 Good morning and welcome to the third meeting of the Public Audit and Post Legislative Scrutiny Committee in 2019. We have apologies this morning from Anas Sarwar, and I welcome Daniel Johnson, who is attending both evidence sessions this morning. Can I please ask everyone in the public gallery to switch off their electronic devices or turn them to silence so that they do not affect the committee's work this morning? Item number one is decision on taking business in private. Do members agree to take items four, five and six in private? Thank you very much. Item two is the section 22 report, the 1718 Audit of Community Justice Scotland. I would like to welcome our witnesses to the meeting this morning, Paul Johnson, director general education communities and justice, Neil Renwick, director for justice and Donna McKinnon, deputy director and head of community justice division of the Scottish Government. I understand that Paul Johnson would like to make an opening statement. Yes, thank you. I appreciate the opportunity to provide evidence this morning to the committee in response to the Auditor General's report on community justice Scotland. As director general for education communities and justice, I am the portfolio accountable officer for the Scottish Government. Sponsorship responsibility sits within the justice directorate led by my colleague Neil Renwick, and in particular community justice sits within the division that is the responsibility of my colleague Donna McKinnon. The accountable officer for community justice Scotland is its chief executive, Karen McCluskey. Community justice Scotland is the national body for community justice that was launched on 1 April 2017 following the Community Justice Scotland Act 2016. It aims to create a more robust and effective system of community justice across Scotland based on local planning and delivery by a wide range of partners. The Auditor General's report relates to the first full year of operation of community justice Scotland. We fully acknowledge and recognise the Auditor General's findings. The report acknowledges that some actions have been taken to address the issues raised, including the recruitment of four new board members, and a recruitment round has now been launched for a new permanent chair, which is currently open for applicants. Both the chief executive and the current acting chair have also confirmed that actions have been taken within community justice Scotland in response to the report, including the appointment of a deputy chair and the strengthening of financial capability. There is wider learning to be taken from this report, including the actions that are needed when our public appointments process do not identify sufficient numbers of board members. The report also reminds us of our need to work tirelessly to ensure that our public body boards have both the necessary skills and the necessary diversity. Community justice Scotland is a relatively new organisation. It has a key role within our justice system. Over its first 20 months of operation, it has already made progress on a number of areas, and I hope that we will have the opportunity to describe and discuss some of that progress, including the training and developing of a wide range of community justice workers and very widespread public engagement and communication. I am happy to take questions on the actions that have been and are being taken in response to the Auditor General's report. I thank you very much, Mr Johnson. I am going to ask Colin Beattie to open questioning for the committee. Given the fact that the committee, over a number of years now, has been expressing concern over governance as a result of various reports that have been brought forward by the Auditor General, how did you try to go off the ball on that one? I would not accept that my eye went off the ball. We are looking at an organisation that has, as I mentioned in an opening statement, already made real progress in its first 20 months of operation. Whenever a new organisation is established, we hand over responsibility to a new board for it to discharge its functions and we seek to support the board in discharging its functions. We can certainly describe the very wide range of support that we have provided to Community Justice Scotland in its set-up. My colleague Neil has been at the forefront of providing that support over the 20-month period. That has helped the board to get established. It has helped it to get ultimately a clean audit report in that the accounts are unqualified. Of course, not everything is perfect. We did have issues. We have had challenges. It is very important that we take those on board and learn lessons from it. When did you become aware that the board membership was not compliant? Let me explain a little bit about the act's requirements in relation to board members. It is important that the act makes provision for the situation that we have. The important point is that the situation is not non-compliant. That is the important qualification. The act states that the number of board members should be between five and eight. However, there is a provision in the act that anticipates the possibility of vacancies in membership. What we have done when we recognised that the initial recruitment process only produced four members was to rely on the vacancy provision in the act and to appoint another individual to act as an adviser to the board. Perhaps my colleague Neil would like to say a little bit more about those provisions and about the steps that we took if that would be helpful for the committee. That is not what the Auditor General says in our report on the act. The Auditor General quotes here at the act states that community justice Scotland consists of a member appointed by the Scottish ministers to chair the community justice Scotland, and at least five but no more than eight other members. There is no mention of any qualifications or variations in here. I will turn you to paragraph 12 of schedule 1 to that act where Parliament stated that the validity of anything done by community justice Scotland is not affected by a vacancy in membership. We took advice and, on the basis of that advice, concluded that the board could continue to properly discharge its responsibilities on the basis that there was a vacancy. Our intention had been when initially recruiting to appoint up to eight members, but you will appreciate that we must conduct a rigorous public appointments process. Indeed, that process was scrutinised at all points by the adviser from the commissioner's office. The process did only produce four appointable members. We therefore relied on that provision around vacancies in membership, pending a further appointment round. Are you saying that the Auditor General's report is incorrect? The Auditor General correctly quotes the provision of the act, but I am simply seeking to explain the other provision that enabled us to proceed. Do you accept the Auditor General's report? I accept the conclusions and the findings of her report. In particular, I accept that there was a need to strengthen and increase the number of board members. Part of our learning from the process and from considering carefully the Auditor General's findings is that we could have taken earlier steps to recruit additional board members. Can I ask for a yes or no? Do you accept the Auditor General's report and the criticism of that report based on paragraph 5 and 6 of that report? It is important that I provide the qualification around the legal basis that the Scottish Government had for proceeding. I accept it, subject to what I think is a necessary qualification. There was a legal basis. Your qualification effectively means that the Auditor General's report is incorrect or incomplete. If it is helpful to the committee to clarify and reassure you, there was a full public appointments process undertaken, as the director general has said, that is set out and asked to seek eight members for the board. That full process was followed. It is the only process that we have for recruiting members on to public appointment boards. An assessor from the commissioner's office was part of that process and was assured that it was followed appropriately. As the director general has said, unfortunately that process, although it got a large number of responses and a number of people were interviewed, only four people were identified as being appointable through that process. The Auditor General is right that, in terms of the act, our process only identified four members against the five. The action that we took in response to that was to check the legislation to ensure that the work of the board would continue to be valid with four members. We also took action to place an expert advisor on to the board with experience of community justice delivery based on an assessment of the skills mix and the skills that were required following that appointment process. I think that, based on what you say, you do not actually accept the content of that report. No, I accept that it correctly reflects the legislation as it is and that we only identified four members, but, as the director general has said, we ensured that the actions of community justice Scotland would be valid under the law, even though it only had four members. We ensured that there were five people around the board in addition to the chair by placing an expert advisor, reflecting the skills mix that was assessed with the chair. Alex Neil What is the definition of a vacancy? To the best of my knowledge, the act does not specifically define vacancy. As I mentioned, we took advice on this matter and concluded that, in circumstances where we had sought to fill up to eight posts and had only filled four of them, we could proceed on the basis that there was a vacancy. I would have interpreted a vacancy to be where somebody has been serving on the board and then steps down from the board and that creates a vacancy. A vacancy is not created because you cannot find the right number of people for the board. The use of the word vacancy is misapplied here. When the Auditor General was doing a section 22 report, did you explain to the Auditor General staff what you have explained to us in terms of a vacancy? I am not sure if we did have the opportunity or if we did take the opportunity to explain that, and I think that that is a very fair point. My colleague Neil may wish to say more on that. We met at an earlier stage with Audit Scotland and the discussion focused on the actions that we had taken to place new board members and the fact that, at that stage, we were just about to appoint the additional members on to the board. The focus of that discussion was on the remedial actions that we had taken. I made the error of not advising them of the legal basis on which we had done, so that was not part of the discussion that we had with Audit Scotland. Given the report, that was