 I welcome everybody to this, the 19th meeting of the Public Audit Committee in 2022. The first item on our agenda is to agree or not to take agenda items 4 and 5 in private. Are we all agreed? We are agreed. Thank you very much. We've got two evidence sessions this morning. The first of those is on two reports that were produced by the Auditor General, one on Scotland's financial response to Covid-19, and the other on Scotland's economy supporting businesses through the Covid-19 pandemic, which are very much related one to the other. I am pleased to welcome in the room four witnesses in this first session the Auditor General, Stephen Boyle, Richard Robinson, who is the senior manager at Audit Scotland. We've got Marty McLaughlin, who's the Audit Manager, Performance Audit and Best Value Audit Scotland, and Ashley Magity, who's an Audit Manager at Audit Scotland. I'm going to begin by inviting you, Auditor General, to give us a short opening statement. Good morning, members. I welcome the opportunity to speak to you today about Scotland's response to Covid-19. Covid-19 has been the biggest challenge to Scotland's public finances since devolution. Both myself and the Accounts Commission for Scotland have reported on some of the key issues the public sector has faced over the past two years. Today's report draws from that work and looks at how the public sector has managed its overall financial response. A key aspect of that was its support for business, and the committee, as the convener notes, is considering our briefing paper in this area today also. The Scottish Government worked collaboratively and at pace with local government and public bodies, allocating £15.5 billion through its 2020-21 and 2021-22 budgets. There are lessons for the Scottish Government to learn about what worked well and what didn't so that it is better prepared for future disruption events. Spending decisions were recorded differently across Government departments, and it was not always clear how data was used to inform funding allocations. To date, there has been some limited evaluation of the financial response. It is vital that that work continues so that the Government and public bodies understand the difference that Covid-19 spending has made and to plan for Scotland's recovery. Central processes rightly set up to inform financial decisions were not used consistently, nor was the information centrally collated. For example, the business support briefing highlighted that information about how around £100 million of national funding was distributed across Scotland was not held centrally. I am since aware that national enterprise agencies do hold this level of information, illustrating the need for central collation and greater transparency. The report highlights that £2.1 billion was carried forward between financial years in the reserves of public bodies. To enhance transparency and financial sustainability, the Scottish Government and indeed all public bodies clearly set out how Covid-19 funding carried forward is subsequently being spent. That is essential for effective scrutiny and informed debate about the financial challenges that lie ahead. As ever, convener, myself and my colleagues will do our best to answer the committee's questions. Thank you very much indeed for that introduction. I think that the watchword this morning may well be transparency. Can I begin by asking about what the criteria for allocation between the different funds was? Have you been able to establish why certain funds were of a certain value and others were of a different value? What work have you done to establish whether those funds were value for money? I will bring colleagues in at different points. We have not expressed a value for money judgment on the use of the funding yet. It is central to one of the key findings that we make in the report. There needs to be more evaluation done of spending across public bodies. Part of that is to bridge the gap between outcomes that were achieved. We touched on in the report that the Government has done some early evaluation of that spending. It will be for Government, in the first sense, to arrive at judgments about how the hugely significant forms of public spending delivered value for money. We are talking in the report of £15.5 billion. It speaks to one of the overall recommendations that we make in the report. To support the assessment of outcomes transparency that you mentioned, a separate report on the Covid-19 spending would help transparency to demonstrate outcome building on the overall allocation of funding. I will turn to Richard first of all and then Ashley. You might want to say a bit more about some of the arrangements that the Government used to arrive at allocations. We know, as we mentioned in the report, that it drew on some existing structures with COSLA, SOLIS and others on some of the earlier days of the pandemic. Thank you, and then I pass over to Ashley to give a bit further information around data, if that's okay. I think there's probably drawn packet a little bit. There's a couple of things. One is about data, the other one is about time and the nature of the expenditure. As we set out in the report, in the early stages of the pandemic there were quite specific things that needed to be done, business support, some of the big spending was on business rates relief, for example, and then obviously the expenditure directly around evidence of PPE, et cetera. Ashley will maybe talk a little bit more about this, but in terms of getting the data from, say, council tax systems and using the data that already exists within the public sector, that was able to be done. Over time, sometimes the nature of some of the packages and measures become wider, more about supporting the public sector, and we emphasise that, I think, in exhibit 6, I think, it is to the report. I think there's something there about time. There is something there also around the fact that quick decisions are being made. We talk about changes to governance structures and the fact that normally there would be options, appraisals, et cetera, and maybe those weren't being done because decisions are being made a lot faster. So, there is something about, it was a very agile, if you will, way of working a budget, matching the budgets through to what was actually being spent, and one of the points we do raise in the report is that it is difficult to sometimes see the links between the announcements that came out at the start to what were then transpired into the budget to what was then spent, and I think there is more to be done there in terms of clarity to bring those things together just to see how accurate some of those initial assessments were. Do you have anything to add, Ashley? Just on data that we say in the report that we sometimes struggle to see how those first initial decisions were made around where money was allocated, and that's because the decisions were getting made quickly. There was no overall governance board that would record that. Following that, the use of data to develop funds, they used data that was available, and that was sometimes limited, but they used things like the NDR database or information that they had on enterprise apprenticeships to develop the funds further once they'd already made that initial decision. Okay, thank you. If I take an example, and I look at the table in the report, which tells me that, for example, the rail franchise has got £441 million of public money, and I contrast that with what I can see. It appears to be that the money is paid to local government for the drop in their income from lettings and fees and so on. The railways get twice as much as the whole of local government if I read it correctly, and if I look at something like the well-being fund got £34 million, how was that distribution determined? What were the tests applied? What was the evaluation in advance of the award of those funds that was applied by the Government? I think that we all recognise that things were done to coin the phrase at pace, but nonetheless there needs to be, presumably, some understanding of why one provider got so much and another got a different amount and why some things were given greater priority in terms of the allocation of resources and other things got less priority. A number of points in there, convener, are trying to address all of those. The overall conclusion that we make in the report is that Governments work well together at pace. That is a fair conclusion that we draw. There was no template in place for the Scottish Government, UK Government public bodies, across the piece, to allocate funding in this national emergency event. If I can take us forward for a second, and I welcome back to your points, as part of the lessons learned through the evaluation and the collection of data, we are looking at what difference does the spending make. We are looking at outcomes to allow for us, as a country, to be better prepared for future events. We hope that there will not be any, but history tells us that we can expect that there will be future circumstances that will require a national response. The point about the Government's governance is that in the early days of the pandemic, much of the decision-making in the Scottish Government context was made at both the executive team and cabinet level. We make a point in the report that it perhaps took too long for some of the more established procedures of how financial decision-making would be made to be brought back into place. Some of those were reasonably set aside right at the height of 2020, but it then took a further year for some of the, I suppose, the rigour, the diligence around governance decision-making to be brought back on board. We think that that is a reflection point about, because that provides some of the mechanisms for testing and challenge about how funding is allocated. The last point that I would make in response to, I suppose, who got what, is that it is safe to say that not all of the spending that was allocated was spent—not drawing a conclusion that it was not needed convener—that there is a distinction between those two things. Some of it will be timing differences and some of it will be due to demand. As we mentioned in my introductory remarks, and it is set out in a number of places in the report, that around £2 billion at the end of last year were in the reserves of public bodies, Scottish Government councils and integration authorities. As time progresses, it is going to become harder for transparency about what is Covid money, what is not Covid money and to clearly see the impact of that spending. I hope that that addresses all your points, convener, but it is safe to say that this was an evolving process. Perhaps one point that I did not make just to return to is that, as we touched on in the report, the arrangements that the Scottish Government deployed were similar to that of the UK Government about the flow-through of funding announcements, Barnett consequentials and commitments for Scottish spending to largely mirror those of the rest of the UK. On 2 March, the convener's group of the Parliament had a meeting with the First Minister and I raised with her some of the points that Richard Robinson has alluded to about the concerns that were expressed by Audit Scotland about the link between budgets, funding announcements and spending levels. In response to one of my questions, the First Minister said that, I know that GP Marks, the new permanent secretary, is keen to talk to Audit Scotland and the Auditor General about how we do that in general, as well as in relation to the additional funding for Covid, and that was about trying to identify where the money has gone. Have you had those discussions with the permanent secretary? I haven't had that conversation yet with the permanent secretary about how the funding announcements, the spending and the budget arrangements deal with such circumstances. As you know, convener, the overall conclusion that we make in this report, and I think that consistently with some of the tracker papers that we've produced over the past couple of years, is that existing budget spending reporting arrangements don't really fit with the emergency that we've seen. Over 300 spending announcements, which typically would have been much fewer and more co-ordinated through budget setting, autumn budget revision and spring budget revision. You'll note that we've welcomed the summer budget revision, but that helped transparency arrangements. However, there is a need for reflection from Government, and myself and my colleagues are very happy to have that engagement with Government to support the decision. Before, I might just check in with colleagues if there's anything that, although I haven't had that direct conversation with the permanent secretary whether we've had that with his officials. No direct conversations of that nature yet, but I'm aware that the Scottish Government are keen to continue the discussion around the recommendations that are made in the report. Okay, thank you. I'm not sure that that keen, if it was three months ago, that undertaking was given and it still hasn't been fulfilled, but I think that as a committee we can maybe take a view on that. I mean, it's not unusual for you to sit before us and talk about a lack of good quality data, and again, it seems to me, looking at these reports, that's really