils may spend 50 per cent of their budget on education and social care. Some may spend 60 per cent, but others—we have touched on Clackmann—may spend 80 per cent of their budget on education and social care. That gives them nowhere to go to try and manage that crisis and that situation, and you have identified that they need to come up with some kind of plan, but it is virtually impossible when you are only dealing with a 20 per cent margin that is left for them to make that possible without having to have drastic reduction in services even further than they have gone before. We all manage that process to ensure that the funding is going in the right location and that councils have enough to keep themselves going because they say that if they do not, then there will be some crises and there may be some losses of councils in the next three or four years if they sustain and continue going at that level. I think that you made two points there. One is the importance of individual councils planning properly, which I think that we have discussed, and the other one is the general trend on expenditure. We did illustrate that making some assumptions—essentially that nothing changes and you just roll forward on what happens—and yes, if you do that, you see that the two big protected areas, if you like, squeeze everything else. Therefore, there is a multiplier effect on any funding reduction on those services. Of course, for many people, those are the services that they see. Not everyone benefits from social care, not everyone benefits from education, so you see, for example, that satisfaction goes down in some areas, so that is not perhaps entirely surprising because perhaps the reductions in services that people perceive are greater for some people. We put in that example to highlight this issue, that it is important. Many of the services might not—I do not want to use the front line because some of them might be regarded as front line, but they might not be so clearly related to immediate effects and clearly regulatory services would fall into that category. Yet, when they fail, it can lead to very serious consequences, but one is not aware of those consequences until something happens. There is an issue around that and about continuing to provide a proper standard of services across the board. It is challenging. We have in no shape or form do we say that this is an easy job at the moment, but that is one of the challenges. The only thing that I would add very briefly is that we set out in the exhibit to the pattern of spending and the extent to which education and social care is now presenting by far the biggest chunk of spend. I would not necessarily accept that that cannot be affected by change and transformation. I think that we would challenge the concept that, because a council spends whatever 60 per cent, even 80 per cent of its spend on education and social care, that is a given and we need to concentrate on the other. I think that the arguments for change and transformation have to apply to education and social care as they do everything else. Thank you very much and thanks for another interesting report. I want to take you to exhibit one context for all that. The UK's Scottish Legislative and Policy changes are taking place. Obviously, there is a lot in the committees in the midst of dealing with a planning bill as well, which will potentially pose some challenges as well. Can you give some sense of where we are in relation to the challenges facing local government in a historical context? We are in unprecedented times, or have we been here before? What can we learn from past experience? That is an interesting question. From my perception, life is now more complex in a proper sense, i.e. A, Fx, B, Fx, C, Fx, A. Everything is more joined up, everything is faster and more complex than it has been before. With local government being, in many ways, the delivery end of many policies, the link between central and local government is more intermingled than it has been in the past. When you put together with the financial pressure, I think that it is more complex, but I am interested in other views. I go to the old guy who has been around a long time. Certainly, I am not sure that I would necessarily want to quote the word unprecedented, but the reason why we have put this exhibit in is to try to illustrate that it is a bit different at the moment. As the chair says, the pace of change is much more significant. The complexities involved are more complex, if you like. There have always been complex problems in local government, but I think that they are multifaceted in a way that I think is different. Technology, as we know, speeds everything up. Apart from anything else, that often speeds demand. Social media creates a different environment from councils than it used to be. There are some of the individual shifts that are potentially significant in themselves, such as withdrawal from the European Union. Across the board, we are looking at issues around the new financial powers and how that changes public services in the country and creates a new agenda. That is partly to do with local government. I certainly support the view that there are significant changes ahead. Our key message being that councils need to be prepared for that and to organise themselves in that context and not to expect things to be the same, and not considering that their job might have used to be when I started local government a long time ago. That was basically about delivering the same service every year in the same way, and delivering the same service in the same way to every person. That has radically changed over my working care, but I think that the pace of that and the significance of all that has become much, much greater. You phrased those as implications and challenges, because some of those are opportunities to do things differently in a very positive way, which we could not, in the past, have mentioned at digital, of course. A minute ago, Mr Sharp reflected on the fact that one-year budgets is not a reason to not scenario plan for the future, and I very much agree with that. Given that Scottish local government has virtually no fiscal autonomy among the least in the whole of Europe at all, surely that has an impact in your capacity to be able to plan for the future? I am a core question of resourcing. I am sure that you can do things differently, you can plan for different scenarios, you can have efficiencies, but the one thing that you cannot do in the present climate is to say, how are we going to raise revenue in different ways? Some of that will touch on with the Allios report later. Have you considered doing some work looking at the comparative work across the UK and Europe about how other local states are adapting and transforming to meet some of the same challenges that we are facing, but they are doing it in a different political context? I will come back to that question a moment. First of all, I think that if you are only given a one-year settlement, the point that I am making is that that is not a reason for you not to only look one-year ahead. In fact, you have to look much further ahead than that in order to keep your organisation going in a sensible way given the challenges that it faces. I am not suggesting that it would not be better if you were given more than a one-year view of financing, just to be clear about that. In terms of comparative work, when we carry out national performance audits, we frequently look in other areas as to what is being done. I am just trying to think if we have done it on this, and I am not sure that we have done it. It seems to me that, as you say, it is widely recognised, and things like COSLA's commission for strengthening local democracy, which was published a couple of years ago, went into quite a lot of that territory. From our perspective as auditors, we look to places such as Australia and New Zealand for comparators as much as we do in other places in Europe. Again, the structure and funding of local government in those countries is very different from what we have here. There is no doubt that that is an important part of the context. I guess that you will also appreciate for us that that very quickly begins to stray into some tricky policy and political territory for us. In a sense, we are working with the framework that there is, recognising that, not least recently, in Edinburgh, with the research paper that they published last week about the official title, Mr White, you will remember the tourist tax, the transient visitor levy. It is a very live debate that we will continue to watch with interest. No, I am happy to go into other areas, but others will not come in any more short of time. I wonder if we could ask a bit more on workforce, if that is going to form a key part of our budget scrutiny. Mr Sharp mentioned Brexit as one of the challenges. Lots of challenges, that is one of the challenges. Do you have a sense that local authorities have done a full audit to work out, for example, how many EU nationals they are employing? Are they in dialogue with them in relation to reassuring them? Have they factored in what their recruitment challenges are going forward in relation to that? On Brexit, we know that local authorities are individually and collectively doing quite a bit on Brexit. This year, we have specifically asked auditors to look at what their councils are