a fairly major error. Was it not? In terms of clarifying, but we do not share the legal advice that we received. No, you do not share the legal advice, but surely you should have explained to the Auditor General your interpretation that that was legal because of a vacancy. Certainly I would have clarified if there had been any question of whether the actions of community justice Scotland were not valid. I would have been happy to clarify the case that we ensured that they were valid. Just to be clear, when the minister signed off the recruitment exercise for the board, did that paper suggest a recruitment of eight members? The issue was that she could not find eight qualifying members vis-a-vis the skillset that you were looking for? That is correct. In the original submission to ministers, it was on the basis that we would seek eight members. That was the basis in which it was advertised and in which we sought to recruit members. The process only identified four members. We do not have any other process in which to identify people. Consideration was given whether or not we could delay starting the work of the board, but the existing community justice authorities were already winding down. There were staff being recruited into community justice Scotland, and clearly they have an important role to fill. We had to ensure whether or not we could allow the organisation to start with four members. We tried to remedy the smaller number of members by adding in an advisory member with significant experience of community justice. Our only other option would have been to delay the start of the organisation until a full recruitment round could be progressed. Do you then recommend to the minister that there should be a further round to try to recruit additional members and that that should be done reasonably quickly? Yes, it was discussed at the right timescale. Obviously, having gone through a recruitment round and only identified four members at that stage, there was a question of whether another recruitment round on the same basis would identify more members. A decision was taken in dialogue with the chair that it was best to allow a number of months for the board to operate and assess what its skills requirements were and then run a further recruitment round to bring the board up to full strength. It would be helpful if the committee could get a copy of the relevant recommendations to the ministers in both the first round and the second round to see what happened. My final question is on this stage. Has any attempt been made to recruit members to the board who have actually been through the community justice system? Or is it all people in suits? No, it was very deliberately intended in the initial recruitment round and again in the second recruitment round to recruit people with lived experience of the justice system. One of the members who was recruited initially has lived experience of the justice system through a family member. But no people who had directly themselves been any time through the system? They certainly weren't excluded. I can't say whether any of the members have that. Is there any attempt made to recruit such people? Yes, there was specifically in the criteria that there was a sought for people who had experience of the community justice system as people who had been through it as accused of crime. As of including the new recruits, is there anyone now in the board who has had direct experience of being through the community justice system? I think that that would fall into information that I wouldn't be able to reveal if I did. Could you write to us and let us know, please? Again, I wouldn't want to commit to release information that I'm not sure I'm able to, but I'll certainly check what I can reveal. That's a simple question. Mr Rennickson, can you check if you're allowed to give us those details and if you are, then you'll furnish us with those? Right. Thank you very much indeed. Willie Coffey. I want to give you an opportunity to give us a flavour of where we are now. I'm sure that we'd all agree that this organisation has made a bit of a shaky start. Let's see. Where are we now with the organisation in terms of the audit principles that we're interested in? Structure, governance, audit and risk and all that. Is that working? Is it up and running? Are you confident that it is and it's delivering what it needs to do for the period ahead? I'm very happy to say more about that. I think that it's clear that the board has taken steps to engage very actively with the auditors and take on board the recommendations that have been made. The board now has a full complement of members with eight new members coming on board. My understanding is that only yesterday the board agreed that a deputy chair should be formally appointed. That is very sensible in light of some of the learning from this audit report. The committee structures, given that the operation of the committees was one of the matters that was referred to by the Auditor General, have been operating as a full board with a high degree of effectiveness. Their minutes are published on their website, and we can see from the minutes that the board has taken time to get established. I have been dealing with the issues around planning, strategy, finance, people and risk that we would expect of a board. Certainly, the actions that have now been taken by the board should serve to strengthen their governance. We in the Scottish Government and the sponsor team in particular will be seeking to support the board very closely over the coming weeks and months, so that the learning from this first audit is fully taken into account and helps to ensure that the organisation has got very strong foundations in terms of its governance. The problems that we have had so far with the smaller numbers on the board and the issue with the chairman and the chair that has had no impact in the overall delivery of the service that we plan to roll out, we talked about a robust effective delivery for community justice and local planning and working with a wide range of partners and so on. Surely, it must have had some kind of impact in your hopes for a clean roll out of those objectives. I noted that Grant Thornton, the external auditors themselves, in discussing the operation of the board, stated that, despite some challenges in terms of the absence of a permanent chair, they said, and I quote, there did not appear to be a significant adverse impact on board decision making. So, this board has functioned notwithstanding some of the challenges that it's experienced. Even more importantly, we can point at this 20-month point to some real successes of the organisation in seeking to deliver its core objectives. I'm sure that's what the members of the committee are particularly concerned about. This organisation has an important role in seeking to strengthen community justice right across Scotland. As I've been speaking to the chief executive and members of the board, I've been really quite impressed by what I've learned about some of the details of what the organisation has been doing in its first 20 months of operation. I commend the staff and the board for the work that they have done, both in seeking to inform the public about community justice, about the benefit of community alternatives, particularly striking, I think, that their second chancellor's campaign has now been viewed almost six million times. That's quite impressive for an organisation in its first 20 months of operation. They have also trained more than 1,200 community justice practitioners, and they have engaged with all 32 local authorities in seeking to strengthen the provision of community justice at a local authority level. That's very helpful. Thank you very much. Mr Johnson, can I ask you about the chair person? I mean, there's been an interim chair, there's no current chair, is that correct? I understand that the advert for the chair went out yesterday. Would that have been prompted by today's meeting? Can you explain the timescale for this? It seems rather odd. I certainly can. There has been an acting chair for some time. I call you, Neil Wabble, to confirm when that acting chair was appointed. When it was recognised that the permanent chair was off and was likely to be off for some time, the board agreed to put in place an acting chair and she remains in place just now, so the board does have a chair. The permanent chair resigned in September 2018. Following that resignation, we have been working on the process for appointing a new permanent chair. You'll appreciate that it's important that that process is robust. We require to engage with the Public Appointments Commissioner to assemble a panel to think carefully about the skills mix that we need to be looking for. Work has been in train to appoint a permanent chair. I'm keen that that work is done as quickly as possible and that it has gone live in recent days. I understand that. That's the normal run of things for government. I think that it's rather odd that we find out that the post was advertised yesterday, less than 24 hours before this meeting. We have absolutely taken steps to ensure that the post could be advertised as swiftly as possible. If the committee are happy to hear more, we might be able to describe more about the process. We have adopted a wide of sought to accelerate the process as much as possible. The process is of less concern to me. I have some sympathy with your problems with governance, because it's so important to get the right people on board, but leadership that the committee has identified over the months and months that I have chaired is absolutely key to driving forward any organisation and the problems that we have with the criminal and community justice system in Scotland. To leave a chair vacant for so long and then for it to be advertised less than 24 hours before this committee meets, just seems rather worrying. Donna McKinnon. To be clear, the post was not advertised yesterday. It was the beginning of last week and the guidelines around the timing have been completely in accordance with the code. We began the process for recruiting a new chair as soon as we heard about the resignation of the previous chair. We have taken steps to look at a skillset, to try and attract as much diversity amongst candidates as possible. We have got an independent assessor, we had planning meetings prior to Christmas, so it's entirely—there's been no delay whatsoever—and we've public appointments team and indeed the independent assessor from the commissioner's office have prioritised this recruitment alongside myself. Thank you for that clarification, Mr McKinnon. Liam Kerr. Thank you, convener. Good morning. Convener has just been talking about the importance of getting the right people on board. Donna McKinnon, you were talking about the skillsets. We heard in your opening statement, Mr Johnson, that there are four new