what you are saying again. I mean, how confident are you that, you know, given the investigations that you've already conducted? How confident are you that we're going to get the kind of good quality data that allows for that transparency that we all want to see? I think that we've seen progress, convener. Actually, I'm going to bring Martin in a moment and Ashley again as well, just to update the committee on—Martin can do that—really on the progress that we've seen since the publication of the business briefing. That was one of the key conclusions in that paper, that there was a lack of centrally held data to support some of the assessment about how quickly the money was spent, which different businesses, which industries got the funding, the equality impact assessment components of it, you know, of different sections in society that were supported rather than others. We know that it's a data cleansing exercise that's under way, and that is seeing some signs of progress that Martin can speak to. I actually might want to say a bit more about some of the other progress that's happening about the centrally collected nature of the arrangements that were put in place. Before I hand in to colleagues, I think that it's safe to say that some of those arrangements were signed, so the financial forms that we touched on in the report did harness some high-quality complete data. Inconsistency of application is one of the features of it about where it was held, and then it probably drifts in to convener about some of the arrangements within the Scottish Government about funding held in some directorates and just that consistency of application. I think that in overall terms we're seeing some progress, but we'd like to see that overall exercise completed and then the more formal complete evaluation undertaken. If I may just pass to Martin, I think that he's able to say a bit more about the business component of that first. Thank you, General. Good morning. With regard to the business support data, the way that schemes were administered with councils and other agencies working on behalf of the Government, they collated the data. What we brought up in the key messages of the report and around paragraph 40 within the briefing is reflecting the demands and the emergency response, that nature of it. There was a limited direction given us to the type of data that should be collated, so when the Scottish Government had subsequently gone back and requested that to carry out central analysis, there's been a variety of quality issues, missing fields, for example, or indeed some councils were providing a payment run, but that meant that there couldn't be an analysis of the time from application. Equally, there was missing data around the number of unsuccessful applications. The briefing reflects the position as at the end of February. Subsequent to that, I've had conversations with members of staff at the Scottish Government co-brass, the business support team and the Office of Chief Economic Adviser around the data cleansing that they're carrying out, which is mainly centred on the national schemes for the moment, around trying to really understand the distribution not only across Scotland but across economic sectors and areas of activity. For the national schemes that are sector specific, such as the wedding fund, the eligibility criteria would suggest that's potentially where the gaps currently lie is in the more general support funding schemes. My understanding is that there was a view to the Scottish Government completing that exercise by this month, and certainly we lay out in our forward work programme within the briefing and as part of the 623, which Ashley may touch upon, that it's something we will continue to monitor. We've an interest in how successful that exercise is and then take forward within our remit what the Scottish Government produces and publishes. I guess there's two parts here around evaluation. We say that we've so far not seen any overall evaluation of the financial response, but we set out in paragraph 91 some of the evaluation that we've seen for individual sample funds, so three out of the 10 sample funds that we looked at have some evaluation. That's not to say that they don't exist. They are held quite often across Government in different directorates, so we recommend that the Scottish Government have an exercise to pull together all the evaluation and look at it as an overall picture, and that so far hasn't been done. The Auditor General mentioned the financial accountability frameworks, the forms that we use to help decision making, and these contain the wealth of information. Things such as what the intended impact was going to be, what the impact would be if the spending didn't go ahead, the long-term financial implications of the spending, but we found that this was used inconsistently, so three of our sample funds had them. Four had a reason why they weren't used, such as the spending was too early before the forms were introduced, and some was already in the budget. The information that was contained in those forms would be helpful for the Scottish Government in order to evaluate their overall spending response, so we recommend that they pull together and collate that information. Martin spoke about data being expected within the next few weeks, presumably, but that's different from the broader evaluation that you're speaking about. Those are two separate exercises. The data that Martin spoke about is specific to the business support fund, and they've been publishing stuff over the spring that we've seen, and there's more planned. This is a wider level pulling together the business support and all their other spending to see what the impact has been. I'm going to go to Craig Hoy shortly, but I've got one final question. When I look at examples of companies that have taken millions in furlough money, which I know is a UK-reserved level of support, but have taken millions in Government compensation towards their fixed costs, when I look at some of those companies, in the same financial year that they are taking that significant amount of public money, they are also paying out substantial dividend payments to shareholders, they are in the same year doubling directors' pay and so on. Were companies registered in tax havens? Were any of those things taken into consideration in drafting the criteria for who was eligible for Government support? I'll check with colleagues to supplement my response. As you suggested in your question, our work focused on those devolved areas of spending rather than the furlough scheme and other UK-wide targeted areas of support. I suspect that the answer is not in that. It probably speaks to the overall conclusion, the pace with which some of those schemes were designed to get spending to where it was needed. It probably speaks also to some of the arrangements that were put in place, some of which served public spending well and others less so. As we've touched on in the previous discussions, using local knowledge of individual businesses that applied for Covid spending worked well. The Scottish Government relied on local authorities to act as agents in many of the respect. If you look at the exhibit 7 to the report that illustrates the flow of funding from Government to councils to pass out funding, you can see that the knowledge of individual businesses cross-checking to the non-domestic rates register served them well. Whether that meant forming a judgment about their director pay, their status and so forth, I suspect that the answer isn't the case. That may well be an area that the Government wishes to consider as part of its reflections and lessons learned. I will check in for colleagues if there's anything that they wish to say further on that point, Martin. I would say that trying to give an overview of the numerous schemes that were in place is difficult, but there were clear eligibility criteria set and the majority of the funding was directed, in particular the early council interventions of just over a billion, the small business and retail hospitality and leisure grants were aimed specifically at smaller businesses. There were limits to the rateable value of properties for eligible businesses that there were sliding scales put in place. The intention of the Scottish Government schemes were to supplement the UK-wide schemes rather than duplicate them. There are parallels, however, to the business sport schemes that were in place across the UK. The eligibility criteria would suggest that some of the issues you raise perhaps wouldn't apply to the majority of funds. I do know that, without getting into the real specifics of it, I do know that when it comes to NDR reliefs, we quote a figure of £827 million for 2021. The actual cost that the Scottish Government was just over £1 billion because it received either direct repayment or through the Treasury, I think, £177 million of people saying we do not need those reliefs, we will return them. That should give the flavour of the nature of the schemes, meaning that perhaps some of those issues would not be widespread. I think that some of the big retail chains returned their NDR reliefs, did they not? I am going to Craig Hoye, who has a number of questions to put. Good morning. Mr McLaughlin, you referred to the data cleansing exercise that is being undertaken, and that will include local authorities as well. That process will be vital to ensure that we have the accurate and complete data. Is it possible to tell us more about what the process entails? Are there any risks in terms of the quality or the completeness of the data that we might get on a local authority to local authority basis? Is it very dependent upon those processes within individual authorities? The process that the Scottish Government undertook once it received the requested data throughout the time that it requested at an aggregate level, just the number of applications, number of grants paid and the value of those payments, when it requested that at the individual recipient level, there were quality issues using a pre-existing framework. They have engaged a specialist data analyst firm who is working through that. There is a lot of data, as you can imagine. The cleansing exercise is mainly to ensure that the basics are in place, particularly for some of the smaller schemes that were not local authority delivered. There was an element of self-certification, so, whilst eligibility was established, there was a historic use of Shire Council names and so on. It is really just getting it to a level where further interrogation can be made. As to the success or not of that, I believe that the Scottish Government's intention is to focus on some of the national funds. It will take more of an effort to go through the local government side of things. I think that there are discussions between the Scottish Government and councils reflecting that there has been a number of returns from councils already, both to the Scottish Government and to ourselves, to support kind of on-going fraud assessment, where I would not like to speculate as to the success, but I do know what is progressing and they have subsequently published a number of reports where there have been elements of the data that we could not interrogate at the time, which has now been analysed. Paragraph 52 on page 17 of the briefing states that you plan to consider further analysis of business support funding once the Scottish Government has completed the data cleansing exercise. Can you tell us more about this work and its timescales? Can you tell us what it is that you think we do not know or what it is that you are hoping to achieve through that process? I will maybe pick up on actually Martin. As Martin mentioned a moment or two ago, we are keen to complete this programme of work on the impact of Covid-19 spending. This report, as we touched on in our overall key messages and in response to the conveners earlier question, we have not been able to express our value from any judgment yet. Once the full evaluation of spending, including the assessment of outcomes, we welcome the Government's early work that it has started to do on the evaluation of the open Government commitments through to 2025. We have not yet set a timescale for it. Much will depend on the progress that the Government is making on its evaluation data completeness exercise, but given the scale of public spending that we are talking about, it is worth £15.5 billion or thereabouts. Really crucially, starting to form an audit perspective on how well prepared we will be for future events. We think that there is an audit contribution to make on this topic to round this off, but timescales are somewhat dependent on the progress of that evaluation work. A couple of areas that have been touched on that I would like to explore a little bit further. We have talked about data and we have been talking about quality data and availability of data, since ever I can remember on this committee. I realise that the pandemic is pretty overwhelming and it is probably unlikely that anybody was prepared with data sets to be able to report in on that. However, there are deducing differences in the way data is being collected, so local council data seems to be somewhat more robust, but non-council data appears to be, I will use the word random, in terms of the way that it is being collected