doing on Brexit. That is really in three areas. One is financial, one is regulatory and the third one is workforce. We will get reports back across the board on this year's reports as to what is happening. That is the key bit of work. We will have a stronger evidence base, but anecdotally, I would say that councils are aware of it. There has been quite a lot of work done. They know where the pressure points are, particularly in areas such as social care, which will be difficult in terms of workforce. Individuals, councils such as Highland very quickly did a very thorough piece of work after the referendum, setting out the potential implications for the Highland region. Obviously, COSLA has been active in that space as well. Impressionistically, we can see lots of stuff happening. As the chair said, we have asked auditors this year to have a look so that we will have a better, stronger evidence base towards the end of this year to see what is happening on the ground. In terms of budgetary terms, in relation to that, we will be looking at our budget process. In terms of inputs, is there additional financial support that the Scottish Government would have to give in relation to managing some of those risks? Is it more a policy landscape and a reassurance? Do you get a sense of what needs to happen? The starting point for us is to get some assurance that councils themselves are aware of the implications in the three areas that the chair described financial being an important part of that, and they have a pretty clear sense of how much European money they get at the moment. The next question then is what happens beyond exit, and that is the million-dollar question that we are all looking to answer. Of course, I acknowledge that there is European funds, but I was obviously thinking about what force it is as well. You mentioned social care, so how, Mr Sharp, did you want to... No, I was just going to say that on the Brexit issue generally, we all have this problem that we have no idea of what shape any deal will be and therefore what the consequences of that will be. I think that all one can do, and it is not entirely satisfactory, is to identify where the exposures are. As we said, for local authorities, you have funding exposure, the regulatory exposure and the workforce. They need to know how many people they are employing, what areas they are in, are there concentrations in particular areas. Whether one is looking at all those people leaving, or some of them leaving, or them staying on different terms, no one has a view on that. If we were talking about budgets, one-year budgets at a time is not ideal, but you supplied five, ten years. I know local authorities say, what would we do if we had a 2 per cent increase or a 2 per cent cut, or a 4 per cent, and they would modernally work over what their actual responses would be on the ground to setting budgets? Should local authorities, once they have done that, what the demographics of their workforce are and the profiles should they be saying, well, if those employees go, what's the plan B? If 50 per cent of them go, what's the plan C? Is it just about the exposure or planning ahead irrespective of what the deal looks like, because that's what they have to do with the finances in a year and a year? Well, indeed, that's what the auditors will report on to what they're doing, but in terms of what impact that will have across the piece, one needs a bit more clarity on what situation we would be facing. That was the point that I was making. That's helpful in health and social care. We will extend a session in relation to the budgets at the element. I think that we might have to do that even if we curtail the allios one slightly, and I apologise for that. In relation to health and social care, a lot of the workforce in the EU and internationally beyond that could be an allios. We might look at that in the next session. A lot of that workforce might be in third sector care homes, for example. I just looked quickly on the line there, so the integrated joint board for Glasgow on 21 March this year set a budget increasing £2.3 million for the national care homes, their share of the national care homes, settlement and contract, including everyone getting at least a living wage £8.75 from the start of May this year, not all employed by the local authority, some of them in allios, some of them in the third and private sector, but they are essentially performing local authority statutory duties in relation to all of that. Do we know the size of that workforce or are local authorities very clear in planning ahead in relation to that workforce? My response is, convener, that they should be. I can't tell you whether they are or they aren't as we sit here today, and that's part of the work that we're hoping to get a bit more on. To be honest, irrespective of leaving the EU, we would absolutely expect a local authority to understand how the care system works in its area and to be planning on the basis of that. As you said, that will include voluntary and private sector providers as much as it will everything else. They should have a good sense of that. Obviously, to take your point, we are expecting them to do more than just say that this is probably going to have some kind of impact on our social care workforce. They should also, as you suggested, have some scenarios in mind about what happens if, and that's the kind of stuff that we would expect to see this year. The reason for asking that question is just to do your workforce planning. Who's doing the workforce planning? I mentioned the Executive Joint Board, which is a separate organisation from the council despite the relationship with the council. That's also why I mentioned £355 million that doesn't feature in relation to the revenue support, but there's the example of that money being spent on the ground supporting local authority duties. So who does the workforce planning in relation to third sector and private care home staff, local authority staff, when alloys are setting budgets on this? How do we get, if we're not alloys, apologies, integrity joint boards are setting budgets around this confusion? Well, potentially, so that's in a sense the point of having integrated joint boards is that it brings together all the different bits of the system in one place. I go back to my comment earlier that we need to remember that different IGBs have different services in scope, but just to focus on the adult social care bit for a second, absolutely the IGB as the planning and commissioning body for that area should have a strong sense of the delivery system in its area, which includes whether it's an allio, a private sector or a voluntary sector care provider, and they should be able to commission services based on the budget that they receive from their council and their health board. So I'm just trying to find a question, Mr Sims, which is going to supplement you on this. In terms of workforce planning in the social care sector, to make sure that we have got enough residential beds, enough step-down beds, enough care at home staff, and the whole gambut of social care services, a lot of those budgets have been set by the integrated joint board, but a lot of people are employed by the council, even though IGBs are putting the money in, a lot of it is contracted to the third and private sector. Who's doing the work? Whose responsibility is it to do the workforce planning, then, if you're not in control of all the budgets in relation to that? So the IGB is. Clearly, and I guess in terms of the setting of the budget, it's worth remembering that the IGB gets its budget in the first place from the council and the health board, which is a process itself, and then the IGB has to satisfy itself that the budget it's receiving from those two places is sufficient for them to then deliver what they need to deliver. As I say, in terms of adult social care, even though IGBs don't employ people directly, the system that we have is that they are responsible for ensuring that everything's in place to deliver the services that are required based on local need. Slightly different direction, convener. Back to Exhibit 1. You mentioned several areas where national government policies can cost potentially councils money, education reform, for example, where financial implications are unclear, the Barclay review of non-domestic rates, you say that that could cost an extra £80 million, and it's not clear who's responsible for those costs. Then we look at early learning and childcare. I don't think that anyone would disagree that there should be an expansion of that, but it costs money and councils appear to be unclear. In fact, they are unclear. I know from the council area where I live, South Lanarkshire, extra money from the government has changed. They don't know how much what's gone down, so there is a lack of clarity. In fact, in your report early learning and childcare, you say that there are risks that councils won't be able to deliver the additional hours. It's the same theme, but do councils, when national government, whoever that government is, announce policies? Do they require extra clarity than they're actually getting? One of the reasons we had the clarity column was just to point up where issues hadn't yet been clarified to a point where everyone knew exactly where they were. Clearly, when you have national policies that either need