non-execs that have been appointed and now there's a move to build a skills matrix. Do you have any thoughts on why it's been done that way around? Shouldn't a skills matrix have been built and a skills review undertaken before you recruited the non-executive members? To be clear, we have been looking at all points about the skills that are required for this board. My colleague Neil may be able to say more or will be able to say more, because at the outset we prepared documentation around the skills that we needed for the board. We were very clear about the skills mix that we needed from the outset, so at every point of recruiting we sought to set out quite clearly the skills requirements. Neil may have more detail about that if that would assist the committee. If I may interrupt before you ask, I think that you're going to answer this question, but I can be absolutely clear for anyone watching. When you were looking to recruit the four new non-execs, did the Scottish Government do some kind of analysis of the skills gaps that were there already? What happened was that, before the original recruitment of the initial board members, a skills matrix was prepared in dialogue with the previous chair. Ahead of the more recent recruitment round, in the absence of the chair, a discussion happened with the whole board on the skills requirements for the recruitment process, which fed into the recruitment of the members. Is good practice once a recruitment round has happened as part of the succession planning and part of the planning of the board to undertake a further assessment of the skills on the board once you have the people round to try and assess who you have and what the skills are and whether there are any gaps? It happened before the recruitment round and then again after the recruitment round as is good practice. Can you give the committee some idea of the current make-up of the board in terms of its skills and diversity? In the Auditor General's report, there were concerns about whether there was sufficient experience in relation to finance, governance and risk management. What is the current situation and are you comfortable that now those three specific areas have been addressed? Yes, we are comfortable that the board has a sufficient mix of skills, although I am going to talk about some further activity that has been taken. In terms of the original four board members that were identified, they include people with extensive public body board experience and also third sector board experience, including one who was the chair of an audit committee of another public body board. It includes people with business experience and people with experience of the criminal justice system. When the skills analysis was undertaken after the last recruitment round, the main gap that was identified was around direct experience of delivery within the community justice system. That was responded to by having an adviser placed on the board, initially a senior female social worker and then more recently a senior former sheriff. For the four new board members, they include people with a mix of experience across the community justice system and across the justice system and other areas. It includes someone who is a former prison governor but also a chair of SASO. It includes someone with research experience, it includes someone with experience of working with vulnerable young people and it includes someone with experience of working within the third sector. There is a mix of different experiences in terms of finance, audit and direct experience of the community justice system. As part of the arrangements now that those eight board members plus the adviser are in place, the board has been looking at its skills, requirements and, along with internal and external audit, arrangements have been made to provide additional training, for example, on audit and risk, and that process is on-going. That might answer my next question, which is just that the recruitment has been done, the board is now full. You are now doing a skills matrix. What happens if you identify some specific gaps that lead you to say, well, wouldn't it be great if we had someone like that? What do you do then? We are content that the right mix of skills are on the board but, as with any board, they should be constantly reviewing the skills that they have and the experience that they have and responding to that by undertaking additional training. That is what is happening on the board. Final question, just a slightly different focus, if I may. The Community Justice Scotland is part of the Scottish Government's strategy to shift the balance from custodial sentencing towards community sentencing. We heard from Willie Coffey's question earlier on. He described that it has had something of a shaky start. We know that the Scottish Government has plans to almost force it to bring in a presumption to push the justice system towards community sentencing. Paul Johnston, are you confident that, if that happens, Community Justice Scotland is ready for that? Has it got sufficient resource, capability and capacity if the Scottish Government forces that change? We are absolutely clear that community sentences are often more effective at reducing re-offending than short prison sentences. You have to have a legitimate alternative, surely? I agree that the Community Justice Scotland, as an organisation, needs to be properly resourced to do its job. We, of course, are continuing to have regular discussions with the organisation about its resourcing. However, it is not the main deliverer of community justice sentences. Those sentences or alternatives to custody are delivered locally. Its role is largely as an improvement body, effectively. It is working with the local providers of community justice, much of which is financed through our partners in local government and is seeking to support improvement in services and improve the consistency of service delivery across Scotland. It is a vital role, but it is not one that undertakes alone. It undertakes it with those partners in local government and with a wide range of other partners, including, for example, the Scottish Prison Service, the Police Crown Office and many other local partners, including a third sector and voluntary organisations. In brief, you are comfortable that Community Justice Scotland is ready for this shift? What I think is that Community Justice Scotland is already delivering on its agenda, but in its first annual report, which is currently out for consultation, it shows that, when you look across Scotland, a lot of work remains to be done in terms of improving the availability and consistency of community sentences. I would not wish to sound in any way complacent. I think that we have a big challenge ahead of us in Scotland to ensure the widespread and more consistent availability of community alternatives, given what the evidence states about the effectiveness of those sentences. In the evidence that we got in December, the auditor told us that the Accountable Officer was intending to appoint someone to strengthen the financial team. Have you appointed that person? That would be a reference to the work that the chief executive of Community Justice Scotland has been taking forward to strengthen the finances. Karen McCluskey is the Accountable Officer of Community Justice Scotland. My colleagues here have been in very regular contact with them to ensure that the financial capability that they need is in place. My colleague Neil may be able to provide an update on just the latest position with regard to that support. Just to confirm that Community Justice Scotland has been receiving shared service support both from our finance colleagues and on a more informal basis from our accountancy colleagues. They have been in further dialogue with them about getting some additional support, and we as the sponsor director have agreed some extra resource to help them with that. They are looking to, in the initial term, to look externally to bring someone in, and then beyond that, to look at the possibility of a succumbent from within the Scottish Government to help with that work. That work is in active progress now. There is also a dialogue with both internal and external audit on the review of both governance and finance within Community Justice Scotland, and the outcome of that will feed into further dialogue to identify what the skills gaps are and how those can be strengthened. Does that mean no? It means that the necessary skills are in place, but we are looking to further strengthen them. I think that the conclusion from the evidence session was that you needed an accountant in the organisation. That should not be too hard to do. That is being put in place for the relevant timescale that is required. We have spoken about it. It takes from September to January to put an advert out for a board member. How long does it take to appoint an accountant in an organisation? We will make sure that that is in place for the current accounting period, so we are working on the basis of making sure that that resource is in place when it is required. I still do not think that I understand that. You need an accountant, you appoint an accountant. What are you actually talking about? We have made resource available. The organisation is going through the process of having that person put in place. Will that be an external appointment? I think that what they are looking at in the immediate term is to bring in someone on a contract basis and then we will look to put on a more permanent arrangement. I think that, from what I said earlier, it seems to take off a long time to appoint someone. That is not a director level, but a working accountant who just needs to get on with doing the books. That is sitting with the chief executive who is moving forward with that. Thank you very much. Daniel Johnson. I begin by thanking colleagues on the committee for welcoming the cuckoo in the nest, so to speak, this morning. I would like to follow on from what Willie Coffey and Liam Kerr were asking. In Scotland, we have an incarceration rate of 140 per 100,000 population. That is a third higher than many other comparable OECD countries and a third higher than it was 20 years ago. I agree with the strategic importance of the work that the community justice does, but is it not fair to say that there is going to be a step change in what we ask it to do with the introduction of commissioning by community justice Scotland? Given the concerns here, is the board and, more important, the community justice Scotland more widely ready to take on that role? I do not dispute what you have said in relation to our incarceration rate and our need to make real progress and to step up the availability of community alternatives. My colleague Donna may wish to say a little bit more about some of the priorities that community justice Scotland is pursuing, but we can