and presented. Given that we have an example for East Renfrewshire, which has a significant proportion of non-council administrative funding compared to other areas, are those differences due to data collection at a local level being variable? Is it that data groups are linked to specific public bodies and it is difficult to bust that out? Where does that come in? I will start. It is a combination of all those things, Mr Beattie. You rightly say that the quality completeness of data has been a feature of this committee's considerations for many years. We are trying not to get ourselves in a somewhat cliched position of auditors about being wise after the event, and it is important to recognise the pace and scale of undertaking and the public body's response to the Covid-19 emergency. Hence that all the more necessity that learning is applied from these processes, the quality completeness of the expectations around data collection are baked in at the point of design. That is easier done when you are not in an emergency setting, so that public bodies are able to prepare for what the financial response might need to be if we have widespread restrictions of the like that we saw. We know what worked well and we know what data is needed to evaluate and form that value from any judgment, or make interventions and tweaks during the process. Your assertion that local authority data collection was better than some of the schemes that were for national bodies is generally fair, although there are variations between the national bodies themselves. I think that the last point that I would make is probably one for the Government in particular to reflect on, especially as many of those bodies were acting largely as agents on behalf of the Government, that the Government can set the direction and expectations around the completeness and quality of data. To give a bit more flavour to that, I will ask Ashleigh to set that out for the committee. Maybe when Ashleigh is answering, she could touch on the point that the non-cancel spending—my understanding and correct me on that—is that mostly that came through the council in a way, that councils used non-cancel bodies to support themselves, and some were directly from the Scottish Government to these non-cancel bodies. I hope that I am making that clear. I can talk a bit about the sample funds that we looked at, and hopefully that will answer your questions. I am happy to do more if it is not. We looked at 10 sample funds, and this was across all different areas of spend, so food funds, wellbeing, business support, and they were delivered by a range of different partners, councils, the third sector, Transport Scotland, SDS, the enterprise agencies. We found that the use of data just varied across the board. Two kinds of data that we speak about—either the data that was used to develop these funds, so how they were setting their criteria and the guidance that they were using—pulled on what was available at the time. If there was better data available, they were able to make different judgments on the criteria, whereas if there was less data, they just had to go for a more blanket approach. Part of being prepared is thinking about the data that we might need in the future that would help us make those decisions, when we are making them at pace, how to make those decisions as best as we can, and having the more data would help that. On the other side is how data was thought about post-spending and how bodies use that data to evaluate what they have done and the impact that has been had. Again, we see that that is varied across the board. The Scottish Government often set their reporting requirements, so it asked the bodies that were delivering the funding to report on certain things. It is mindful that this was a really busy time and councils and other bodies were under a lot of resource pressure already. Again, we see that it varies and it is held across Government. From our sample funds, we were able to see where pockets of data were collected, but it was all held within directorates. Again, we recommend that it is pulled together. We do say that some of that data just does not exist and it will be very challenging to get it. We draw on an example in paragraph 98 of a contract where a standard clause was used that deleted the data at the end of the contract. That would have allowed the body to make judgments on how quickly the money got to the people that needed it, but those time date stamps were deleted, so it was not possible to do that analysis. That date has gone now and that will not be possible. At the start of a contract or the start of a spending, what data you need afterwards to be able to make those values for money judgments is important. That is something that we recommend the Scottish Government learn from. Your briefing states that non-council administered funds. The complete geographical analysis is not currently possible on these. I think that you said that the Scottish Government was working on that currently. Do we have a time when that might be delivered? I will check with Martin first of all, but I think that we know that its progress is being made in such aspects of that with the convener's question. Mr Beattie, we are evaluating some of the data that we were not able to say terribly much about in the briefing in March, but we know that that is progressing. For aspects of the funding, there is a council-wide analysis possible. What I think to reiterate Ashley's point is that across the piece for all the various Covid-19 components, that is not yet possible, but Martin can say a bit more. I would like to begin by clarifying what is shown in Exhibit 4. The design of the funds took account of who was best placed to deliver them. The council-administered funds were those with the rateable premises, which placed your lines, I think they mentioned in paragraph 27 of the briefing, around the NDR data sets, which are known to be robust to those pre-existing relationships. Equally, the non-counseled ministered funds, as we referred to them in that exhibit, were the kind of specific sectoral funds and they were delivered by the likes of Creative Scotland, the three enterprise agencies, the Scottish Government themselves and Visit Scotland. Within that, the non-counseled ministered funds are very much non-counseled ministers. Where you see variation across the proportion of funding that each council has received, whether that is administered by themselves or by another body, will be reflective of the economic and business space. Without getting into great detail on it, East Wren, as a commuter authority on the fringes of Glasgow-Neilsrath Library, does not surprise me without doing the full analysis that their small commercial business space is smaller and they receive a smaller level of successful grant claims than the likes of Glasgow-Redenborough. It will just be reflective of the local economy in that position. With regards to the data and it not being able to be split down geographically, that was very much just due to the issues that I mentioned earlier on and the data cleansing exercise is hoping where that kind of relatively basic information, whether it's because of an incomplete field or self-certification based upon an eligible postcode but has then been apportioned out to the wrong authority, is progressing. As I mentioned earlier on, June was my understanding of when they were expecting it to be complete. I should just mention that, as the Attorney General alluded to within his opening statement, that this comes back to central relation. We, from lasing with the Scottish Government, couldn't break down an element of funding and then subsequent to that and speaking to Scottish Enterprise and looking further in that, it appears that the Enterprise Agency did have that information and there was a timing issue with it being shared. So there will already have been an element of progress on that 100 million as to the success and the status of those funds to the Minister for the Life of Creative Scotland and Visit Scotland to perhaps, as you would imagine, are less used to working through those processes than the likes of the Enterprise Agencies and councils with existing relationships, then I wouldn't like to speculate. Okay, so we wait and see what the Scottish Government produces. I think that this is exactly where we are at. So just to reiterate the point, we are seeing progress but I think that it matters what the Government produces, the overall collation and then that next step about evaluation of what difference did it make, what outcomes were achieved from the Covid spending and then that more detailed analysis about comparing and contrasting different groups in society, different geographies as well. Orgin, I'd just like to change this a little bit to talk about fraud, which my colleague Craig Hoy here touched on. We've had other evidence sessions where we've discussed this and when you look at what's being reported in the UK Government in terms of allegations of fraud and other irregularities, particularly around things like PPE and so forth. I've seen figures of 36 billion and I think that that is an official estimate as to money that had somehow gone missing in the system in payments to companies and so on. We hear of inappropriate PPE running hundreds of millions of pounds having to be destroyed, PPE that wasn't delivered. It seems to me unlikely that we've completely body-swerved that, given the sheer volumes of money that was paid out due to Covid. So I'm not seeing that reflected in information coming forward here. I've still got this suspicion and I hope you've got a suspicion as well that there's still more to come out on this. We're always right to be wary and guarded on the risk of fraud, Mr Beattie. So I share your position that until there is a complete data gathering analysis and so forth, there is always a risk that aspects of fraud remain undetected. In truth, that's really the case with all areas of spending that there may well be circumstances that haven't yet been detected. Perhaps to reiterate, findings that we've shared previously with the committee and are also included in those papers is that the volume of fraud that you refer to from other reporting hasn't been detected or found in this area of public spending. Scottish Government's consolidated accounts for 2020-21 particularly focused on the increased risk of fraud and the Government did accept an increased risk of fraud around Covid spending by virtue of the pace with which they wished to get funds into businesses that needed it most. The estimate was of in the region of 1 to 2 per cent of that area of spending, of £36 million. That's considerably less, albeit a significant amount in itself than some of the other areas that have been quoted in other parts of the UK for some Covid schemes. Perhaps to refer also to the PPE briefing that we produced last year, that similarly didn't have the level of fraud error unsuitable acquisition of PPE that has been reported. Two reasons that I think are probably relevant is that existing arrangements were utilised. In the case of Covid monies, as Martin mentioned, windows were funneled through local authorities, as part of the agency arrangements. Their familiarity with local businesses and the non-domestic rates register allowed them to intercept some examples of potential fraud. As with the PPE briefing that existing arrangements of Scottish Enterprise had with some foreign suppliers, it also allowed them to speck and ensure some of the quality control. We haven't seen it yet, but I think that just to reassure the committee myself, my team and the auditors that we appoint have that firmly as part of their work. Although it is not yet detected, we continue to look and encourage management to do likewise. Just a couple of brief ones to wind up on. The national fraud initiative briefing states that the business support funding payments are included in the data matching exercise. To what extent could other areas where Covid-related fraud and error occur be picked up in this initiative? I might need to think about it a bit more deeply than I might be able to respond to the committee this morning. I think that the first thing that we see is that it is important that it is included, that it gives the scope of the NFI the opportunity to detect any undetected fraud, so we welcome that. I think that, as the committee will be familiar with, we will be producing the next NFI report later in the summer. The scope beyond that, whether there is opportunity to go, is something that we have got an open mind about, if that is a further mechanism with which to evaluate the £15.5 billion. There is a number of means. Ultimately, prevention and detection of fraud is a role for audit, but it is the responsibility of management that they have designed systems to do so. The evaluation analysis that we have talked about this morning is another key component of that—the completeness, the collection of data. We have got an open mind about it and I might want to take it away to come back to the committee on the national fraud initiative if you are content. Your briefing refers to the retrospective fraud risk review that the Scottish Government undertook on 11 major business funds, which were administered by councils and other bodies. Can you tell us what the fraud and error rates for funds administered by