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FINANCE COMMITTEE

AGENDA

16th Meeting, 2006 (Session 2)

Tuesday 6 June 2006

The Committee will meet at 10.00 am in Committee Room 2 to consider the following agenda items: 1. Accountability and Governance inquiry: The Committee will take evidence

from—

Professor Alice Brown, Scottish Public Services Ombudsman; and Kevin Dunion, Scottish Information Commissioner;

and then from—

Dr Jim Dyer, Scottish Parliamentary Standards Commissioner; and Kathleen Marshall, Scotland's Commissioner for Children and Young People.

2. Post-Enactment Scrutiny of Financial Memoranda: The Committee will consider an approach paper.

3. Review of Scottish Executive Management of Public Finances (in private):

The Committee will consider a paper from its budget adviser.

Susan Duffy Clerk to the Committee

Room T3.60 Extn 85215

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The papers for this meeting are: Agenda Item 1 Submissions from:

• Scottish Public Services Ombudsman; • Scottish Information Commissioner; • Scotland's Commissioner for Children and Young

People; • Scottish Parliamentary Standards Commissioner; • Commissioner for Public Appointments in Scotland;

and • Scottish Parliamentary Corporate Body.

Audit Scotland “Shared Services” Report, Commissioned for the Scottish Parliament Corporate Body PRIVATE PAPER

PRIVATE PAPER SPICe Briefing: Regulatory and Investigatory Bodies created by the Parliament since Devolution (previously circulated to Members in hard copy, available from Scottish Parliament website) The Constitution Unit Public Officials of Parliament Presentation (previously circulated to Members in hard copy, available from Scottish Parliament website) Extracts of Reports from Other Legislatures (previously circulated to Members in hard copy, available from Scottish Parliament website) Agenda Item 2 Approach Paper from SPICe and the Clerk Agenda Item 3 PRIVATE PAPER

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Finance Committee

16th Meeting 2006, Tuesday 6 June 2006

Accountability and Governance Inquiry

1. The Committee launched its Accountability and Governance Inquiry on 1 March 2006. The remit of this inquiry is to:

• examine the growth in the number of independent, regulatory and

investigatory bodies and the associated growth in funds allocated since devolution;

• examine the adequacy of processes for setting and scrutinising the

annual budgets of such bodies; • examine the appropriateness of existing lines of accountability and

how this process works in practice; and • identify whether there are any potential overlaps in remits and

responsibilities of independent, regulatory and investigatory bodies and any financial implications of such overlaps.

2. A call for evidence was issued and all submissions which have been

received can be found on the Committee’s webpage. 3. The Committee has so far taken evidence on 16 May from the Auditor

General and Audit Scotland, the Scottish Commission for Public Audit and the Scottish Legal Services Ombudsman, and on 23 May from the Scottish Charity Regulator, the Convener of the Standards Commission for Scotland and the Scottish Commission for the Regulation of Care.

4. The Committee meeting on 6 June will involve taking evidence from a

selection of parliamentary commissioners and ombudsman. The Committee will then take evidence from John Elvidge, Permanent Secretary of the Scottish Executive on 13 June, and from the Minister for Finance and the Scottish Parliamentary Corporate Body (SPCB) on 27 June.

5. The written submissions provided by witnesses for the evidence session on

6 June are attached as follows:

• Scottish Public Services Ombudsman; • Scottish Information Commissioner; • Scotland's Commissioner for Children and Young People; and • Scottish Parliamentary Standards Commissioner.

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6. In addition, the submission from the office of the Commissioner for Public Appointments in Scotland is also attached. The Commissioner was due to give evidence to the Committee at this meeting, but was unable to attend.

7. The submissions from the SPCB is also attached for members’ information. Roz Wheeler Senior Assistant Clerk

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Submission from Scottish Public Services Ombudsman

Introduction I am pleased to contribute evidence to this Inquiry which addresses issues on which I have sought to generate debate since my office was established by the Parliament in 2002. I present my evidence by reference to the four heads of the Inquiry’s remit. I summarise in Section 5 at the end of this evidence my answers to the five specific questions posed in the Convener’s letter to me of 1 March. Growth in the number of bodies since devolution 1.1 The Ombudsman role in Scotland is not a post-devolution creation. The

first Ombudsman with responsibilities in Scotland was appointed in 1967. In 1999 there were four Ombudsmen dealing with complaints about devolved public services in Scotland.