have confidence that the steps that have been taken to strengthen the governance oversight and the finance of the organisation will stand in good stead for the challenges that lie ahead. I agree that it is important that the organisation is in fine health to take on the challenges that we face. As Paul said, a key priority for community justice Scotland will be to adopt a strategic commissioning framework. It is doing that in conjunction with local areas and doing a lot of consultation on what that might look like in order to maximise resources locally and to get people working in partnership for better outcomes. Another priority will be to—we touched on it earlier—alternatives to prosecution. A large part of the groundwork has been done through Karen McCluskey's championing up and down the country on that to get people in line with policy directives of pass presumption against short sentences and the management of offenders bill. I think that communications engagement up and down the country will help going forward in terms of commissioning and strengthening the evidence around alternatives to prosecution. Daniel Johnson Given that you set out some successes that I would not dispute, you would acknowledge that that commissioning role will be a major step change in terms of what community justice Scotland is being asked to do? It is an important aspect of their role, but it is important to emphasise that community justice Scotland will not be the direct provider of community justice sentences. That is not the intention. Rather, it is supporting local partnerships with the commissioning of those services. I would see it as an evolution of their role and as part of the importance of ensuring the better, more effective and more consistent availability of community sentences across Scotland. It is important that we do not think that the organisation has gone from its current size and that it is about to become a massive provider of community justice disposals across Scotland. That is not the case. It will simply be seeking to support the local providers. I will get you to clarify. Either commissioning means that they are commissioning services or they are not. Commissioning does not imply provision, but it implies looking at providers, looking at what would be delivered and deciding whether or not to give the money. That is what commissioning means and that is substantially different from the work that it is currently carrying out. My understanding is that it is working on a framework for commissioning to enable local commissioning to take place, but again, Donna, perhaps you would have more to say on that. Given what that organisation is now tasked with, there is a long leading time for this. We are helping in the transition from the Scottish Government to community justice Scotland to do that. A crucial part of that, as Paul has indicated, is a commissioning framework, which is essentially a good practice guide. That is an important first step. We have given community justice Scotland extra resources to enable them to take commissioning forward. As I said, there is a long leading time. We have not just given it to them, the first year of operation, for example. Just finally, in terms of the success and the strategic priorities for the board, as a member of the justice committee, we have heard both from third sector organisations and from sentences themselves that there is a great deal of confusion as to what is available in terms of community sentencing. As long as that remains the case and sentences do not have confidence in what is available to them, there is going to be a significant problem in getting that sea change in sentencing to take place. Do you agree that that is a key strategic priority? Do you believe that community justice Scotland is equipped and making progress towards that awareness and understanding from sentences? I absolutely agree that it is a key priority for community justice Scotland to support the more effective and consistent availability of community sentences. I think that what they have already done through the first report that is now out to consultation is to give us possibly a clearer picture than we have had previously of what our country looks like in terms of the local availability of community sentences. I think that that is a first step towards identifying priorities for improvement, and that is at the heart of their role. Thank you very much. Do members have any further questions for our witnesses this morning? Can I maybe ask a final question? Mr Johnson, you will see that Parliament believes very strongly in gender balance on their committees and bodies. What is the current gender balance on the board? At present, the board has six men and two women and is therefore clearly not yet meeting the aspirations that we have for gender balance. It is a real priority of the Government, as you know, that we seek to achieve gender balance in all of our public bodies. It is something that I wish to raise with a new chair immediately on the chair's appointment really to ensure that there is a focus on developing greater gender balance and greater diversity across the board, as the board takes its work forward. There will be at least two further opportunities for members to join community justice Scotland in advance of the date when the Gender Representation Act comes into play. There are opportunities, but it needs to be a real focus of attention, because we know that diverse boards are very likely to be much more effective boards. Thank you very much indeed, Mr Johnson. I thank you all very much for your evidence this morning. Before I suspend, I welcome to the public gallery the honourable Maxivono Thomas and colleagues from the Public Accounts Committee of the House of Assembly of Turks and Caicos Islands. I now suspend the meeting briefly for a changeover of witnesses. Item 3 is a major capital project. I would like to welcome our witnesses to the meeting this morning. I have just counted that there are seven of you and seven of us, so that is a good match. Alison Stafford, welcome director general of finance, Rachel Gweon, deputy director of infrastructure and investment, Alan Morrison, capital accounting and policy manager in health, finance and infrastructure, all from the Scottish Government, then Bill Reeve, director of rail, Michelle Rennie, director of major transport infrastructure projects, Transport Scotland, Peter Rickey, chief executive of Scottish Futures Trust and Kerry Alexander, investment programmes director from the Scottish Futures Trust. I understand that Alison Stafford is going to make a brief opening statement. Thank you very much, convener. Good morning and thank you for inviting me to attend to assist the committee's scrutiny of the latest report on the Scottish Government's major capital projects, which we submitted to the committee on 2 November and also published on our website. As convener has just introduced us, there are a number of colleagues here. Michelle and Bill will be very much able to assist with responses on transport questions broadly and also on rail. Peter and Kerry are here very much to support the committee's inquiries on non-profit distribution hub and the schools programme and Alan to help with the health inquiries that you have. These were the three areas that you were particularly flagged that you were interested in. The committee may be interested to know that the current format of our reports was the product of a tripartite consideration involving the then Public Audit Committee, Audit Scotland and the Scottish Government. This report has stood us in good stead over many years and has evolved to include some further information on infrastructure investment, including major infrastructure programmes as well as projects. The autumn report, which came out in November, gives that six-monthly update on major projects over £20 million, including the local economic benefit that is attracted and generated by each project. I just want to mention also the spring report in 2018. Those spring reports regularly provide information from the annual infrastructure investment plan progress report and over the last year that report additionally included an overview report in response to the interest that the committee had shown in infrastructure investment more broadly. This is us responding to your inquiries and providing the information that will help you with your review. That overview report contained details of capital spend beyond that invested by the Scottish Government, details on private sector investment leveraged into our infrastructure investment programmes, an overview of financial transactions and a breakdown of the total investment in our project pipeline by year, sector and funding. It also included the revenue commitment position on our 5% affordability cap and the profile of revenue spend for NPD, the non-profit distributing model, and hub projects, including the associated net present values. So there's a wealth of information there. To put these reports in context, they are a collection of projects and programmes to really make a step change difference in our inclusive economic growth. They are projects and programmes led by organisations across the breadth of the public sector in Scotland. The responsibility for the delivery of individual capital projects and programmes remains with the relevant accountable officers. Given the span of infrastructure projects, if the committee has a detailed inquiry from a sector that's not represented here this morning, I will endeavour to write with the additional information where that's deemed necessary. That's a brief introduction. Before handing back to the convener, I will pass over to a couple of colleagues who need to declare non-financial interests with regard to the committee's business this morning. Peter Rickey. I'm Peter Rickey. I'm the chief executive of the Scottish Features Trust. I do need to declare this morning a non-financial interest as a director, Aberdeen Rhodes Ltd, the NPD company that is established to deliver the Aberdeen Western peripheral route project. Kerry Alexander. I also have a non-financial interest to declare in Gulliford tri extracts in Rennes Ltd, which is the special purpose vehicle that runs the Rennes college NPD project. Thank you very much indeed. I'm going to ask Colin Beattie to open questioning for the committee. Obviously, a main objective is to maximise the value of our infrastructure in terms of its usefulness to the economy. Could you comment on the overall affordability of public sector infrastructure where it's privately financed? The whole area of affordability, so the infrastructure investment plan sets the context for all investment that takes place and the decisions that are ultimately made by Scottish ministers in putting forward budget proposals each year. Our budget, as you know, is made up of a whole range of different