public bodies are and how that compares to the funds administered by councils? Martin, if he is able to pick that question up about the comparability of the respective rates, if we do not have that detail, we can come back to the committee in writing. The fraud risk review was undertaken after the Scottish Government had already carried out an assurance mapping exercise where it went back to the councils and the other agencies involved and said what controls are in place on this system, this system and this system. Subsequent to that, the business support steering group requested that the Government's head of counter fraud profession carry that out. The 11 funds were assessed against the Cabinet Office's global fraud framework, so that was the recognised system that they used to assess this. I do not have the detail on all 11 with me, I do apologise. I do know that it included the small business, retail hospitality and leisure and the strategic framework business fund and they were highlighted in everything that has been assessed as high risk. That was not so much reflective of the controls that were in place as so much the timing of it, the pace and also the scale. It constituted such a large proportion of the funding distributed that there was intelligence, which was also factored into this assessment of the funds that were likely to be targeted by organised crime, etc. Those were higher risk than some of those who were perhaps paying out small grants to sole traders. I would say that that risk review that I was made aware of and met the Government about was also reviewed in parallel by the Auditor General's appointed auditors and formed the basis of his opinion on the consolidated accounts. The levels within it, I believe, and it wasn't a complete return from councils, but I believe that as part of this survey that they undertook, there were around 2,000 potential fraudulent claims that were identified through the local government schemes with around 1,500 not paid out, so they were caught, if you like, and around 90 to 100 that were paid. The others couldn't determine whether that payment had been made, but in the scheme of, I think, it was 100, 180,000 successful applicants, the controls in place appear to have been effective, but that is not to prejudge the on-going work and the findings in the NFI. If there is any further information that we can receive on other bodies, that would be helpful. I am delighted to do that. I think that the scale of the Government's assessment of fraud is in the estimate of 1 to 2 per cent. As we touched on in the evidence session on the consolidated accounts, whether it is fraud-detected recovery matters or whether it is for the Government and other public bodies to follow through on that, so there will be further reporting in the section 22 report on the Government's consolidated accounts later this year. We will give more of an update. If we have any interim information, we will share that with the committee. Thank you very much. I am going to Willie Coffey, but before I do that, I welcome to the committee the Honourable Nathan Cooper, the Speaker of the Assembly of Alberta. You are very welcome here. I am sure that we will get a chance to maybe speak to you a little bit later on, but thank you for coming along to observe this morning's committee. We very much appreciate your time. I am going to turn to Willie Coffey, who has a series of questions around equalities. Thank you very much, convener. On the general one, if I could just switch the focus of our discussion to the agenda about equalities and societal issues and so on, your report reminds us that in April 2020, at the start of the pandemic, the Government identified four harms that it described as direct health impacts, indirect health impacts, societal impacts and economic impacts. Can you tell us a wee bit more about that? By and large, are you able to say whether the Government stuck to those four key themes in its decision making process throughout the pandemic to ensure that those particular areas of concern were adequately covered by funding support that came through? Good morning, Mr Coffey. I am delighted to pick that up. I will bring colleagues in at various points to supplement my response. The equality has been a feature of public spending during the course of the pandemic. The report and previous reports from ourselves and from other organisations have emphasised the unequal impact of the pandemic across different groups in society. In terms of the Government's Covid-19 spending, in the early stages, as you rightly say, it has set out the four harms with which to guide its approach and its approach to public spending on Covid-19. We have seen that through our data analysis, and I will bring Ashley in a moment to say how that has been used to shape some of the schemes. Perhaps the area in which we think that there is more work to do in terms of what comes next is that there is a commitment from the Government that, as well as the four harms that are identified for Covid, it would also be a reference to the national performance framework. Public spending would link to that. That would be clear about the piece that we have touched on a number of times already this morning, but what the outcomes have been from public spending related to Covid, where have those contributions been made? That is an important component of what comes next. The scheme design, Ashley, you can pick that up, if you will. The four harms framework was not intended to be a spending guidance document. It was the approach that shaped the whole response to the pandemic, so which restrictions were going to be put in place at what time, and how to balance the four harms that were caused by both the pandemic and the restrictions that were put in place, and how to go through the pandemic and balance those out in a way that would mitigate the overall harm to Scotland as best as they could. Through our conversations with Scottish Government, the four harms were a key part of their decision making, and we hear how that was informed decision making. However, we do not see any links specifically to it in any of the sample funds that we have looked at. Neither do we see links specifically to the NPF, so although they are very clear about what outcomes they hope to achieve with the spending decisions, they have not made that explicit link back to the four harms. Doing that will enable them to pull together the information and be able to see what impact the spending has had. Has that been put to the Government and do you expect to see that when the Government finalises its own report and assessment of Covid support spending? It may be a question directly for the Government just to clarify their intentions. We have seen some evaluation. We refer to that in the report that the Government has done some early assessment of the impact that we have shared with the committee in previous reporting. They have also undertaken some equalities impact assessments to evaluate some of those that were done retrospectively, reflecting the pace of spending. For us, there are two components. One is to complete the evaluation of this public spending and then to make an assessment of what arrangements will best serve public bodies in Scotland for future events. It will be for the Government to be clear on how it attends to approach that. I hope that I can come back in later on. I will now go to Craig Hoye, who has some more questions to put on the question of fraud. The last time that we touched on this, you thought that the assessment of 1 per cent to 2 per cent for fraud and error was reasonable. How do you come to that conclusion? Good morning, Mr Hoye. Martin will say a bit more about that. We formed a fraud judgment on the basis of the Government's own work. The Government looked at the controls in place—this was around business spending, I should say, just to be clear about that—and identified that the 1 per cent to 2 per cent risk of fraud translated to an anticipated fraud level of between £16 million and £32 million of that area of spending. The overall volume of transactions crossed reference to the control framework in place. Martin can say a bit more about how that was deployed principally through the work of internal auditors, council fraud departments, the assessment of applicants for schemes versus the non-domestic rating register, picking out duplicate entries, applicants who were operating in the council area. We are all various factors of it, but the Government, rather, to arrive at here at what we consider to be anticipated questionable claims and then some sampling and extrapolation therein. We took an assessment of the judgment that the Government made, arrived at the position that we got to and said that this was our overall reasonable approach, as ever. Once more evaluation assessment is done, it may vary from that number. It comes back to the overall point to make where there is further certainty about levels of fraud, recovery and enforcement action should follow. Martin can pick up more detail on that. Yes, it would very much be our view on the work that the Scottish Government carried out and where. We refer to agents who are acting on behalf of the Scottish Government as an incumbent upon the Scottish Government to assure themselves the regularity that that spend. We know from the assurance mapping exercise that where there were issues identified they went back out to the individual council, the small number of councils where there were issues or indeed the enterprise agencies etc etc and worked those through. Subsequent to that they did the more detailed fraud risk review. There has been elements of data matching throughout this. Not only with the Scottish Government may I add there was actually responses to the work that the Government carried out where there was pre-existing networks used, professional networks across councils etc where there was limited data matching exercises and it does very much reflect that although it's the Scottish Government's money and it was the Scottish Government who had to place reliance upon it, it reflects the maturity of the control environment and the systems that are in place. So, whilst elements of that spending weren't covered by the local government audit opinions, I think you can take assurance from the fact that there's been again 32 unqualified audit opinions issued on councils and the audit general in his opinion when the Scottish Government has said the same. Just in relation to fraud and error, obviously it might be quite difficult in certain defined circumstances to assess whether or not it was a fraudulent claim that was made or it was somebody just simply misinterpreting the rules and given that the principle of the rate payer applying for the small business support funding. I had an example of somebody who was subletting within a broader unit who made the claim and then the rate payer who also was operating from that unit made a claim but only to find out that the person to whom he sublet some space was obviously had already effectively got there before him. In those circumstances it would be difficult to say if that was fraud or error. So, with those clear cut cases of fraud, obviously, you said that you're going to go, biologic, you should make sure there's recovery action. Have you got any assessment of that £16 million to £32 million? How much is going to be effectively an error? Should, in those circumstances, there be recovery action or is there some kind of complex repayment process that will have to be undertaken? I think that it varies. There is a fine line between fraud and error. I think that it only probably speaks to the volume of convictions for fraud. It can be very difficult to prove that. Perhaps without knowing the detail of the example that you raise about, if I picture it rightly, Mr Hoy, that the council might have detected that potential error with their control environment if there weren't two payments for the same premise. That ought to have been one of the checks that councils were able to deploy to stop those. Some things will have slipped through. We know that. The point is that the overall evaluation and recovery where necessary, where there have been overpayments, there will be a variety of arrangements that will be in place. However, if there's been genuine error, we would expect public bodies to look sympathetically to those arrangements and to put arrangements in place, but it is important to recover misspent public funds. I know that Willie Coffey wants to come back in on business support funding, so I will bring him in, but I'm going to turn next to Sharon Dowie, who I know has also got some questions to put in this area. The briefing states that, between March 2020 and October 2021, the Scottish Government provided support to businesses totaling £4.4 billion, most of which was administered by councils under a number of support schemes that were touched on earlier on. The report explains that playing such an important role in delivering grants on behalf of the Scottish Government put a significant strain on councils' resources and that that was particularly problematic for smaller councils. Can you tell us more about the impact on councils from having to administer the funds? I'm going to bring colleagues in pretty swiftly on this one just to say a bit more about what it has meant for Scotland's