to be delivered locally or they interact with other services that are delivered locally, local government, as a sort of local delivery end, is critically important and how all that joins up needs to work. There needs to be good communication of exactly what's expected and how it's being funded. As you pointed out, in a number of those areas, when we produced the report, we noted where it appeared that there were still details to be to be thrashed out or, in some cases, agreed to bring that clarity. Until that's done in each case, there is a question mark over exactly how it's going to work, both in terms of its efficacy in scope and the burden on councils. If we look at early learning and childcare, how high are the risks that councils won't be able to deliver? Since we published that report, you'll know, Mr Simpson, that the Government and the Convention of Scottish Local Authorities did reach agreement on how much it was going to be. I think it was a figure of about £980 million that they ended up on. At the time of writing that report, there were councils that were saying a number that was quite a lot bigger than the Government's number, and they've met somewhere in the middle, as far as I can tell, which, I guess, is what happens and genuinely make no comment about that. There is an argument that says that, at the point of introducing some of those significant policy changes and shifts, it is really quite difficult to put an exact number on it that everyone is going to sign up to. There is an entirely legitimate process to go through to figure out what does that mean on the ground. The point that we are trying to make here and early learning and childcare is a great example, because it touched on everything. It had hugely significant workforce implications, it had hugely significant capital investment and infrastructure, so physically having to build new nurseries was a thing. It's not just about the money, it's about the capacity of the system to implement the changes that are required in real life to ensure that people are able to get the additional hours that have been promised. That is a really good example. The point that we are trying to make in Exhibit 1 is that it is only one example, and even that on its own would be significant enough for people to get their head around. Mr Simpson, with your permission, we will leave that hanging. There are a couple of final questions. Run this at the very latest until half past 11. We will get a quick turnover on that. I will give a name check to Mr Whiteman, Mr Gibson and then the final question for Deputy convener, Monica Lennon, and hopefully by Jenny Gilruth. Let's see how we can do that. Coming back to transformational change, we all attend public meetings. Jenny Gilruth spoke about GPs. I was at a meeting last night about planning in the city, where the citizens have got lots of angst about what's happening and what needs to change, and there's a lot of frustration with the system in general. The Irish referendum last week on the Eighth Amendment was really interesting because that started off with a citizens assembly of 99 randomly selected people who basically scoped the whole issue and initiated that whole process of change through Parliament and ultimately to a referendum question. Is there scope in terms of transformation to do better engagement with the citizen, by trusting the citizen and trusting things like citizens assemblies, to come up with the kind of ideas, test them out, map them, consider them and ultimately come to change that's going to have more trust and more buy-in by the electorate. Is that something that you're looking at? You mentioned small teams of people in corporate back offices. With all due respect, you can do a lot of work inside the system to transform it, but ultimately it's the people who receive the services who have a lot to say about how those services should be delivered and could perhaps be more in the driving seat? I mean, first of all, generally we've very much encouraged councils to include communities in the transformation process in terms of finding out what outcomes are required in different areas and in different ways of delivering them. That's part of the transformation process. In terms of what people are doing to include communities, it varies across the country and the whole community empowerment move is still developing. I think that everyone's learning from different things, but yesterday we published East Ayrshire and there are quite a few examples of active engagement with communities and doing exactly the sort of things that you're talking about. I'm talking about all the communities that are consulting them. I'm talking about handing over a set of problems, let's just say for the sake of the argument, the challenges that you present in Exhibit 1 to something like a citizen's assembly, resource it—I mean, the Irish citizen assembly worked very intensively, they gave up weekends and all the rest of it over a year. Hand that over, that's what I'm talking about. I'm not just talking about better consultation and all the rest of it, I'm talking about where the changes come from, who's driving it. I apologise to Mr Wightman for this interjection. I'm really keen to hear the answer to that. That's a fascinating question, but we are here to discuss the challenges and performances 2018 accounts commission report. It's as fascinating as it is that we might be getting a slight mission drift, Mr Sharpe. All I would say briefly then, convener, is that to be clear, when we're talking about community engagement and empowerment, we're also talking about much more than consultation. Whether that's a citizen's assembly, there are lots of different ways you can do it. I think that our short answer would be yes, there is absolutely more scope for communities to be involved much earlier in a process and not being presented with some options about what do you think about these things that we've come up with, but a much more first principles discussion about the kind of place you want it to be and how communities would see some of the challenges and hear progressed and met. The short answer is yes, there's absolutely more scope for that. Thank you. Mr Gibson. Convener, it's actually on the key messages part one and it is on community empowerment. One of the things that you say in key message four is that in 2016 only 23 per cent of adults agreed that they can influence decisions affecting the local area. No doubt that's why we have fairly low turnouts at local elections. In the same paragraph you say that a new legislation involves councils developing fresh approaches to community empowerment. Some examples of good work taking place, including new ways in which councils consult with, listen to and work with local people in communities. You've said indeed that there are, but you haven't given us any examples of those and I'm just wondering if you can perhaps give us one or two examples of those. Certainly, and if it would be helpful, we can follow up with a couple of those, Mr Gibson, but the chair mentioned the report that the commission published this week in East Ayrshire and, while by no means would you say that they've absolutely cracked it, their vibrant communities approach we think is really very good in genuinely involving local communities in thinking about how services are designed. I think that the interesting thing about the vibrant communities model is that it's pretty essential to how the whole organisation is run. We see quite a lot of quite interesting community engagement initiatives, whether it be shirrets or different ways of involving communities in different decisions, but they tend to be quite discreet, I guess. The interesting thing about East Ayrshire is that, for quite a long time now, they've had that model baked into how they run their organisation and you can see all sorts of benefit for that. I'm happy to follow up with a couple of specifics, if that would be helpful. I just wanted to turn to, I guess, the final page of the report, but it's really important stuff. You did mention earlier on, Mr Shack, about the reduction to regulatory functions within councils. There's a couple of different departments mentioned planning, so I'll refer to my register of interests, because the RTPI identified a 23 per cent reduction in staffing and planning team since 2009, and the committee has been scrutinising the planning bill, so we have a keen interest in that. Trading standards, COSLA, have reported a 20 per cent decrease in the workforce. You're rightly saying in your report that those departments and others at a similar point provide important services to communities such as inspecting building standards in public health, so there's a risk that staffing pressures and budget cuts could lead to errors with potentially serious consequences to the public. The commission reported in 2013 that the long-term viability of councils trading standard services is under threat of potentially leaving consumers without important protection, so it sounds potentially very serious. My take on this is that local government has been hollowed out. When we look at the figures, what can be done to rebuild those services? I wish I could say that people are still delivering the same service to less staff, but on trading standards, Unison has got a report out today, and some of their members are saying, for example, that