ways of financing infrastructure investment. You've asked specifically about the privately financed and those are the ones that, as you recognise, have a number of years where the Government continues to pay on a revenue finance basis. The method that the Scottish Government has adopted to make sure that it maintains that level of investment on the revenue finance in a way that is affordable is to voluntarily and put in place a cap on those revenue finance elements year on year. That cap is set at 5%. You will see from the budget that was laid out to Parliament in December that the basis of that cap has been revised so that we keep it absolutely in step with that affordability and with the changing nature of what's captured by that cap. One of the big triggers for revising it was the different treatment due to classification changes of the regulated asset base for the rail network and that required us to look at it and we keep these policies under review. But the 5% cap has been the methodology for testing and ensuring that affordability and that trajectory is set out in our budget documents. It's something we've published for a number of years now so that there is a transparency around that. That's the method that we use, the 5% cap. Obviously, it's very important to maintain a certain level of infrastructure investment. What's the impact going to be now that the NPD model is presumably going to be discontinued? You are right. The NPD model, because of classification changes again, no longer gives us the additionality. It was extremely useful at the time, and particularly in response to the crash in 2008-9, the programme that followed that was really essential for maintaining and contributing to some economic growth when it was really tricky for Scotland at that time. The NPD model is by virtue now discontinued. What we are seeing is that we are still making a level of investment that our next year budget, as you will see from published documents, is an excess of £5 billion. We continue to use a whole range of other financial tools at our disposal, not just traditional capital grants but also a range of other financial instruments. Those are able to underpin our commitments that we are setting out in the budget for next year. There is work to look at what other models will be suitable going forward. That will be essential to be part of that ambition that was set out in the programme for government by the First Minister in September for the national infrastructure mission. In terms of the sorts of models that we are looking at, I could invite Peter Rickey to say a little bit more if you would like to know a bit more about those detailed models. As Alison said, the forms of private financing of infrastructure or any sorts of financing of infrastructure that we can use to deliver additionality requires a private classification under these EuroStat rules that we have talked about before. The latest version of that rule book is 150 pages published jointly by EuroStat and the European Investment Bank in 2016. That sets out a relatively narrow track of the sorts of structures that can be put in place. The Welsh Government will adopt the Scottish non-profit distributing model to deliver the same sort of additionality. It had a programme that was in planning when the rules changed and have evolved their model to be a profit sharing model. It now calls it the mutual investment model. That has been assessed by the Office for National Statistics and now by EuroStat as being privately classified under this new latest rule book. We are exploring opportunities around that similar sort of model to see whether there can be a version that would work in Scotland that is likely to be very similar to that mutual investment model that the Welsh Government has adopted. It is important that that both is able to gain a private classification but also that it is suitable to deliver the sorts of projects that we want to use it for and that the industry will respond positively and will tender and be able to offer good value to us and it is able to deliver sustainable business for the construction industry as well. We are undertaking a little bit of engagement with the marketplace at the minute to understand the acceptability of those arrangements to the market, mainly the construction market but also financiers, along with looking at some of the details of the structure based on the Welsh mutual investment model. Can I ask you a slightly different angle on that? I was looking at the weighted average cost of capital and the internal rate of return. I wonder if I use the internal rate of return as opposed to the modified internal rate of return because it seems to me that the modified internal rate of return might be more accurate. There are quite a lot of different ways of measuring the cost of capital on individual projects. We have used the weighted average cost of capital, we have used an internal rate of return. A modified internal rate of return is not something that is widely used in the sector and it is not something that the financial models that the consortium put together and that the financial advisers for individual projects look to. I am not able to run a discussion with you now about a modified internal rate of return versus an internal rate of return, I am afraid, because the factor that we have used, we have used weighted average cost of capital and internal rate of return. Both of those have been published now, but the way that the phasing of the different sorts of financing projects, the senior debt and the junior debt come in and the difference in the weighting is something that can affect differences between those two variables. However, I am not in a position to comment on whether a modified internal rate of return would be more accurate measure than an internal rate of return. I am just picking up that last point. Obviously, there has been this debate led by, on one side, the Cuthbertson and the other, SFT, about how you measure the effectiveness of NPD. I do not think that we can go into the detail of that here today, but one of the important points is that any successor programmes, obviously, we need to be absolutely sure that we are ending up with a proper reflection of the best way to fund. Can I just go back to those changing rules, because they are pretty fundamental in terms of their impact? You say that they are from Eurostat, just as a matter of interest, if and when we get Brexit, do we still have to abide by Eurostat rules? Let me start this response, and I may again invite Peter to come in. Eurostat produce managing government debt and deficit, and those are the rules and effect that create the context. However, Eurostat do not invent the context for their rules. Those rules are set at a much higher level, and they originate from the UN. If we are respecting the UN and the principles that they use in terms of their national statistics that they set out as the guiding principles for any nation across the globe who are part of the UN thinking, those set the parameters for how Governments are seen to be competent and do business in this sort of space. The Office of National Statistics, which is the UK-wide body—there is not a specific statistics body for us in Scotland—we come under the Office of National Statistics, will fulfil a role, as far as we can see, that will continue to take and interpret what comes from the UN and see how that should apply to classification issues for anything that is managed under public finances within the UK. The short answer is that I do not think that by one bound we are free. Peter, have you got anything that you would act? I know that you work closely with these organisations as well. I think that that is exactly right. We need to have a set of rules, and as Alison talked through the international hierarchy of those rules, and I cannot see a very quick change coming in the detail of the rules that we will have to apply. Can I say that Alison explained that to the committee before and was aware of what she said, but I just wanted to check whether those specific changes fall into the UN category or are they purely Eurostat, because some things are just Eurostat and some things are informed by UN rules. I just wanted to check whether there is this particular change informed by the UN changes. The UN level sets a series of principles, and those principles are worked through in details by the different statistical authorities. You are right to say that the detailed guidebook that I have referred to is published by Eurostat, but that is set to embody the principles. We have no information that the ONS would seek to embody those principles in a different way through any changes. I do not want to dwell on this too much. No, just the last point to say is that I think that it is fair to say that it relies on those experts that are in the various statistical authorities, whether it is at European level or at national level for the UK. They actually have to take what comes from the UN and they have to interpret it. As we have seen, those interpretations, how it is captured in the managing government deficit publications that come out, and how those are interpreted is a skill and a science or an art form, even all of its own. I think that the only fair answer to say is that we will have to wait and see. Can I move on to a wider subject? I am obviously very interested in how we achieve the national infrastructure mission in the general terms, Alison. You have provided an answer. Can we clarify where we are in terms of the national investment bank? When can we expect the national investment bank to start raising money for infrastructure projects? What will be the relationship between the Scottish Futures Trust and the national investment bank—indeed Scottish Enterprise—because there is an element of overlap that I would have thought across the board? So, where do we act with the national investment bank? What is its relationship to SFT? Is there any impact on the role of Scottish Enterprise, particularly in lending to businesses or investing in businesses? I will start and give you some overview, and I shall bring in others, as necessary, Rachel and Peter. In terms of the Scottish National Investment Bank, a bill that will be introduced early in this year, in 2019, to establish and set the financial arrangements for the Scottish National Investment Bank, so that, from 2020, the bank will be investing in our businesses and communities. That is a specific timeframe. The headline in terms of the relationship with Scottish Futures Trust will be operating in very differently on tell. The Scottish National Investment Bank, in terms of establishing that, will be using financial transactions. The requirement in that particular use of our budget is that it is actually applied for organisations that are outside the public sector boundary. It has to be used with private sector. The