councils, but perhaps just before doing that, I might turn to Richard. First of all, we can see that there was no template for this. I think that that probably goes back to the overall conclusion that people worked well together at pace, but there were really significant demands upon public workers across the piece. Rightly throughout the pandemic, we've been visibly aware of the efforts of many key workers, but it is also safe to say that some of the behind-the-scenes contributions were also very important. Councils aren't all the same shape and size. As Martin mentioned one of his examples earlier, some of the bigger authorities were better able to cope, but some of Scotland's smaller councils wouldn't necessarily have had the resource with which to do so, but still had to support their communities in the same way. To add a bit of colour to that, Richard, you might want to start first of all. Thank you. Am I briefly, and then pass on to Ashleigh, if that's okay? We've spoken already about the use of the processes and controls that were in place throughout the public sector, including councils, to help with the quick movement of funds effectively during a pandemic. In terms of the processes for the councils, that's one thing, but then obviously in terms of the workload that you're putting on these systems, whether they're around the NDR systems or the systems within it, that's another matter. Part of the report there is in terms of absorbing that additional workload and pressure. Those councils are smaller, found that more difficult, and I'll ask Ashleigh if there's more detail on that. That's about it, I think. I think just what I talked about earlier around the reporting requirements, that there were 300 announcements, so councils were delivering a lot of funds, it's not just the business support, there were funds across the piece that they were delivering, and then providing monthly or weekly reporting on. That extra level of reporting alongside delivering the funds, alongside their normal day jobs, just added to the resource burden. I should also say that councils were involved in some discussions with the Scottish Government about how best to shape the funds and how they would be best able to deliver them, so they were involved in those initial discussions around what the funds would look like, but not necessarily in where the money went and whether they were going to be the ones to delivering them in the first place. Can you tell us more about how you plan to audit the additional £375 million that's been made available for business support as part of your including work programme? In its first instance, where those monies have been distributed, we'll do, through our annual audit work, we'll pick that up. That will cover the recording of the amounts, the regularity of the spend, its completeness and so forth. Once that evaluation work is completed by the Scottish Government, we'll take a view as to how and when we best complete our overall audit work of Covid-19 spending. As we mentioned in the report, it's becoming harder to track and monitor what's Covid-19 spending and what's not. Neither the UK Government nor the Scottish Government in their 22-23 budgets have separate Covid-19 funding, but as part of the overall clarity understanding how £15.5 billion of spending has been achieved, what's been achieved from it, we do make a recommendation in the report that a final overall evaluatory piece of work is undertaken to set that out. We'll have an audit contribution to make. We're hesitant on timescales at the moment until that's completed. The briefing also states that a number of private sector businesses operating in Scotland decreased by 5.4 per cent from March 2020 to March 2021. Given that some businesses will have started trading during the same 12 months, is there any data available on the actual number of businesses lost during the first year of the pandemic? Last Martin, if he has any detail on that, if not again or something, we can come back to the committee on that. As it currently stands, that information is not available to the best of my knowledge. That was based on a Scottish Government business survey and, like so many economic statistics, it takes time to compile when it's published in the rears. When we prepared this report, the March 2021 figure was the most recent available, so I would suspect that that longer-term view you're looking for has to movement from the very start to the end. If we can term it that way, the pandemic will not be available yet, but we can certainly check on your back. I will speak to the clerks about it and alert you if that analysis has been carried out and published. Just on that final point, do we know the number of jobs that were lost as a result of 5.4 per cent of private sector businesses ceasing to operate? Is that a net figure? Yes, it is. Do we know the sectors yet that those were in? I'm not sure that we do, but I have that information to hand. As you know, there are multiple publications and sources about the overall number of economically active people and some of that analysis by region, by sector and type of the economy. Whether we've been able to triangulate that to attribute all to Covid, I'm not sure we've done. I guess that probably a question we might need to take away and come back to the committee on writing, probably referencing some of the ONS material that might cover some of that. I recognise that it may not be a central part of your work, but it is of wider interest, isn't it, to understand not just the businesses, but whether they are sole traders or businesses that employ people and which sectors were hardest hit, it would be useful for us to have an understanding of. I agree with you. We'll see what we've got and we can certainly sign post to the committee to other information that's published. I mentioned that Willie Coffey had some more questions in this area, so Willie, do you want to come back in? Yes, thanks again, convener. Auditor General, do you remember that, as the various support schemes developed, we were all aware of the huge impact that it had in hospitality, leisure and culture, all those sectors were really hammered and desperately needed funding support. Another sector, the wholesale sector, they were technically allowed to continue trading, convener, but they had nobody to trade with because everybody that they traded with was closed down. What's your sense of that and whether we've got that right? I also recall, convener, that when one scheme came along, people were missed out and we even thought of having a scheme for those that weren't in the scheming. I got the sense that we didn't quite know how to resolve those types of issues. What's your sense of whether, on balance, we got the decision making process right to support the sectors that desperately needed the help? It's a really interesting question, Mr Coffey. The wholesale sector, and there were others as well, soft play providers, taxi drivers, were other examples of industry sectors that came to light as a result of voices of operators in that sector, highlighting that they weren't necessarily covered by some of the existing grants, the resultant hardship that those providers were experiencing. There are some examples in the report that public bodies and government learned as they went and responded with some additional funding arrangements. I think that, as we highlight in the report that, at the early stages of the pandemic, the grant allocations were really quite specific for this purpose, and Richard could say a wee bit more if he wishes about how that evolved through specific grants, through to being a bit more general. That model perhaps affords public bodies more licence to gather up effective industry sectors as the pandemic evolved. For me, it speaks to the overall arrangement of evaluation and reflection that we might want to have now in place about what worked well and what didn't work so well. Would public bodies be confident that all the arrangements are sufficiently covered? It is one of those long-lasting examples—all sailors, taxi drivers, soft play and the extent to which they were covered and adequately supported. It is an opportunity for reflection. Importantly—I think that it has come up already this morning—the Government has rightly pointed out that it now has better established relationships with some of those industry sectors than it would have done before the pandemic, continuing to build on those relationships to inform what future interventions might look like. Just to check whether I should have said anything about that. Just briefly, I suppose, part of the point that we are making in the report is the way that funding, which was mostly from Barnett consequentials, then transpired into the spending choices in Scotland. There was a broad consistency between that, but as we set out around the power of 15, 16 of the report, what the Scottish Government was able to do was to then effectively change, tweak, moderate to make sure that they could take more accounts of those gaps or the changes in them, and the Auditor General gave some examples of that. I think that there is something also there, which we have mentioned earlier around the nature of the support changing over time, going from something that is more specific, such as building a hospital or getting business rate relief in place, etc. It is just something that is more general around supporting services, replacing lost income, meeting the needs of communities. One of the things that we are raising in the report is that councils are often best placed to do that, to understand local communities and how best to support that. What is important, and it goes back to that overall point, is that that information and intelligence about how it was spent is not lost, not just for future emergencies that may arise, but for the fact that it is the same going to your earlier point, Mr Coffey, on equalities. Is about your understanding of the difference that money has made and what that means for the recovery from the pandemic as well. One last question from me on that area, convener, if I may. Your chart on Exhibit 3, Auditor General, shows the total spend during the pandemic. That chart shows that around about August last year, Scottish Government spend is outpacing the consequentials coming in. What is the reason for that? Is it to address issues perhaps at the end of furlough schemes and did we continue to try and provide support there? Just what is the reason for the additional spend by the Scottish Government consistently for the past year? I will pick that up first, and Richard can come in as well to give a bit of detail to the nature. At a higher level, the Scottish Government has broadly allocated funding in the same way as the UK Government. It has made funding commitments for Barnett consequentials to spend largely consistently with how they have been spent in other parts of the UK. The differential that you refer to, Mr Coffey, is where the Scottish Government has decided to do other support mechanisms through its own funding arrangements. It has used, partly, some of the Scotland reserve to support some of its spending arrangements and also reallocated some of its core budget, where spending had not been necessary in the way that it would have been anticipated. It has not supported the rail operators, as you mentioned earlier, convener, but some of the passenger arrangements that the demand was not there in the same way. The Scottish Government has a licence to do that. It is through the fiscal framework that has ability to take spending decisions as distinct from Barnett consequentials. That largely explains the differential between the two numbers. Again, Richard, you can add a bit more. Thank you, Auditor General. That is correct. Some of it is around the reallocations and the reserves elements of things. As we have said in a series of our tracker papers before this paper, we can see that coming through, especially in those areas where the demand for expenditure was less as a result of some of the measures, and the Auditor General corrected my mentioned elements of transport, etc., during lockdowns. This is around announced spend here. Going back to the point that the announcements are then into the budgets and then the spending itself, I think that what is really important is that we continue to be able to see and that the Scottish Government may have transparency around how those announcements resulted and were spent against the nature of those announcements, which was £300 over the course of the year. The differential is about £1.3 billion at that point. Will we see in the Scottish Government's assessment where exactly that extra spend went? We would anticipate that. There will be some outturned publications this month—todd, perhaps, if I have my dates correct—through to the publication of the Scottish Government Consolidated Accounts, the audit and the presentation of that to Parliament later this year. The committee, through our section 22 report on the Scottish Government Consolidated Accounts, will give more detail on that, Mr Coffey. Can you pick you up on something that you just said in reply to Willie Coffey? That was about the rail franchise's money—the £441 million that was given to the rail operators. Are you saying that that was all barnic consequential money or that there was additional