consumer protection is at an all-time low. In over 30 years of trading standards service, I have never known morale to be so low, so it's not a great time to be working in local government. What can be done to turn this around? As we've been saying, there are very significant challenges for local government at the moment, and it needs a different way of organising themselves and a different way of providing services. That is a process that everyone, to some degree or other, is having to go through. It's necessary for local government to perform its function for all the services to be provided at an adequate level, not just the protected services. That has to be built into the transformational change. Clearly, as a direction, that can't go on forever—there comes a point where you can't do any more. We are not saying that we are at that point at the moment, but it is very challenging. Significant change is the order of the day, if you like, and councils are in different degrees engaging with that. It's a sort of moving process, and we need to keep monitoring it and see where things are and share good practice where we find good practice and point up issues where we see issues. As best we can, work with local government as they go through this. I'm not sure that we can say. The only other thing that I would add is that, in response to the 2013 report that you mentioned, the improvement service in COSLA did put in place some national initiatives to support those services, particularly around workforce and encouraging people to come into the professions. It also seems to me—and we are thinking that that might be an area that the commission might follow up in the next couple of years—that seems to me an area that has to be right for more shared working and more joint working across councils. I think that that has to be one of the potential solutions to managing the challenges that we have described on page 38. Just to clarify, you mentioned what has been done to attract people into those roles. My understanding is that, particularly speaking to people who work in planning a job that I used to do, I still have a lot of contacts there. Those are posts that are being voluntarily made redundant and posts that are not being filled, and the people who are life working in departments are not having enough CPD or training or career progressions. Why has their work been done to attract more people in if the jobs are not there? I can double-check this, but at the time it wasn't just about bringing people in, but that was part of the problem. There was something about the pipeline, if you like, of professionals coming through, but you are absolutely right. That is against a backdrop of the number of jobs reducing and increased pressure on those services locally. It was looking at how they alleviate all those things. As I have said, the commission has a potential audit for its medium-term programme in the next couple of years. We think that, as the report says, there are still lots of evidence that those services are still under significant pressure. Just a final question on that. I have raised issues about local government finance with the Government. The Government has been treated fairly by the Scottish Government. One of the options that are available to councils, given the limited financial autonomy that Andy Wightman outlined, is to introduce charges. Is that something that councils are looking at in terms of some of those statutory functions? I think that we note in this report, and just generally, from our BV work, councils are certainly looking at waste-race revenue, which has principally been on fees and charges. I think that there is also more of an appetite for looking at, maybe, other ways to raise revenues. As you know, in England, there has been much more commercial activity by councils. That has not been so much the case in Scotland, but certainly it is something that some councils are looking at, but it is still mainly focused on fees and charges. One of the main themes today has been transformational change. Obviously, the budget challenge is currently being faced, and I note in the report that you say that there can be difficulties recruiting to the top team as salaries are often lower than in the private sector at senior levels. I would like to ask at a specific point, then. In Fife County, the chief executive is currently on a remuneration package of over £200,000, so more than the Prime Minister or the First Minister. North Lanarkshire has 18 staff earning over £100,000. Edinburgh's council finance director earned over £500,000 last year. Does Audit Scotland have a view with regard to how we pay council officials? I think that there is a disconnect here in terms of talking about the wider budget constraints of councils at the moment, and the pay in the public sector is being extremely high in some instances. I think that you have picked out some specific examples. If we look over the piece and you look at areas where you are competing with the private sector, I think that there is a disparity. If you look at specialist areas such as finance or some specialist engineering or digital, where everyone is trying to find digital experts, you get a good senior. The digital person is quite a struggle. Across councils it varies. At the moment, Clackmannanshire is recruiting, and I think that one of their issues may be that I am not sure about this, but I think that their salary, because of the size of their council for the chief executive, is probably less than the heads of service in some other areas. That might be an issue. I think that it is a mixed-state position, but I think that the point is still fair. Fraser, have you got a… No, I think that the short answer is that we do not really have a view about whether that is right, wrong or indifferent. It is a scale that is set nationally. The numbers that you are quoting there will include pension entitlement and other things, so the actual salary will be a good bit lower than that in those cases. I suppose that my final reflection is that those are, and genuinely I make no judgment about whether it is the right amount or not, but those are very big and complicated organisations to run. Even where you are not directly competing in a private sector employment market, we have seen councils struggle to recruit top people. You mentioned one or two councils that have got a number of folk over £100,000. I would also observe that the strong trend that we have observed over the past five to ten years is that top teams in councils are becoming much smaller. Lots of councils now will have three executive directors running the whole organisation, which, if I am honest, brings its own degree of risk. I am kind of ducking the question, but I think that it is ultimately for councillors to decide what they think those jobs are worth. You thought about a career in politics once this one is over, but you never know. Please do not answer this question, but, if you miss of me, we did have a note that we really should ask about additional pressures in relation to wage constraints. If you like, we have been listening a bit about the aspiration for a 3 per cent cap, but still a 3 per cent wage increase. That is a pressure that will be mentioned in the report, but anything additional that we want to give to us is how it might link to workforce planning and financial pressures. I think that we would be welcome to go forward in relation to that. That would be very helpful. I thank you all for your attendance. I thank Ashley Magity just now for coming along, because the other three of you are stuck with us for a little bit longer. Thank you, Ashley. As we now move for agenda item 1, we will suspend briefly before we move to agenda item 2. Good morning and welcome back everyone. We now move to agenda item 2, councils use of arms length organisations. The committee will take evidence from the council commission on its report, councils use of arms length organisations. I welcome once more, Graham Sharpe, Fraser McKinlay and Ronnie Nicholl. I apologise for not giving you your full Sunday titles, but you were with us in the previous evidence session. Thank you very much for that. We are also joined by Derek Lloyd, auditor performance, audit and best value, Audit Scotland. Thank you, all of you, for coming along. Mr Sharpe, some opening remarks would be very welcome. The accounts commission welcomes the opportunity to discuss our council's use of arms length external organisations report with the committee. Virtually all councils might use to some degree of arms length organisations. They take many forms, including companies, community bodies and charities. They provide a range of services, including sports and leisure, museums and theatres, social care and more commercial activities such as property management. Their use has grown over the last 20 years, and we estimate that there are about 130 allios in total in Scotland accounting for an annual spend of more than £1.3 billion. Our report gives an update on councils' use of allios. It builds on our earlier work around governance, including our 2011, how councils work, guidance on the subject. An allio structure may deliver tax benefits, and we found that taxation advantages have been a strong driver for charitable allios. Operational benefits of allios include their ability to trade more widely and access new funding or