Scottish Futures Trust supports a tremendous amount of our infrastructure delivery through public sector areas of activity. To address those particular areas, in terms of the current landscape of other activities, there are discussions that are taking place about those areas that would fit more readily within the scope of the Scottish National Investment Bank. I know that Scottish Enterprise is having constructive conversations with those establishing the bank to work that through. However, I would turn to colleagues if anything specific they wish to add. Peter, do you want to start with the relationship or the different space of activities across the two? I will build on Alison's point. The SFT does not operate as a provider of finance. We operate with public sector bodies across Scotland and interfacing with the private sector to innovate and deliver structures that are financeable and to manage programmes of activity through delivery of infrastructure. The Scottish National Investment Bank will be a provider of finance. As Alison said, there is a range of areas providing finance to private sector entities in which it can work. In our work in coming up with ways and means of financing projects, it may be that some of the ways that we are able to develop will be suitable for the SNIB to provide the finance to. We would work very closely with them in those cases. However, there is a lot of the work that we do with public bodies where it would not be possible for the SNIB to provide that sort of financing. There is definitely no overlap and there is great synergies in terms of how those areas will complement each other. The thrust of your question was about where that fits within the National Infrastructure Mission and how that is financed. This year, the legislation is due to go through Parliament setting up the powers that the National Investment Bank will have, which will help to see the context and the types of products and finance that it could be looking to provide, albeit that the consultation out there has said that it is more independent for the bank itself to choose the products. The budget also sets out where the money is being made available, so £340 million, I think, before the end of this Parliament. The £2 billion capitalisation is allowed in the plans moving forward. Alison and Peter have already given a pile of information, but a couple of areas that people will need to be alive to is that the National Investment Bank will need to invest in the private sector using financial transactions in a way that does not affect the classification of any projects that are invested in and bring them back on the balance sheet. The reason I am raising that is that you and I are both aware that Common Wheel and others have put papers out there making suggestions about what might or might not happen that has not really been able to draw out that flavour. We can come perhaps in the Infrastructure Commission, but that has a role in looking at the future delivery in this landscape. Jim McCall, our leading industrialist and most successful industrialist in Scotland, has made the point to the economy committee last year. He is very, very supportive of the National Investment Bank, particularly in relation, for example, to export finance and the like, as well as investment. However, one of the points that he makes is that, if it is too constrained by state aid rules, as other investment banks are not in Europe to the same—to any great extent—for example, look at the German National Investment Bank, his concern is that the state aids might limit the ambitions and the potential of the National Investment Bank. Is that something that you have been looking into to talk to Jim McCall about his concerns? Clearly, given his track record as being the most successful industrialist in Scotland, we should be listening to what he is saying. The best thing for me is to reflect back to the programme board, the points that you are raising. The Scottish National Investment Bank has a programme for its delivery. It will be very much alive to the issues of state aid. I know that it is. To make sure that those particular points—I have not personally spoken with Mr McCall. I have on other matters, but not on this one, but we will just make sure that those points are reflected back into the programme board, and I am very happy to do that. We are quite lucky at this audit committee in being able to see right across the public sector landscape over the years. We pick up common issues and threads in capital project delivery from time to time. I am particularly interested in how we perhaps learn any lessons and share good practice. My colleagues will no doubt highlight some examples where some attention needs to be given to delivery of some of those projects, but there are a number of successes too. I would like to ask you how we gather together the examples of good practice and try to share that. We have said that for a number of years at the audit committee that it is one of our wishes to see evidence of this. How do we do it in practice? I know that there is quite a broad range of projects here—mostly roads, rail and schools, I suppose. How do we gather that kind of intelligence? How do we call it to assure across the board to improve the delivery of projects such as this for Scotland? You are absolutely right—it is a very broad span. I have had the benefit of working in this space for a number of years as well as establishing the infrastructure investment boards for the Scottish Government in 2010. As you said, very early on, part of the work of the board was actually responding to areas that the predecessor of this committee had flagged up and some of the reports from Audit Scotland as well. Building that capacity and capability and getting a sustained programme of delivery was key. As you said, not everything works perfectly in this world, but if you look from the last report that we have put out, there are more projects. The majority of projects are on time and on budget. Learning the lessons has been an important part of that journey. One of the things that has happened that is now systematically in place is that for any of our major projects, there are gateway reviews that take place and specific reviews through the work of SFT that happen real-time as programmes and projects are taking place. Those are carried out so that those who are responsible for those projects can get some third-party input to test and review. From that work, there is a centre of excellence in the Scottish Government that captures both those findings of those gateway reviews on major projects as they take place, but also at the conclusion when there is the last gateway that has taken place. There are ways that that information is shared. We find that, whilst there are written documents that capture this, there is nothing as powerful as getting the people that are leading these projects together and matching up people at particular times with those who have done projects before with those that might be doing them for the first time. Those are some of our key systematic ways of doing that, but there will be specific things that happen in specific sectors. I would like to ask Kerry to say a bit about what has happened around the schools programme and also to bring in Michelle as well, because in terms of our biggest area of spend of capital investment, it is all the areas of transport. Michelle will be able to say what happens in terms of getting the learning and ensuring that we are getting the benefits that we expect from the investments that are made. If I may, convener, I will carry you first. Yes, certainly in relation to the future programme, there are those two elements of real-time and also assurance that you go along and also reflective in learning lessons from what has already happened. In terms of the real-time being out and engaging regularly with local authorities on what they are doing within their projects and being able to pass that on and discuss that with teams as you are working with various project teams in those projects. Also, as you go along, being able to do that in each of the assurance reviews, feedback those recommendations and take those recommendations when our team and Scottish Government are working with other local authorities. There is also a reflective part to that, so local authorities are performing their post-project reviews and post-occupancy evaluations once they are in facilities and thinking back about what happened, how did it go and what could we do differently in the future. On the schools programme, there has already been an interim report that has been published on what has happened and what has gone well so far and things to build on for the future. The team will certainly be using that to look at, on the back of the more recent additional investment in schools that was announced just before Christmas, how can you learn lessons and apply those going forward? On the roads projects, we have instigated, in addition to undertaking the assurance reviews, we have instigated a more formal process within Transport Scotland, where at the end of each phase of a project development, we stop and reflect, speak to our supply chain and our various stakeholders and try and record any lessons at that point in time so that we do not have to wait until the project has completed in order to build those lessons in to our project pipeline later on. As I say, we are doing that in consultation with our supply chain and with stakeholders, and we have at least biannual meetings with organisations like the Civil Engineering Contractors Association. We also pick up a lot of lessons from our regular engagement with communities up and down our road schemes across the country. We offer lessons learned register and informal learning with our project managers and project directors, and we offer that support throughout the project delivery phases. Only one brief follow-up on that. Thank you very much for that feedback. We used to hear at this committee fairly regularly, convener, you will remember, that perhaps there was not sufficient time to put into the planning phase of particular projects, and that had serious consequences thereon. That can apply across the board to any kind of project, and there was also perhaps not the same amount of attention at the end of a project, post-project evaluation and review and so on and so forth. We always cried out at this committee to see evidence of that taking place, because some of us felt that that was the key to future successful delivery. Has that been the main change? Are you seeing that more across the public sector? That particular attention has been given to post-project delivery to feed lessons back in, and are we given all those wonderful projects and project managers the time to design and deliver the projects initially so that we have a better chance of successful delivery? We have