Scottish Government money put into that? I am not sure that I have the detail and the distinction of that effect. I think that there is no obligation on the Scottish Government to spend barnic consequentials in the same way that the UK Government has done so. The analysis of that £400 or so million, whether that creates a flow-through entirely of barnic consequentials or whether there is any additionality, I would need to either check with colleagues or come back to the committee if we have that information. It looks like we need to come back to you, convener, on that point. No, that is fine, but I would certainly welcome that. In two final summarising questions from me, it is something that we have touched on during the course of the evidence session this morning. That is about the overall assessment of Covid-19 spent by the Scottish Government and Ashleys. Do you have a time frame for when that information is going to be in the public domain? My second and final question is really just to pull some of this together. What do you think the key themes are coming from the inquiries that you have carried out, and what are the critical lessons to be learned from that completely unforeseen experience that we have all been through? I will go second. I will ask Ashleys first of all if we have any timescale in all addresses to your other point. No timescale, as yet. The Scottish Government has indicated that they are keen to do the recommendations in the report and engage with us on them, but we have no timescales yet. I think that, consistent with our key message in overall finding, is that public bodies of the Scottish Government work well at pace. They did the best they could with the circumstances that they found themselves channeling unprecedented sums of money through to businesses and public bodies to keep them going. There was no template for this. I think that that is one of the overall reflections that we have. We have spoken in previous sessions with the public audit committee and predecessor committee about the extent to which we were prepared for a pandemic. Much of our thinking, as we now know, and I am sure will be explored further by Lady Poole in our inquiry, was that our preparations centred around a flu-like pandemic. The extent of interruption that we have seen was not anticipated. In my opening remarks, we do not know if there will be more disruption events. Climate change might well influence that, whether there are more pandemic and epidemic events. It is important that we learn the lessons from this, because all of this will come down to the role of the state to intervene and support, and inevitably that comes back to enormous sums of public spending. That is a clear understanding of how we best do this. We all want to recover and move on and get back to our daily lives. However, there is a real necessity that we learn lessons from the pandemic so that we are better prepared. We know what works well and we have an evolving template that we can draw on. That emphasises the importance of the recommendation and your question. There is now that final evaluation data that is collected. There is a proper and full assessment of what worked well, what the outcomes were, and then that we can modify that for if and when there is a next time. On that note, I thank Auditor General Llew for the evidence that you have led this morning. Richard Robinson, Ashley Magity and Marty McLaughlin also thank you for the input that you have given us, which has been very valuable. I will now briefly suspend the meeting to allow for a changeover of witnesses. I welcome people back to this meeting of the Public Audit Committee, the 19th of this year. Agenda item 3 is for us to consider the briefing that was produced by the Auditor General on social security, implementing the devolved benefits. I am pleased that the Auditor General has been joined in this evidence session by Carol Grant, who is an Audit Director at Audit Scotland. I am going to begin this session by inviting you to give us a short opening statement after which we have questions from members of the committee. Many thanks, convener. This report is the latest in a series examining the progress being made by the Scottish Government to establish the Scottish social security system. I am pleased to report that the implementation of the devolved social security powers is going well. The Scottish Government has implemented new and complex benefits, including the Scottish child payment and child disability payment. Those are significant achievements. In addition, there is a focus on the needs of service users, building on the founding principles of the Scottish system. The Scottish Government is preparing well for the next stages of delivery and is managing this complex programme of work effectively. It is also important to recognise that the scale of what is yet to be delivered is significant. The same scale set is challenging and it will be some time before the devolved benefits are fully administered in Scotland. My report highlights that there are some substantial remaining risks, including assessing relevant data, putting in place longer-term digital solutions and getting operational staffing in place. Managing these effectively going forward will be critical. The Scottish Government currently estimates that the work to implement the devolved benefits will cost £685 million up to 2025-26. I recognise that the scope of what is being delivered has increased over time, but as the Government's understanding of what it requires to deliver this programme of work has improved, a lack of regular reporting has made it difficult for those charged with scrutiny to track costs. I welcome the Minister's recent announcement of his intention to publish a revised programme business case for social security later this year. Critically, my report highlights the need for the Scottish Government to manage the long-term financial sustainability of its social security expenditure. My report noted that, by 2026-27, benefiting expenditure in Scotland is forecast to be £760 million higher per year than the corresponding funding received through the block grant adjustment. The Scottish Fiscal Commission's May forecasts show that this figure is now expected to increase to £1.3 billion over the same period. The Scottish Government's other spending priorities will need to be managed alongside its social security priorities. I am joined by Carol Grant, who is involved in leading the preparation of the report, and between us we will look to answer the committee's questions. You mentioned the minister in your opening comments. The minister wrote to the committee on 19 May, rather unusually, in an unsolicited letter in which he set out his response to the report in which he used expressions such as significant progress, the scale of what we have achieved, a very substantial achievement, the Scottish Government is preparing well, the recommendations that Audit Scotland has highlighted, our areas that we had already identified and were working on prior to receipt of this report, things that are demonstrably working, that we have robust processes. Do you think that there is a recognition in and amongst all that of the scale of the challenges that you have identified in the report, and that there are substantial risks remaining ahead, not least, for example, in getting operational staffing in place? I wonder whether you would comment on how you see Social Security Scotland and the Scottish Government's position on it. Do you think that they fully recognise the challenges that lie ahead? I think that, as we say in the report, convener, I mentioned a moment or two ago, we think that they have made progress. This is a complex, significant programme of work, and I am sure that we will cover much of that in the session. As I also said, there are significant risks to be managed and delivered upon over the course of the next few years. Not particular to this programme, but the overall fiscal risks are very significant. The Fiscal Commission's forecast on our £1.3 billion distinct from associated funding will have to be managed in the entirety of the Scottish budget. There are data risks to be managed, and there are IT implementation requirements, not to mention the point that you mentioned and we covered in the report, too. That will be a substantial operation of staff, of public service. Many people in Scotland will rely on the service that is being provided by Social Security Scotland. Some of that is still to be transferred from the DWP, and all that will have to be managed effectively over the course of the next few years. It probably leads us to a balanced position, convener, of one of progress, but many risks are still to be addressed. Looking to the future and reflecting on the past, what do you think the critical factors have been that have allowed for the reasonably successful start to the work of Social Security Scotland? I will offer a perspective on that and bring Carol in a moment, too, who is close to some of the detail. Much of you say that the overall arrangements and the planning and the relationship—many of the factors that we speak about with the committee regularly about the hallmarks of well-run projects—have been in place through the implementation of this complex project. I do not think that we can understate the significance of that. Scotland has now inherited benefits that have been administered by the DWP, and it has also implemented its own Scottish unique benefits for the provision of Social Security Scotland. We have seen effective project management implementation. Relationships have been important. Leadership has worked well during the course of the project, but none of that should be taken for granted. What has gone before will necessarily mean that everything will do so in the future. However, as an interim report, we are seeing signs of progress. Carol will also have a perspective. The other thing that the Auditor General has mentioned that has been so critically important is the relationships and the way that they have been able to establish those between the programme in the Scottish Government, Social Security Scotland and DWP to ensure that the flow of information is there, that everyone understands the priorities and that they are all working towards the same aim. That is what we have seen really develop over the past few years and has been critical to the successful delivery to date. I invite Craig Hoy to put a couple of questions now. Craig, thank you, convener, and good morning again, Mr Ball. We note that, as a result of the Covid pandemic, there has been some degree of prioritisation that has been entered into. Some of the more complex benefits are due to be delivered at pace over the coming years, including the adult disability payment. Does the current timetable, which is in Exibit 1, represent a sustainable pace of change? Does it make sufficient allowance for unforeseen circumstances or for competing priorities, for example, for the creation of a national care service? Is that a credible timescale or do you think that we have to perhaps build them further delays? There is always a balance, is not there, about setting a timescale that is stretching achievable but not unrealistic. In the round, we think that the agency has done that. Carol can come in at a moment to update the committee about a little bit more detail. It is safe to say that there has been some re-planning of the implementation. The pandemic has understandably affected the anticipated earlier timescales for the roll-out of benefits in Scotland, but it is also true that, as you mentioned, there are a couple of factors. One is the national care service, which will require considerable input. There will be competition for skills and services within the Government and an already demanding market for some of the services that have been used. There is a balance between employing those skills and bringing in contractors to support the implementation of projects where they are not available to be sourced in-house. In the round, we are seeing progress. There are still some risks. Carol might want to say a bit more about that. One of the dependencies that we touched on in the report is with the DWP, the implementation of a system implementation that DWP is working on for later this year that will be dependent on roll-out of future benefits. Stretching and achievable are the watchwords that we have, but rail requires careful management, which is very reasonably what we have seen up until now. The other thing to draw out is the risk management arrangements within the programme, which we have seen as being robust. Although we comment about the lack of public reporting in terms of programme costs, we have seen really strong internal monitoring of costs and of their development of the longer-term plans to enable them to deliver. The Auditor General mentioned the reliance on the DWP. That has developed significantly over the past few months in terms of getting the arrangements in place to ensure that system can be delivered. It is recognised as a risk for all the partners involved and is being actively managed and monitored to support the delivery of the timeline that is detailed in Exhibit 1. One of the benefits that was introduced despite the Covid pandemic was the child disability payment, which was rolled out nationally in November 