sponsorship. Allios may also bring a more commercial or responsive delivery model under a board of directors or trustees. We report that there is evidence that allios do bring benefits to services, and we give examples from sports and leisure and social care as two prominent service areas where allios have been deployed. However, we note that financial pressures remain and allios bring particular risks that need to be managed. We found that councils undertake detailed planning and appraisals for allios, but we report that they could do more to involve the public, communities and businesses in the process. We see improving practice in how councils manage their relationships with allios and oversee them. For example, scrutiny that is proportionate to risk, council committees looking at performance and strategic decisions, and officers taking a stronger role in monitoring finances, risks and governance. That said, issues may still arise over the operation or governance of allios, and we highlight some of those in our report. We emphasise that, regardless of how services are delivered, councils must apply the following public pound code to ensure safeguards are in place over how they use public money. Finally, we describe the changing context in which allios operate. That includes questions over future taxation benefits to councils, following the Scottish Government's response to the Barclay review, funding pressures and the changing policy environment in areas such as community engagement and health and social care integration. That means that it is even more important for councils to have a strong case for using allios and to consider alternatives. Indeed, options appraisal is an important theme to our best value work in councils. It follows that councils must keep their allios under review to ensure that they continue to meet their intended objectives. We will continue to look at allios in our on-going audit and best value work in individual councils. My colleagues and I are again happy to answer questions. Thank you, Mr Sharpe. That is very helpful. We will move to our first question from Andy Wightman, MSP. Thank you, convener. Your report and your opening remarks indicate that allios come in various shapes and sizes, but is there any defining feature of an allio? What is an allio? I am tempted to say that the defining feature is that there is not a defining feature. No, they come in all shapes and sizes. They are employed in different areas of activity. The key element is that they are some form of organisation, which can be a company, a community body, a partnership, a trust. It is separate from the council and has a separate decision-making body in respect of its operations and strategy from the council. It carries out activities for the council. It may carry out additional activities, but there is a link in its activities to the council's wish to supply services to its citizens. Ultimately, that comes down to governance. In a sense, the strategic plan, the annual report, is signed off by a body that is not the full council. Governance is one aspect of it. There are structural aspects that are very specific. The main structural benefit of an allio, if you like, is a tax benefit that accrues only to charitable allios. There is a governance issue, an information flow issue, but there is also an operational side, because, as we have said in the report, there are arguments in specific situations that a focus on specific activities from a group of people that might not necessarily work for a council body can bring benefits. I think that there is operational governance and structural. For example, here in Edinburgh, we have a wholly owned municipal bus company called Lothian Buses. Is that an allio? Yes, I believe it is. It has been around for a long time. You mentioned in your report that you hinted that, in England, a lot of allios are used for quite commercial purposes. Again, I would like to dig into history here, but municipal corporations in Scotland used to do a lot of enterprises, they had energy companies and transport companies. In a sense, nothing is new here, but it seems to me that allios emerged a bit by accident rather than design. Could you say something about the genesis of the modern allio? I think that, as you say, there have always been bodies associated with the provision of services by councils that have been separate from the council yet linked to the council. Allios, as we see them now, emerged in the public eye as a result of perhaps some high-profile events and a burst of allio growth. At one point, the tax benefit of charitable allios was quite a strong incentive and it was promoted to councils by certain advisers. A number of allios were set up with that as a strong benefit. There was a growth in allios plus some high-profile events, and that is probably why the perception of allios emerged rather than the allio itself. On to the charitable status of allios. Clearly, that enables them to attract extra funds and you highlight some of that, which is obviously important. You also highlight the Barclay reviews proposals to end their eligibility for charitable relief for non-domestic rates. That proposal is not being taken forward, but constraints are being placed on any future ability, too, to create allios and get that relief by offsetting it. On paragraph 17, business cases identify NDR relief as a specific benefit provided that the allio meets the requirements for charitable status. While NDR relief can bring benefits locally, it offers no net financial gain to the public sector. That is true. You have said that. It offers no net financial gain. Why all this fuss? The comment on the public sector is looking at the public sector as a whole. You will appreciate that, from an economic point of view, taxis are not a cost, they are a transfer within the public sector. If you look at the total public sector, a public body saving tax is not a net gain because their gain is as a loss somewhere else. However, there are different levels of the public sector. A UK national point of view is a no gain, no loss. It could be a gain or loss to, say, the Scottish Government. What is a no gain or no loss to the Scottish Government might be a gain or loss to a specific local authority. If you are a local authority that is faced with financial pressure and you can do something two ways—one of them through an allio and one of them not through an allio—and the only difference—everything else being equal—is that if you do it through a charitable allio, you save some tax. That, from your perspective, is a saving on cost and you would be able to deploy those funds elsewhere. From a total public sector point of view, it would not be a saving on cost. Does that not suggest that we should be considering regulating allios because they are essentially used to gain competitive advantage? Well, certainly, the market mechanism is a perfectly valid way of allocating resources. To the extent that a tax benefit to certain players in the market gives them an advantage, it distorts the market mechanism as an allocator of resources. That is a valid line of argument. You mentioned in your remarks that there are questions around the extent to which the public is engaged and involved in allios. In your report, you said that public satisfaction with allios, generally speaking, is pretty high. Why is that? I think that we are looking at different things here. In particular, we noted that when councils are looking at setting up an allios structure, we did not find evidence that there was good engagement with the public and communities over the different options and going for an allio rather than something else. However, we noted that many allios themselves did have good engagement with the public. As you would see, there was evidence of good performance by allios, which would result in public satisfaction. The two things are not inconsistent. I am looking for bids for questions for members, but I want to explore one matter. I have a few volunteers now. The current first decision was made by an allio in Glasgow in relation to concessionary swimming. The council agrees that there is a budget that Glasgow life has and that cuts its cloth accordingly and that there is a business plan in relation to that. For example, pensioners got free swimming in Glasgow. It will now be £3 a swim, but low income pensioners will be £1 a swim. Very controversial with constituents. Contact me about it. Taking both sides of that right thing, a wrong thing to do, but I have been contacted about it by constituents. The logic would appear to be that most pensioners that were using the free swim were in higher income brackets, and when surveyed said that they probably would not mind paying it to swim. Low income brackets are £1, everyone else £3, and the money is allegedly then targeted to target groups that might be less likely to use Glasgow life facilities. It is hugely controversial in Glasgow. I am not sure where the accountability sits in the round in relation to that, but in terms of outcomes, should Glasgow life be very clear? Who monitors Glasgow life other than Glasgow City Council to make sure that their meeting comes as they say? This time next year, as a Glasgow MSP, I am interested to know whether the number of pensioners that were swimming went down in Glasgow and the number of pensioners that were swimming from more deprived groups went up