already heard some good examples of the post-project reflections that have taken place. I think that the committee's observation about that planning and investing enough time in that, I think that the areas that those projects that do perform well have had that investment. I think that the trajectory on that of putting more time in there has been improving. There may still be areas where it can be better, but I think that it is something where there is some improvement. There are still things that have come along that have impact on projects. Sadly, where there are delays, it can be some things that are out with the normal pattern of things, whether that is bad weather, whether that is contractors who are no longer able to supply what we expect, whether there are particular things when things are discovered on routes, or some of it is just also responding to local communities. Some of the things in that planning phase are still areas that are likely to give us some variability, where local authorities are rightly consulting with their communities about the location, say, of a school, and there can be different sites that are discussed and debated. Overall, we are seeing some improvements in those areas in the way that you have highlighted. I take on Willie Coffey's points about the learning outcomes, and I want to look at some specific issues that particularly involve the north-east. First of all, the AWPR, so I guess I am addressing my comments to either Peter Rickey or Michelle Rennie. The AWPR has been significantly delayed. There were two basic reasons that seemed to be floating around in December for that. One of those was a contractual issue. The contractual nexus between the various parties involved hadn't been sufficiently bottomed out to open the road, to do the handover. What was the contractual issue? How did it arise, and how do we ensure that, in future infrastructure projects, it doesn't happen again? Michelle Rennie, the issue around delay on AWPR is primarily related to delays—the contractor has told us about it—are primarily related to weather, to delays with the programming of certain utility works, and more recently to delays in relation to defects that have been identified on the dawn crossing. There were contractual issues, Michelle Rennie. I don't disagree with what you say, specifically on the contractual issues. What went wrong? Why did it go wrong? Whose door is it? How do we make sure that it doesn't happen again? I want to set out the basis of the delays in the first instance. The way that the contract was set up didn't envisage that we would have defects on the dawn crossing. I think that that's a fair reflection of most contracts. They're not structured in order to facilitate defects necessarily. Although there's a mechanism within the contract for dealing with defects. The contractual mechanism to which you refer is that that was discussed at the Rural Economy and Connectivity Committee, which was to allow the phase between Stonehaven and Charleston to open. That phase was identified as a variation to the contract, because originally the whole section, including the dawn crossing, would have opened up as one phase. That was to split out that section, that 31.5km, as a sub-phase of that, if you like. That had to be agreed between ourselves and the contractor and their lenders as a variation to the original contract. How do we ensure that that doesn't happen again? To me, as a lawyer that's dealt with these sorts of contracts, that's the sort of thing that can be planned in. I think that people who are watching are struggling to understand why that wasn't planned in. How do we make sure that it's planned in in the future for infrastructure projects? I don't think that it's possible to plan in every possible scenario on a 58km scheme. The scheme was planned to be opened in phases so that the benefits of each phase could be delivered once that phase was complete. The Balmedge to Tipperty phase, for instance, was opened in August, and that's a normal part of the planning of these jobs. Had the work on the dawn crossing not suffered quality issues, that whole phase would have opened up as one without any difficulty. The fact that the contract had the mechanism and the flexibility in which to create a change to allow the Stonehaven to Charleston section showed that it has the sort of flexibility that it needs. The thing that you can never control is the speed at which each organisation manages that process through their own governance. We can control that. I'd like to look at this dawn crossing issue, this issue with the bridge that is apparently delaying that entire section. Certainly constituents have represented to me, so I have no particular knowledge about bridge construction, but that particular bridge you basically turn up, you kind of pour it, you put it in place, you move on. If that's not right, I accept this is an enormous project. It's a very good project, but fundamentally it's putting a bridge in place. How come this one has gone wrong? Whose door does that lie? Again, how do we ensure that it doesn't happen again? I'm interested in your representation of the simplicity of the construction of the bridge. How does it not happen again, Michelle? The contractors wouldn't see it like that. The fact that these defects have been picked up is a function of the robust quality management process that's in place on the bridge, and they were picked up prior to opening the bridge, and they were picked up during construction. These defects will be remedied at no cost to the taxpayer, and the remainder of the road, what can be opened, has been opened, delivering significant benefits. In fact, some of the feedback that we've had said that the section that's opened already is the closest thing that one road user has experienced to time travel because of the journey time savings that he's making on a daily basis. What we've shown is that we were able to deliver significant benefits at the earliest possible opportunity, and that the contract that we have in place makes facility for dealing with any defects at no cost to the taxpayer, and that the quality management system that we have in place is robust and picks up these defects on time before the road is open. I'll press you on the cost of the taxpayer. Yesterday, my colleague Jamie Green asked about the cost, and I think that it's projected now to be £750 million, give or take, £745 million, £750 million. Jamie Green asked the cabinet secretary about this, and I just wasn't convinced by the answer. It wasn't particularly clear, and I just wondered if I might press you on that. The cabinet secretary said that there will be no cost overrun, but he said that it was because the contractor hasn't yet provided evidence of why an extra amount would be needed. I'm paraphrasing, but that was what I heard. If that's right, if there is no cost overrun subject to the evidence being provided, is it not possible that there could be a cost overrun on that? Well, each of these contracts makes provision for the contractor to make claims in limited circumstances. There is a mechanism for the contractor to make a claim, and there are details that the contractor needs to provide in order to substantiate his claim. That's not particular to this form of contract, that's a normal risk sharing device, and this contract is no different. The contractor has submitted substantial claims, and that has been discussed at the Rural Economy and Connectivity Committee. We are discussing those claims with the contractor and examining the detail, but, as yet, we have not been provided with sufficient substanciation to allow us to take those claims forward. That is why the estimate is currently at £745 million. To further the things, I'm going to move from road to rail now, if I may. I suspect that Mr Reave will be on this, and I'll be as brief as I can because the time is running short. I believe that there are plans to upgrade four stations in Scotland, which might include Inverness and Aberdeen certainly started, I see from the report. There is a desperate need to upgrade Montrose up in the north-east, which has nothing like the facilities that they already have. In fact, Montrose lags the rest of the stations on that section of the east coast mainline anyway. Will Transport Scotland be upgrading Montrose any time soon? I'm pleased to say that there are plans to improve the facilities at Montrose that ScotRail is developing currently, and I can write with more details subsequently if that's of interest. The reason for the upgrade is in no small measure because of the increase in service level on that railway, which is a very good thing, but it creates more interchange between passengers getting off the stopping services and on to the fast services, so it's becoming a more important interchange, so I think that I'd share an appreciation of stakeholders at Montrose that an improvement in those facilities is appropriate. Fantastic. When you write in and tell me what's going to happen, are you able to give me some concrete timescales, because I think that's what people will need? I'm certainly content to give you the timescales that we have, yep. I'll be very grateful, thank you. The other question I have, again, sticking with you for me, Mr Reave. In the report, there's talk about this £200 million that was promised to the north-east to improve the north-east mainline, and at the time it was made, so 2016, there was this promise, here's £200 million, it will shave 20 minutes off the journey time down to the central belt, and it will be in the north-east, it will be between Aberdeen and it will be between Dundee. Now, since the report to the committee has been drafted, the report of Arup has been laid, which I think says, if there are various options, if you invest £200 million, you will shave two minutes off that journey time, and I think that six of the projects will happen south of Dundee. My question to you is, what planning was done with Transport Scotland prior to the announcement in 2016, such that when the cabinet secretary comes out and says, £200 million, 20 minutes, all in the north-east, there is actually a robust base for that? Given the remit of the projects, according to the documents that we have, is to deliver economic growth and encourage people on to things like rail, how will the £200 million improve journey time sufficiently and provide sufficient improvement to the customer experience to be valued for money? There's quite a lot going on there, so let's take this a step at a time. Firstly, the £200 million is an additional sum to the other extensive investments already going on in the north-east of Scotland. For example, we have a £330 million project to upgrade the capacity to the west of Aberdeen, being delivered as we speak, and going very well, I'm pleased to say. The £200 million has the purpose of improving journey time and capacity