2021, following a pilot in three local authority areas. Your report states that the pilot provided a limited opportunity to test aspects of the benefit and that the data collection was still being developed during the pilot process. What were the risks of the Government launching the pilot without sufficient testing? How has this impacted data collection? Are you confident that the current data and the data collection system is effectively fit for purpose? I will ask Carol to pick up most of that. I will make a general point about the approach that is being used, which is an agile project implementation approach. Over the years, the committee has heard examples of where agile project implementation has been implemented, with varying degrees of success. In particular, it is not that long ago that Cap Futures was a feature of agile project implementation methodology that had not gone well. There are trade-offs. It is the overall conclusion that we make in this report about the use of agile. It is allowing for the project to proceed, but there have to be some elements that are picked up a later date. One is aspects of evaluation, not in its entirety, and aspects of data collection. Alongside that, there are technological components and use of manual processes that allow for the right level of pace and sufficient analysis, but I recognise that that has to be picked up in maintenance and evaluation at a later stage. In overall terms, the methodology is working well, but the trade-offs that Carol can pick up, if she wishes. I think that, specifically for the child disability payment, we see in the report that there was limited opportunity to test some aspects following the pilot. The way that the pilot sites are used or the areas are used is really to enable them to scale up, to get that feel for the implementation and to do almost constant learning as they go through the process in terms of how long it takes to process applications, how the system is working, and any interfaces. I think that the successful launch and delivery to date shows that that learning cycle is working. It is something that features throughout the annual audit that I am involved in, and it will be something that we will continue to report on publicly through the annual audit process. I know that Colin Beattie wants to put to you a few questions, so I will call in over to you. In general, that must be a red letter. There are two positive reports in one day. I cannot remember when that last happened. There are three areas that I would like to touch on. One is the new approaches to the social security system. Paragraph 20, page 11, refers to the introduction of these new approaches. They seem very commendable and so on. They have been introduced and they include things like local delivery, advocacy, and multiple channels for accepting applications and so on. Back to that favourite old one, data. Is there any data on the use of these services and the extent to which they deliver value for money? To an extent, Mr Beattie, is the answer. As you say and we have set out in the report, the overarching principles that the agency has sought to implement its approach is one of dignity, fairness and respect. They consciously use the language of clients for service users for the social security system. The implementation of their approach of local delivery advocacy, which is included as part of the legislation, and then that multi-channel access is also noted. As we mentioned in the report, it is a paragraph 24. The agency is gathering the views of their clients and also of partner organisations about how that is working. They have also undertaken some client survey and are using that intelligence to gather feedback. 80 per cent of people are using the services online, given people a range of options. 90 per cent of people who are asked say that they have been treated with kindness for the approach that they are using. Carol might want to comment about some of the additional analysis that they are using, some of the academic research that is going on alongside some of the initial survey work. Maybe I could just, to integrate that point, just ask one small question. You have got some percentages and so on, satisfaction. What do we compare that to? A piece of data is just a piece of data until you can measure it against something. You are right. Carol can speak further about that. 90 per cent of what has to be accompanied by trend analysis targets expectations to make data more meaningful. The extent to the application of that and the quantification of the impact. We might come on to further about what the impact of some of the interventions have been in a moment, but I will pause and see if Carol wishes to add. I think that if I could describe it, I would describe it as the data landscape is being developed, to be honest. I think that they are collating a lot of information. We don't yet have the detailed trends and we have been having discussions in terms of where you would set targets. Social security Scotland, we have had numerous discussions and they are very keen that it is not about time to process and things like that. That is not the system that they want. They want to understand how long it is taking them to process but they do not necessarily want people to feel that there is a set target that will drive behaviours in relation to how they are engaging. It is very much an on-going development in terms of the data capture but also what that is telling them and whether they are capturing the right information, where they want to tweak it and where they want to gain additional information in other areas. In terms of the value for money element that you mentioned, it is a key principle within the social security charter. It is something that they are focusing on but I would say not yet in terms of that assessment and that flows through the report in terms of some of their messaging. Are you satisfied that some of the data is going to be eventually useful in terms of how they are developing it and how they are putting it together? It seems an opportunity for once to get the data collection right since it is a new system. Yes, absolutely. What you will see is flowing through the annual report and accounts in the performance report at the front. That is evolving to be much more led by the data but telling the story rather than data for data sake, I suppose. It is almost at that point now where it is that assurance that the data that is being collected is the right information to inform the decision-making as they move forward. We will move on to the next area, which is the adult disability payment. Your exhibit highlights the huge increases that are expected in the scale of the activity to be undertaken by Social Security Scotland. One of the areas that has been highlighted is the lack of certainty around levels of staffing required to administer the adult disability payment. It is obviously a risk and a lack of certainty. Given the unknown resource implications of the benefit, how confident are you that Social Security Scotland is well placed to respond to the increase in demand? What is the plan? I think that you are right. Carol can come in and say a bit more about the scale of what is being proposed. As we use the language, it will increase hugely over the course of the next few years. In staffing terms, last December, the agency had 1,800 staff. It expects to go up to 3,500. Much of that will be driven by the adult disability payment as part of the caseload work that is required. The agency has a workforce plan. It is reviewing its progress in terms of full-time staff and any additional support that it might need. We know that we have a plan in place. We have seen that it has scaled up considerably over recent months as it gears up for the progress and transfer of responsibilities for the new benefits. We touched on the discussion with Mr Hoy about the progress of benefits that has been interrupted. Managing in conjunction with the responsibility plus staffing that goes side by side is a trick to pull off. We have to be largely aligned as the agency gears up. The workforce planning arrangements are in place. Carol can say a bit more about it if she wishes. What we are seeing is large-scale recruitment, but we are seeing that it has been well managed. In the report, we refer to the figures that the Auditor General said of 1,800 staff at Social Security Scotland. The updated workforce statistics were published last week, and it is just under 2,400 now. You can see that it is a flow and that it is managing it well. It is also considering, as many public sector bodies are at the moment, what hybrid working can mean and how that can flow through the workforce and how that can change the structure. All of that has been taken account of. We have seen the workforce plans being developed alongside the longer-term financial planning and the estates planning to make that complete picture. I will move on to the last area, which is the Scottish child payment. There has been reference made to the DWP in connection with that. I think that there are huge challenges in relation to timescales and data sharing that you have highlighted in your report. The whole extension of this payment relies on the DWP developing a new digital system. You have highlighted that there is not much space left for testing in advance of delivery. The programme is being developed on design plans that cannot yet be tested. One of the lessons learned from the launch of the Scottish child payment for children under six was the need to plan and protect suitable time for system testing prior to implementation. Are you confident that the risk is being managed appropriately? What are the Scottish Government's mitigation plans? Should the timescale slip due to circumstances outside its control? Do we have faith in DWP on managing to deliver in time? Forgive me, Mr B, if I do not offer you a categoric assurance that it is progressing. The only thing that I would say is that all the points that you make are right, that this is a significant next step in terms of the extension of the Scottish child payment. There is dependency on the DWP. As we know at paragraph 35 to the report that the programme, the Scottish Government programme management arrangements, they are aware of this risk. They are having regular meetings, interaction to track and monitor progress that is on track, including up to the need for ministerial consultations, if required. Today, we have six months to go before this is due to be rolled out. It will be for the agency, the programme to closely track. If necessary, there comes a point in any project implementation that it is better to delay than it is to progress with risks that go beyond a tolerance level and a way for the programme to take a view about that as to how it progresses. As things stand at the moment, our assessment is that the programme is managing well and that they are aware of the risks. Clearly, there is a crucial six months ahead. I will check the carol if she wants to supplement it. Nothing in terms of specific details. In relation to the detailed audit work that was up until the end of February, we have had on-going engagement since then. From that engagement, we believe that the risks are being well managed. It is high under the priorities for the programme. I have no doubt that you will be reporting back on the implementation in due course. Just to give the committee that assurance, this is a series of reports that we have produced up until now on the implementation of social security. Given its significance in both fiscal terms and the roll-out of the devolved powers from the Scotland act, it is very much in our thoughts to continue offering assurance to the committee. That is very helpful. Willie Coffey has got a question or two. Thanks again, convener. I ask you to talk to us a wee bit more, Stephen, about the systems development aspect of this. You will recall, and members will recall, at the outset of this project, which was in the previous Parliament, convener. There was some concern about the software systems development side of it because of our previous experiences, but it is fair to say, and I will ask you the same question, that this one has gone particularly well. The agile methodology has been deployed in another area that you mentioned that it was not so successful, but this one has gone really well and it is so complex. Can you unpick why you think that this particular methodology and this particular project has gone so well compared to predecessors that we have other experiences of? I am happy to do that, Mr Coffey. There comes a point that you have to move on. I recognise that it is appropriate that, in terms of the roll-out of public systems, agile has not always been looked upon favourably. It has not always gone well in Scotland, but that is not the case with the approach the agile methodology, as distinct from waterfall, which is the other... Looks to being the right choice that the Scottish Government has made for the roll-out of this system. To reiterate the point, this is a very complex process, very significant benefits that people rely upon to get right, and that is what we have seen so far. The reasons behind that are what we have been learning from previous approaches. We have seen that being brought into place. The right leadership, the right skills are in place, and I