1.2 The Scotland Act 19981 required the Scottish Parliament to consider

arrangements for making complaints about the Scottish Executive. The Parliament introduced something much more imaginative and wide-ranging: merging the offices of the former Ombudsmen to create a ‘one-stop-shop’. A key aim was to provide simpler, more accessible mechanisms for the public to make complaints.

1.3 The Parliament also extended our remit to include new areas: mental

health complaints previously handled by the Mental Welfare Commission; and complaints about the enterprise network which had a separate Adjudicator system. Our work grew in April 2005 with implementation of a decision to simplify NHS complaints processes by removing Independent Review Panels (IRPs) so that complaints come straight to us if attempts at local resolution have failed. Our jurisdiction was extended again in October 2005 to include further and higher education.

1.4 We now cover local government, the NHS, housing associations,

universities and colleges, Scottish Executive departments and agencies, regulators, NDPBs, cross-border bodies, the enterprise network, the Scottish Parliamentary Corporate Body (SPCB), and Crown appointees such as the Auditor General, and the Public Appointments Commissioner. Our remit continues to extend as new bodies are created and the range of public services delivered by the private and voluntary sectors increases.

1.5 These developments represent a considerable reduction in complaints

handling and related bodies in Scotland rather than a growth in the number of offices.

1 http://www.opsi.gov.uk/acts/acts1998/80046--i.htm#91 (section 91).

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Processes for setting and scrutinising budgets 2.1 In its call for evidence the Committee raises important questions about

how budgetary control can be balanced with independence. For Ombudsman offices in most democracies that involves a division of responsibilities between the executive and the legislature. For example, in the Australian state of Queensland the Ombudsman is an officer of Parliament and reports through its Legal Constitutional and Administrative Review Committee (LCARC). The Ombudsman submits annual estimates to the state government but the Minister responsible for setting the Ombudsman’s budget must consult the LCARC in developing the budget.

2.2 The UK Parliamentary Ombudsman reports to the Westminster Parliament

through its Public Administration Select Committee and submits annual estimates to HM Treasury. Her responsibilities to Parliament, accountability and relationship with HM Treasury are set out in a Statement of Responsibility2.

2.3 The Scottish Public Services Ombudsman Act 2002 requires the SPCB to

pay any expenses incurred in the operation of my office. As Ombudsman I am required to submit annual accounts to the Auditor General for Scotland for audit. And, as the person designated by the SPCB as accountable officer for my office, I must ensure the propriety and regularity of the office’s finances and that resources are used economically, efficiently and effectively. In this regard, since my office was established I have successfully operated within budget.

2.4 It could be argued that there is a tension in an arrangement whereby

responsibility for budgetary oversight of my office rests with the SPCB, a body within my jurisdiction and whose chief function is to provide the Parliament with property, staff and services. By contrast, responsibility for examining Audit Scotland’s proposals for its use of resources and expenditure rests with the Scottish Commission for Public Audit constituted under the Finance and Accountability (Scotland) Act 2000. It seems to me that this arrangement, and those I have outlined in paragraphs 2.1 and 2.2, provide good models for balancing budgetary control and independence.

2.5 The establishment of the annual budget is a detailed process based on the

requirement to resource the delivery of our strategic objectives, as articulated in our annual business plans. The strategic objectives and the business plans are drawn up by the SPSO Executive Board. These objectives and plans are centred on our legislative obligations and include operational activities (complaints investigation, enquiry management, and advice giving), outreach work (public awareness raising and feedback to public bodies), general office functions, and specific improvement initiatives

2 http://www.ombudsman.org.uk/about_us/governance/statement_of_responsibility.html

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(eg projects and investments). In line with principles of accountability and transparency, I publish the business plan and our objectives in our annual reports.