for frequency on the railway between Aberdeen and the central belt, and indeed the Aberdeen central belt group, involving representation from Tayside and Aberdeen, and across the rail industry, is working to establish the best way of using that £200 million to improve journey time. It is not the only investment that is contributing to that improvement. Separately, we have an improvement to the signalling capacity just south of Aberdeen, with a very long distance between signals, which means a long time between the frequency of trains. We've also started the introduction of the new high-speed trains on the Aberdeen to central belt services, and those, given their superior performance, are also contributing to the improvement in journey time. I don't recognise the £200 million specifically against £20 million in isolation. We've been given the task of finding the best possible investment and the best return for passengers and freight customers, so we can get from that £200 million. Treating the railway as a system, where the system includes the infrastructure, the track, the signalling that's controlling the trains, the capability of the trains themselves, and indeed the timetable, because it's the iteration of those things that leads to the right outcome. The report to which you refer was one commissioned by that group and is part of the process of development, and it focused on what potential could be achieved looking just at upgrading the track, so line speed improvements and specifically some issues like redoubling of some bridges. It concluded—we weren't entirely surprised by that conclusion—that that wouldn't give a particularly good value return. Separately, there's work going on with colleagues in parallel with that report looking at issues like the capacity of the signalling. My judgment at this stage, without that work having been completed, is that that's likely to be a more fruitful area of foreign investment, because we have quite an old-fashioned signalling system between Dundee and Aberdeen. Turning to your last point about where will those works be located, the railway as a system, the objective is improvement of the journey time, the capacity and the freight capacity between Aberdeen and the central belt. It is sometimes the case that the best way of improving a train to Aberdeen is to make an investment somewhere in one of the key junctions further south. For example, we have some single track sections between Dundee and Perth, which we are looking at. I expect that most of that money will be spent towards the north end of the line because we have some other projects under development. I pick up Mr Coffey's observation about the importance of studying this carefully before you commit the funds. That's exactly what we're doing. The commitment was that this money should be spent over the 10-year period of the Aberdeen city region deal, and we want a couple of years into that. I think that we're making good progress in a proven development process to be able to meet that commitment, but I'll also point you to all the other investments that are going on on that route at the moment. I'm not quite sure which one of you deals with items not in the report, but you say that the fourth replacement crossing, which I take to mean the Queensferry crossing, was completed as of April 2018. I've raised this before as a regular user of the road when you're bumping a cross on the hard shoulder at 30 miles an hour overnight. It doesn't seem completed. I think that the cabinet secretary said that work could go on to the end of this year or something like that. Can you please explain why this is in this section? Queensferry crossing is completed in the sense that it's operational. There are still finishing and snagging works under way. Most of those that require traffic management will be taking place at times during the night and where traffic volumes are minimised. You've probably seen it on social media in the evening, but it's not overnight. I appreciate that there is still traffic, but what we're trying to do is do the work at the times of the day where there is less traffic and we're not doing it at peak times. My point is that, completed in the real world means finished, perhaps not signed off on a contract or something like that. Can you give us an update on that and perhaps bring it back to life so we know what is happening and when it will happen? As I said, there are some finishing and snagging works that remain. The contractor has suffered some delays as a result of failure of his subcontractors. Do you tell now or be an apologist for the contractor? Inability to be able to identify specialist resource within the time. Their current estimate is that they will be complete by October this year. Can you put it back into the report then so that we can monitor it? By all means, we can add in terms of the covering material that we give you, something that covers this issue. You've completed it to me. We're happy to provide you with regular updates if you wish to. You have further questions, Mr Boyle? No one asks me. Okay, Daniel Johnson. Raised the issue of the new Edinburgh Children's Hospital. It's a £150 million hospital that is badly needed. As anyone who has used it, the old sick kids will attest to the sick kids being in my constituency. If you google the Edinburgh Children's Hospital and you go to the NHS Lothian website that deals with those details, it says that it will be open in 2017. If you go to the project page, it says that it will be open by 2018. I think that we can agree that this is not a project that is on time. As regards the budget, just back in July, according to Lothian health board papers, the health board made provision of a £11.6 million loan for working capital to IHSL, which is the contractor leading the project. £11.6 million against a project worth £150 million seems a very large working capital loan to be made, so this begs the question as to whether or not this is delivering value for money. On top of that loan, it also agreed to pay a rental fee to IHSL so that it could get early access to install equipment to hospital, which, as I alluded to earlier, should already have been open. Is this project delivering value for money? Frankly, given the litany of errors that have gone on in terms of failures of contractors, the clear issues with the finance, the fact that the external verifier refused to sign off the building in the autumn, and indeed the video clips that did the round showing floods of hot water in the building itself, clearly this is not going right at all, is it? Mr Johnson, to Alan Morrison, who is in charge of health, is it delivering value for money, Mr Morrison? The figures that you referenced are part of a settlement agreement at IHSL, and they are in discussions with the special purpose vehicle about how to resolve the issues that you have mentioned. Those negotiations have not concluded yet, and they are still subject to commercial terms being agreed. We are there to identify the issues that need to be resolved before the hospital is open and complete. Again, we feel that the importance is getting a facility that is ready and fit for purpose, and having that done before patients are transferred over is important. It is disappointing that the hospital is late and behind schedule, but the clinical services being delivered at the existing site, we still receive good feedback that they are still high-quality and delivering good patient care. In the meantime, we are continuing to work with the SPV and the contractor to resolve the issues that need to happen before the hospital completes. Can I begin by saying that a delay of over two years is more than disappointing? Coming back to the loan of £11.6 million, I ask both in terms of its size and its necessity. Is this common practice? It strikes me as odd. If NPD deals are about risk transfer, it seems to me that the public sector is bailing out failures on the private contractor's side. It is certainly health projects that are the only ones that I am aware of that we have had this arrangement on the wider NPD programme. I do not know if anyone else would want to comment on that, but it was principally done because there was a dispute over a number of different areas, and it was seen as the best way forward to get the hospital open as soon as possible. Essentially, the SPV and Lothian had a different interpretation as to where the problem lied, whether it was in the design or in the construction of some parts of the hospital, and it was agreed that rather than going down a court case that would add further delay and further risk to finding an outcome of that particular agreement, that was a sensible way forward. At the moment, that is still being negotiated, and NHS Lothian needs to confirm that what that money is there to do is legitimate and reasonable. The fact that it has not been agreed yet shows that the diligence of Lothian in making sure that it is appropriate for what the money is intended for is being delivered. Can I confirm that a £11.6 million will be lent on a commercial basis at a commercial rate of interest? That is part of the negotiations, and it has not been confirmed yet. NHS Lothian has promised agreement that someone is available, but they need to be content that what they are getting for that delivers value for money. If I look at a contract that has had contractors fail through such major disputes regarding what has actually been agreed to, as you have just alluded to there, and has required almost what is getting on for 10 per cent over and above the contract value, that strikes me that there must have been significant failures in the way that this project was scoped by contractors selected and contracted for. Would that assessment be correct? Where are the failures that have led to this situation? I think that it is still to be determined. One thing that we will need to do is to review the circumstances behind it and see if there are any lessons to be learned from it. I think that these are complex projects, and we recognise that there will be occasions when the contract or things do not go according to plan. We need to understand where the problem is, whether it is in the design of the hospital, whether it is the interaction with the contractor and whether there are lessons that can be applied more generally across the health sector. One final question is a simple one. Do you have any idea when this hospital is actually going to open? We do not have a definite time at the moment. That is not very good, is it? Do you have any further questions on this, Mr Johnson? Alison Stafford, do you look like you wanted to add something? No, I think that it has been well explored. Thank you. Do members have any further questions for our witnesses this morning? I thank you all very much indeed for your evidence. I now close the public part of this meeting as we move into private session.