think that it is also important, and Carol can touch upon all of those points as she wishes, some of the assurance arrangements that are in place. We are not seeing a competitive environment between the programme and the agency, sharing of information, the right interaction between the agency and DWP. Much of that is so important about the not just executive competence and transfer, but also the implementation, that is seamless for the clients of the agency. All those components we are seeing, Mr Coffey. If I may, the whole point about Agile is that there is trade-off. You recognise through the progress implementation that you are not done. There is a system management maintenance, IT requirements to go back to revisit, as I spoke to the committee previously about the concept of technical debt. There are sacrifices to progress, and you have to go back and address those over the years. There are still things to be done with the methodology, but certainly quite a distinct change from previous reporting on the approach. I do not know if I have covered everything, Carol, but feel free. I think that the expertise that exists in the programme has been really important in terms of the successful delivery. The other agreement between the programme and Social Security Scotland that prioritisation was on the elements that would impact on service user experience. Having that clarity around where the prioritisation lay in terms of the development and the system and the interaction between the clients with the system has ensured that they have been on the same page throughout. I think that that has helped with the successful delivery so far. It is a good practice for software development and software engineering to deliver the things that the customers want and no more. That is a crucial feature of agile that you do not do more than you need to. You have mentioned a few times, Stephen, that there are trade-offs with that particular methodology. There may be parts of the system development that have been set aside. Will we ever need to implement them? Are the solutions that we are getting at the moment likely to be permanent solutions, or will we keep having to backtrack and improve and develop and so on and so forth as the project develops? The agency will need to take a view on that as it is through its system maintenance on-going development. Clearly, we are not in a stable environment yet. There are still more benefits to be rolled out and how all the system components interact with one another, what needs to be maintained. Inevitably, technological developments will be system changes that might make redundant some of the requirements of the system that have been set aside at the moment. I guess that it is complex, and it is difficult to be definitive today as to the extent to which all that matters. It is maybe worth emphasising what we say in the report, Mr Coffey, that in terms of the overall cost of implementing it—the Government has referred to a figure of £685 million—that does not include any of the additional on-going maintenance around Agile for some of those components that have been set aside for the time being. If it is the requirement, some of the costs beyond that will be for the agency to arrive at and assess what that means in financial terms. Do you anticipate that, given the complexity of what is to come, is it of the same order of complexity in terms of IT systems design or so on? Is it of the same order as what we have already done, or is it even more challenging, technically, what is going to be required to complete the benefits, if you can? I will ask Carol to pick some of that up. I think that it is shades of grey, if I am frank. None of that is straightforward or simple. There are so many interdependencies and the extent to which the next iteration of the role of the system is more or less complex in the respect that it is all largely similar—it matters so much that they get it right—but in terms of whether there is any material differentiation, Carol can speak to that. The adult disability payment was always the one that was held up in terms of having discussions about the most complex benefit that was going to be delivered and the caseload being a challenge. I do not want to commit to it entirely, but I think that we are at that point in the complexity in the system, and it will be more the learning going forward. I just wanted to bring up your question about whether there will be the need for all the technical data to be addressed. It comes back to the data point that we were talking about earlier. The client's interaction with the system is such an important element of it, but Social Security Scotland is also looking at what data it wants to get out of the system, and there may be processes at the moment when there is a manual intervention or a manual process being used that would be more efficient to be done directly from the system. All that is taken into account in terms of, as the Auditor General said, that balance between where the improvements lie and which ones are actioned. Will you be continuing to monitor the development of that as it goes forward? Yes. It is a core part of the Audit of Social Security Scotland, and it flows through our annual audit report each year. I will turn to Sharon Dowie, who has a couple of questions to follow up Willie Coffey's line of questioning. On programme implementation costs, they are estimated at £685 million to 2025-26 compared to £308 million set out in the 2017 financial memorandum. The report also highlights that implementation costs are not being routinely reported on publicly, which clearly makes financial scrutiny particularly difficult. You mentioned in your opening statement some of the costs being higher than the block grant, and I think that Carol said earlier that there was strong internal monitoring of the costs, even though they were not publicly put out. To your knowledge, what action is the Scottish Government taking to improve the accuracy of future cost estimates? Good morning, Deputy convener. I will start as Sharon Carroll can come in on all those points as she wishes. Exhibit 5 to the report. We set out the change since the 2017 financial memorandum of the anticipated cost of the delivery of programme. Those have changed substantially, so we have started at a figure of £308 million, moved to £651 million in 2020, and then the most recent update is at £685 million. It is very clear, and I think that this is not a case of cost spiralling out of control. What is much more of the example here is changing the scale and scope of the project. As the understanding of what is required has changed, additional staffing costs that we have touched on already, managing the volume of the caseload are key factors. As well as the expansion of the extent of the benefits anticipated, are more of the story. It is the case, though, that those have not been routinely reported, and that has reduced the extent of transparency and scrutiny available to Parliament and users of the service. As I mentioned in my opening remarks, it is positive that there will be an updated business case. We welcome that expect to see that as a regular feature through the continuation of the project, so that that can be sufficiently tracked and monitored. You also mentioned the fiscal sustainability. As the roll-out of the benefits increases, the Scottish Government will fund much of that from its own resources. Therefore, there is a divergence and policy choices and priorities that the Government and the Parliament's consideration of the budget will look to undertake, based on the fiscal commission's most recent estimates. There are variables, and even the fiscal commission acknowledges that in its own report. Those are forecasts, not necessarily predictions, but there are huge sums of money involved here, and that will influence the priorities that the Government will have to manage in its overall management of the fiscal position of the Scottish budget. The impact of the interventions through the new social security system, some of those may be longer term, all of that makes it more complicated in terms of the overall management and balancing of Scotland's budget. Again, I will invite Carol Stenton, further, as she wants to add. I think that, particularly in terms of Exhibit 5, where it is about the programme implementation costs, it was very clear from the initial estimate that it was based on high-level assumptions. We have seen that understanding of the programme scope developed, but alongside the timescales being extended, partly as a response to the pandemic. There has also been the introduction of Scottish-specific benefits, which we are not necessarily featuring in the original assessment of the costs. It also now includes the cost of case transfer, which there was not that clarity around at the initial estimate. The one thing that I would say is that the £685 million that we quote is the estimate at the point that we were doing the work, and until the full programme business case is published later in the year, we will not know if that figure moves with the work that is on going at the moment. Has the Scottish Government committee to publish the implementation costs for the new benefits? We expect that that will be covered by the programme business case when it is published later in the year. We welcome that additional publication, the transparency that we offer, but, importantly, that affords visibility and scrutiny of the project's costs as it progresses. One of the risks identified in relation to staffing is the increasing reliance on contractors. You note that the programme is clear that it wants to ensure knowledge transfer from contractor staff to payment employees and for this to support growth of their own staffing specialist areas. To your knowledge, what concrete action is being taken in that regard? There are arrangements in place. We have seen evidence of that. It is recognised as a risk. The extended timeline for the pandemic almost gave a little bit of space for it to really take stock of that. I cannot remember the name of the programme, but there is something that has been set up, but I can provide that after the session. There are definitely solid arrangements in place to ensure that knowledge transfer, because it is seen as such an important area by the programme in the Scottish Government. On the last point, you mentioned earlier that staffing numbers had risen from 1,800 to around 2,400. Are they all direct employees of Social Security Scotland, or is that a head count that includes contractor staff? I am sure that, from reading the statistics that it was last week, they came out that it is the employees of Social Security Scotland, but I will check the publication and confirm that. Is it full-time equivalent? It would be useful to understand that. The last question that we have is about the impact on outcomes, which, in the end, is what this has got to be about. The Scottish Government has stated that the three principal objects of rolling out the Scottish child payment are that one is to reduce child poverty by at least 3 per cent. Two is to make sure that it gets to those who need it the most, and not just those who would help them to get over the line of meeting targets such as that over 3 per cent figure. The third object is to try to bring about a sustainable and lasting reduction in poverty in those families that are currently below the poverty line. We were interested in understanding whether the current performance measurement frameworks are fit for purpose and whether they are sufficiently resourced. Is the capacity in the system to properly measure those targets that have been set? It is something of a halfway house at the moment, convener. I might refer to a number of points of government. Hasn't yet set out its formal strategy for how it will evaluate the impact of the benefits, and that matters to address the outcomes that the new approach of the Scottish system of social security needs to happen to complete that overall picture. In terms of the Scottish child payment, you are quite right in terms of the three criteria. There is much commentary on progress—or the anticipated progress—towards the Scottish child payment targets. Yesterday, for example, Joseph Rowntree Foundation and Save the Children published a joint report on some of the implementation and the risks present towards meeting the interim child poverty targets. For the committee's awareness, Audit Scotland will also be producing a briefing paper in the autumn about progress towards child poverty targets and will and the opportunity to update the committee further at that point. In overall terms, as with all aspects of public spending, it matters that evaluation is anticipated at the start. We have seen that. There is a distinct picture here from others. It is part of the agencies' thinking, the Government's thinking, as it evaluates the roll-out of the benefit, but as part of the overall strategy, there are still some steps to be taken. At that point, I would like to draw the session to a close and thank you, Auditor General and Carol Grant, for your input this morning. I am quite sure that Social Security Scotland and its performance is something that the Public Audit Committee will continue to have under its watch. Thank you both very much indeed, and I will now move the committee into private session.