in Glasgow. There seems to be a lack of clarity in following through. What would appear to be a policy decision on one level, but it is unclear whether that becomes a politician's policy decision or whether that becomes a business decision on behalf of the Allio? That is still evolving in Glasgow. You might not be able to comment on that, but do you have other examples across the country for whether there seems a blood between what is a business decision by the Allio, what is a policy decision by the local authority and who is actually measuring the outcomes after those decisions have been made? I think that that is illustrating one of the main points that we make about the use of Allios, which is that if you are setting up an Allio, you have to be very clear about what your objectives are. You have to be very clear that those objectives are built in to the arrangements that you have with the Allio and that there is a way of monitoring them and, in effect, holding the Allio to account for its performance against those objectives. In that example—obviously, I do not know any of the details—if the objective is to increase the number of pensioners using the pool, that would lead to one set of behaviours. If it is to not charge any pensioner more than a certain amount, that is a different objective. It really depends on how they have set out their objectives and how they are monitoring performance against those objectives. That will bottom itself out in Glasgow, and I will certainly make representations to both the administration and Glasgow life in relation to that and how they will track that forward and be held to account for whatever outcomes are or are not achieved in relation to that. It just seemed a real-time example of Allio's inaction at a local level, where decisions that they make can be controversial. I am just wondering whether the council commission has taken a broader view on how disengaged they think that Allio's are from the communities that they serve or are they getting it just about right. What can be done to change that situation? In terms of the evidence, we do not have any evidence that Allio's are systemically disengaged. I think that the Allio's structure itself has to be considered separate from the management of the Allio. Many of the issues that might be raised in a service that is provided by an Allio might equally be raised in another council on the service, not being supplied by an Allio, and it is down to management. Again, that comes down to when you have in mind setting up an Allio, you have to be clear about the purpose, clear about the objectives, and those objectives need to be built into the monitoring and performance structure, so you can be assured that the Allio operates in that way. That is slightly different, but not necessarily more difficult than if you are running a council service internally, and certainly in terms of how it performs in public perception. I do not think that we have found any evidence that one is systemically better than the other. One of the tricky things about this piece of work for the team has been prescribing what is happening to the Allio-ness or not, because it is entirely possible for a council department to be completely disengaged from its communities as much as it is an Allio, I think that is the point that the chair is making. You absolutely touch on the key point, convener, which is that what is important for us is the extent to which, first of all, Glasgow's life in that case would apply everywhere and are able to explain the rationale for that decision, and then are reporting on the impact of that decision. Second of all, in this case, Glasgow City Council, through its governance arrangements, is asking exactly the same kind of questions as you are. What difference has this policy change made? Interestingly, what we heard in speaking to people who work in Allios is that they would potentially argue the flip side, which is, in a way, easier for Allios to take some potentially controversial decisions, which they believe to be in the best interests of local communities and the service, free from what they might call the politics of a particular situation. Pays your money and take your choice on that one, I think. I am not suggesting that they are disengaged. I am just trying to get a picture across the country and that the proof of the pudding will be needing. This time next year, we will get a matrix of what has actually happened with swimming in Glasgow and we will find out whether that was a good decision in relation to public service, a good decision commercially, in that law bottom itself out. It is just a real-life example of how we want to make sure that, when Allios make decisions, they are accountable for them and we are actually measuring the outcomes. I have found that helpful, Mr Gibson. Thank you very much, convener. You are not very keen, as exhibit 10 seems to indicate, on councils being on Allios. For example, you give three advantages of having council nominees, board directors and trustees, but six disadvantages. Are you suggesting on balance that councils shouldn't really serve on Allios? I think that councils need to consider carefully why they are putting a counsellor on the board of an Allio, because there are clearly disadvantages of a counsellor being on an Allio board, specifically their ability to contribute to discussion on the monitoring, funding and performance review of the Allio is limited. It depends on why you want the counsellor on the board. Is it to contribute to the board? If that is the reason that there are other ways of doing it, you could put an independent person on the board, for example. Is it to monitor what the Allio is doing? That will probably not work terribly well because of the constraints. There are other ways of doing that that are probably more robust, such as writing it into the documentation when you set the Allio up and the contractual arrangements between the council and the Allio. Is it to give local people a voice because it is operating in a particular local area? That might be a good idea. There might be other ways of doing that as well. You might actually get representatives from local community on the board. What we are saying is that you just need to think carefully about why the counsellor is going on the board. You do not find yourself in a position where you have put people on the board in a general way, thinking that we would like them to keep an eye on what is going on, and then you find that, in fact, they are constrained from doing the things that you had in your mind when you put them on. Or, indeed, you have a conflict of interest situation where they seem to be serving the interests of their council or their political party, as opposed to the needs of the Allio itself and the delivery of those services. That goes into another area of whether you are serving in an Allio and you need to know or have training to know what your obligations in serving as a trustee or a director of a company or whatever it is are. Generally, your obligations are to that organisation and not anyone else. You cannot serve as a representative of somebody else. You have to serve the organisation as a board member or a trustee. However, it is not straightforward. There is a case that we investigated some years ago now where there were councillors sitting on the board of an Allio. The Allio was in financial difficulties. The council was the main funder. The council continued to fund the Allio because it did not know about the financial difficulties. The councillors could not say anything about the financial difficulties, because they were on the board of the Allio and were constrained by their duties as a director of a company, which was, I believe, explained to them by the then company's lawyers. You do not want to find yourself in that sort of situation. The way around that is to be clear what you expect from councillors on the board and, in terms of information and monitoring, to make sure that you have proper contractual or other legal arrangements to do that. You are not just relying on people on the board because they cannot perform that function. I am hearing loud and clear that there seems to be no great enthusiasm for councillors being on Allios. Does the council commission do any work to suggest if there is any difference in terms of the outcome, in terms of service delivery of Allios with councillors on them and those who may not have councillors on them? Does the council prove to assist in general or be a drag on that? What we have seen in some of the figures that you presented to us, for example, is that you have talked about five councillors seeing a 50 per cent reduction in cost and a 50 per cent increase in service uptake for sports and leisure. You have illustrated how effectively the Allio of Lothian buses is delivering highland life, some co-operation that is going on between allio initiatives with regard to wider social and community benefits, for example quoting Edinburgh leisure and leisure and culture underneath, etc. If the councillor's presence has had any impact in terms of the overall delivery, is it good or bad? There are two things there. One is whether we have done any work on any correlation between councillor presence and performance. I would imagine that we had not done that. Then there is an attribution of cause as to whether, if a councillor is on the board, that in itself is the reason for superior performance, if that is the case. Are they making the Allio work more efficiently and effectively in order to deliver on the underagonic performance? To be clear, I was not saying that councillors should not be on the board. I am saying that councillors need to be very clear about why the councillor is on the board and the historical straightforward reaction of, well, we want some of our people on the board so we know what is happening is actually not a reason to have councillors on the board. There might be quite legitimate other reasons to have councillors on the board. Well, thank you very much, thank you very much. Following on from that, if you do not have councillors on the board, the council still needs to be able to scrutinise the Allio and direct the Allio in some way. How do we achieve that? How do we achieve a proper level of scrutiny? Well, again, it goes back to being clear about the objectives, how those objectives are going to be monitored, how the performance is going to be measured and what the consequences on the Allio are of performance or lack of performance, and that all has to be set up in a proper arrangement. When the Allio is set up, it needs to be monitored and we have quoted in the report examples where monitoring has improved with council officers looking at Allios on risk bases, on an amount of funding bases and you need a structure in the council, depending on how many Allios you have, to monitor performance. It is crucial that you ensure that the Allios are doing what you set them up to do, but you just need to do it a different way if you do not have someone on the board. I come back to the point that having someone on the board can do a number of things, but one of the things that it can do is represent you on the board and report back to you what is happening because those are the things that are constrained, so you need to do that through proper, sort of, legally valid channels. There is a fine line, I think, Mr Simpson, between you mentioned scrutiny and direction, and certainly in the case of charitable Allios, I think that Oscar, the Office for the Scottish Charity Regulator, would be concerned at a council directing a charity board to do stuff, so this is another example of where the demarcation is really quite important because it is absolutely legitimate and important in terms of following the public pound for councils to scrutinise best value performance and those things, but there is also still the point of them being arms length is that the councils, generally speaking, would not be directing them to do stuff, which is why the setting up, as the chair has said, is hugely important, the purpose of that is hugely important, and we mentioned a couple of examples in the boarders how they've established what they call a strategic governance group, so they don't have councillors on the board, but they do have a board of councillors whose job specifically it is to scrutinise and monitor the performance of the care allio on the boarders, so there are ways of managing it. You could, for example, have a leisure trust who take a purely commercial decision to allow certain sports to use leisure centres over other sports because those sports earn them more money, a commercial decision, but that might not necessarily be the best decision for the health of the council area and the council as a whole may take a different view, so how can a council influence the allio in that situation? It would be down to the agreement between the council and the allio in the first place as to exactly what services the allio had to provide and how those services were defined and monitored. I would also just comment in passing that you could have a leisure centre that is run directly by the council that has also got a dilemma of whether we provide services that might be better for the community as a whole or whether we actually make more money so that we can keep going, so it's not just an allio that might have that sort of decision to make. The report itemises that, in some areas, 25 out of 32 councils are actively involved in allios, especially in the culture and leisure site, and you've itemised why that might be the case. The influence came from taxation initially for some of them, but now that we have potential taxation reform, what impact and where do you see that taking them? The Barclay review focused, as Mr Whiteman referred earlier, to the damaging effect in competition and the market mechanism of a tax subsidy, if you like, and the Government's gone some way towards that in the provisions that it's bringing forward. As I understand it, new allios won't benefit from any tax break. You'd see that about half the allios were charitable allios, so it would only affect charitable allios, and then the question would be whether that marginal tax benefit was the critical issue in making the decision or not. In some cases it will be, and we know certainly already of a case where it has been, and the council is looking at another way. It will definitely affect the number of new allios to some extent. In terms of existing allios, I think that the position is unclear. I don't know to what extent existing allios can expand their activities without a penalty. Clearly, in the ordinary course of business, you would expect them to expand their activity. I think that it's unclear generally how that works, so I wouldn't be able to give a view on what I thought about the impact on existing allios. What kind of risk assessments and governance should allios consider when the environment seems to be changing? We recommend anyway that, given the previous paper that we made the point, that tomorrow is different from yesterday, so councils need regularly to have a look at why we have this allio and why we have it. Does that still make sense? I think that the tax change is an environmental change that would result in such a review for charitable allios. I'm happy to ask more questions than other members were in at the moment. Just on that, there are quite a few changes taking place in allios that have been set up. Some are coming back in-house. To what extent, because of the part of budget scrutiny that we're looking this year at workforce planning, and you highlight that in our previous discussion as one of the big challenges, do allios provide a useful mechanism to plan workforces? Arguably, they're more flexible. On the other hand, it can be very difficult to plan a workforce when it's not your workforce. I'm talking about the council planning the delivery of services. On balance, are allios a good thing, a bad thing or a different thing when it comes to planning workforces for the future? I'm afraid that I'm going to give you an answer on the same theme as before. Allios are varied, and it's rather situation-specific, as to whether they would be a good thing or a bad thing. It'll depend on their size on the sort of work that they're doing. Clearly, an allio will be more flexible on its terms. That could be a good thing. It might be able to attract people that the council couldn't. On the other hand, in terms of total employment and the council planning, clearly there is a barrier there. It's not necessarily as easy to get a handle on the future employment of allios if you're looking at the whole thing. If it's a major issue, in terms of a high employment activity, that could be something that the council has to work around to overall plan its workforce. I think that it swings around a bit in Fraser Johnston. I think that the answer is that it depends. I'm afraid that the analysis is not terribly helpful, but it kind of does. I think that what that brings us back to is our core point, and that is the absolute essential importance of purpose and being clear about why you're setting a thing up. Being clear about what it is that you want to achieve will then help you to decide through a good and effective options appraisal process what the best vehicle for that delivery is. I think that, in a funny kind of way, the decisions around Barclay mean that if anything councils will need to think harder about that, because in the past it's been too easy to say, we get a tax break, let's do that. If we're honest in lots of places, we haven't seen terribly much by way of different ways of delivering services. It's just that the leisure services have continued to function as was, but they get tax relief. If anything, what we're encouraging councils to do is to think more creatively about what they're trying to achieve, what's the best way of delivering it, and then you get a decision about whether some kind of value might be the best option for that or not. At that point, issues of workforce would be absolutely critical to the decision that they're taking. Have you found any evidence of better or more effective engagement with social enterprises, for example, in delivering services with alloys? I'm not specific with social enterprises. Nothing that we've come across brings to mind. Typically, social enterprises are involved in contracting and delivering services on a contractual basis, but alloys hasn't made much difference to that that you can... Not that we've seen, no. I apologise for going back to the previous report, but in the previous report, we looked at in the last evidence session at 41 that it says that our analysis by council over the period 2011-17 suggests that some councils relied more heavily on others in staff reductions to making savings. However, because we are unable to track staff moving to arms length external organisations, alloys, it's difficult to draw clear conclusions about changing workforce numbers nationally. Why don't we just know how many workers there are in alloys? Surely, to goodness, this is just audited. There's an outturn and we can look at it, we can analyse it and we can scrutinise it because we can track our heads round the efficacy of alloys and the benefit of alloys, but we're also looking at workforce planning in the round, so I sort of backtrack slightly, but when I look at local government workforce planning going forward, I want to see those employed by the local authority, those employed by local authority alloys and those contracted by the local authority, including third sector and private organisations in care, for example. In relation to alloys, do we have a best guess on how many staff there are employed? I think that's a fair point in terms of the total workforce. Yes, we're not in the business of guessing, because I'm sure you know that. What I will say is that we are drawing our workforce information from returns that are made, and at the moment those areas that you mentioned that would be interesting are not included in those returns, so it's simply a matter that our sources, it's not to say that there wouldn't be a way of uncovering numbers around alloys within particular local authority areas, but they're not routinely gathered as part of the returns that are made on workforce. Whose job would it be to decide what is routinely gathered? Presumably the people who are asking for some of those returns, which include the Scottish Government for workforce returns for local government. The Scottish Government could specify in more granular detail the workforce employed directly by local authorities, the workforce employed through alloys, and the workforce contracted elsewhere. That is a better question for Government convener, but my guess is that some of the definitional issues around that would be quite complex, because I'm not sure where you would draw the line. Councils contract and have service relationships with a huge number of organisations and public private volunteers. What have we said to allios? Apologies, I've tried to widen it out here. The allios, again, come back to the definitional issues, because for example, do you include Lothian buses? For example, do you include the people that work for the SCCC, which is a wholly owned company of Glasgow City Council? Where do you draw the line? The figures that we referred to earlier, which we get from the staffing watch, are specifically about those employed by councils. What I would say is that there's a slight separation for me about understanding the size of the local government workforce, as you just described it. That being quite tricky, what absolutely should be happening to come back to the earlier conversation is that councils on a service delivery basis should be including allios and other organisations when they're trying to figure out the future for that service and the workforce that they have at their disposal. We would expect individual councils to have that level of detailed information. Is there best practice guidelines for local authorities and how they do their workforce planning in relation to that? Who would scrutinise that? Maybe the committee? I don't know, but who would scrutinise that? In terms of general workforce planning, we look at that through the best value work. There's statutory guidance and other things about how you manage your people. The care inspectorate and others would have a strong view about how social care workforces are planned for education in Scotland. From our perspective, we're interested in the overall approach to workforce planning, and individual inspectorates will be interested in individual service areas. I'm pleased that other members come in and ask a question, but I'm going to ask this one. I'm sorry to be Glasgow centricain, but I'm a Glasgow MSP. One of the things that the good administration has said it's going to do is bring Cordea back in to direct local authority control. There's a gradual process in relation to doing that. There's a cash cost to doing that, some of it administrative bureaucratic, but some of it because the terms and conditions that Cordea staff, quite often low-paid female workers were on, with Cordea. The equivalents, who are directly employed by the local authority, would be on a better salary and better conditions, so there's a cost to bringing a predominantly female low-paid workforce directly to the council. Excuse me, has the council commission looked at whether one of the reasons for having alios might be to pay workers less on poorer conditions? I think that we cover this area in the report. In the case of Cordea, we quote that there was a legal case that Cordea staff could compare themselves with council staff, although that wouldn't cover absolutely everything, including pension arrangements and such. It is up to the council to ensure that there are appropriate employment policies applied by alios, and we didn't find that there was any systematic issue there where alios were employing people at much less. I think that's fair. I think that, across the piece, everybody suggests that councils are trying to maintain terms and conditions for staff when they transfer over to alios. In the majority of cases that we looked at, that was the situation. I feel that, except that it's a complex debate, it depends on what grading system you use, what equivalencies you apply to the local authority from alios. I know that it's not that straightforward, but I did note when I was made that there was a cost to that, and some of that cost was going into staff wages, which I welcome, that staff wages were uplifted. I've got one final question if no one else has a question, so I'll leave it as an open question. We're doing budget scrutiny, new process for budget scrutiny in relation to this committee and the Parliament as a whole. We're trying to get a better understanding of not just the inputs, so how much money the council gets from the Scottish Government or from fees and charges from council tax, but delivering better outcomes for the constituents that we all serve. We're grappling with that. Alios are a significant employer, even though we don't know how many people are employed by alios. Although they're not directly employed by Glasgow City Council, in my case, they're other local authorities. Effective, a lot of alios are subsidised by their local authorities. Therefore, in reality, council tax money and Government money is being used to subsidise alios. We've got our budget scrutiny ahead of us. How would you suggest to us that we follow the Republic Pound to make sure that alios are properly resourced in doing the jobs that we all like them to do? Definitions to one side, Mr McKinlay, so I'm not talking about the SCCC, for example, but maybe care services, leisure services. Back in the olden days, we would just say core council services. I think that, again, looking at the report, the evidence that we've seen is that alios are providing good quality of services in a number of areas. Indeed, the financial return for the council has been good in a number of cases. I think that we've quoted some examples where you said that the council is subsidising the alio, but the funding that the council is providing to the alio to provide a service that the council would otherwise wish to provide has, in fact, reduced over time. In fact, the council is getting a benefit from the fact that the alio is able to generate other income. I think that looking at it in terms of subsidy is probably not the way that I would look at it. I would look at it in terms of what services the council is looking for the alio to provide and what amount of funding is being devoted to those services and what's the quality of those services. That's the way around that I'd probably approach it. I think that only to say that we are really committed convener to supporting all committees in the new budget process, so it may be that we can pick up the conversation with the clerks and see what if there's anything that we can help provide that would help you to get a bit of clarity around that, more than happy to take that conversation forward as we are with other committees as you go through this new approach to scrutinising the budget. I think that that would be very helpful in particular, Mr Sharps, who has warned some relation to subsidy. I almost bought into a whole other narrative there when I used subsidy. I get the idea that councils use their funds to deliver services, and alias are part of that service delivery mechanism. If you can do that more efficiently, that's fantastic, but that doesn't make it a subsidy, it just means the money that councils are spending to provide those various services. That gives me a bit of clarity in relation to taking forward some budget scrutiny going forward. I thank all of our witnesses this morning over two evidence sessions. It's been very helpful for us and we look forward to developing that relationship further to aid us in our budget scrutiny. Thank you for attending. We will now move to agenda item 3, consideration of evidence, which we previously agreed to take in private.