2.6 The largest element of our budget is staff costs associated with complaints

investigation plus linked revenue expenditure. The budget for specific improvement initiatives is agreed on an item-by-item basis, following the required procurement process. The total budget is reviewed and approved by the SPSO Executive Board in advance of submission for scrutiny by the SPCB. The SPSO Executive Board also formally reviews actual expenditure against budget at their monthly meetings.

Lines of accountability 3.1 I am accountable to the Parliament not only for my finances but also through

the requirement that I lay before the Parliament reports of all of my investigations and, annually, a general report on the exercise of my functions. In addition I consider that effective accountability must be built into all our processes and procedures.

3.2 Accountability was the theme of my 2004-2005 Annual Report3. In that

report I set out how my office sought to enhance our accountability as well as improving the accountability of bodies under our jurisdiction. We made significant changes to our reporting practice in order to present to Parliament the outcome of a far greater number of our decisions than previously. In so doing, we are able to make our reports available to all the bodies under our jurisdiction and to the general public. Other ways in which we have sought to improve our accountability and transparency are by constantly reviewing the efficiency and effectiveness of our business operations; developing the quality and consistency of our complaint handling; welcoming feedback and complaints about our service; supporting internal and external audits of our services through our Audit and Risk Committee and by engaging with the general public, bodies under our jurisdiction, MSPs, members of the Executive and other stakeholders.

Potential overlaps 4.1 Before addressing this issue it is worth clarifying the role of Ombudsmen.

An Ombudsman is not a regulator, an inspector or a ‘tsar’. The role is distinct: quasi-judicial and integral to the administrative justice system. Sweden was the first country to introduce the office of Ombudsman in 1809. Since then almost every democracy across the world has set up such an office4. What has changed and will continue to change is the context in

3 SPSO Annual Report 2004-2005 pp 5-7. http://www.scottishombudsman.org.uk/images/downloads/annualreport2005.pdf4See, for example, 'Human rights and non-judicial remedies – The European Ombudsman's perspective', Speech by the European Ombudsman, Professor P. Nikiforos Diamandouros, at

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which the Ombudsman operates. For example, countries like Sweden have recently developed the role of the Ombudsman to include a more specific responsibility for human rights5.

4.2 Ombudsmen offer a free and impartial service and provide a route by which

members of the public who claim to have suffered an injustice in the delivery of a public service can seek redress from an independent body without recourse to the courts. As such my office is one of the key checks and balances in the democratic process providing a means by which members of the public in Scotland can hold public bodies and the Scottish Executive to account.

4.3 The core work of investigating complaints is demand led and determined by

the general public. The number of complaints and enquiries recorded by my office has increased from 1791 in 2003-04 to 2377 in 2004-05 to 3698 in 2005-06. In addition to responding to public demand to investigate complaints, the SPSO has a proactive function in raising public awareness of the right to bring a complaint to the Ombudsman, providing advice to those who contact us, and in promoting good administration in the bodies under our jurisdiction. This gives my office a uniquely comprehensive understanding of the delivery of public services. Evidence from our investigations is used to help bodies across Scotland learn from real examples of what went wrong to improve services in the future. In this way we make an important contribution to policy and practice as well as providing justice for the individual.

4.4 The Ombudsman does not operate in isolation. Since devolution, new

bodies have been created and it is important that the different roles complement one another. We have done much to reduce potential duplication - for example, through memoranda of understanding with other organisations and publishing guidance for the public such as the Route Map6 guide to complaining about public services in Scotland produced in cooperation with Audit Scotland and others.

4.5 In my view office-holders have a responsibility to explore all opportunities for

joint working, not least to lower the cost of delivering our services. Real savings have already been made - for example, together with the Scottish Information Commissioner, the Commissioner for Children and Young People in Scotland and the Commissioner for Public Appointments in Scotland, we agreed to purchase the same financial system and used the same adviser to install it and train staff in its use. This brought economies of scale, as well as providing back-up for contingencies. Further, the case-

the London School of Economics and Political Science London, 30 November 2005 http://www.euro-ombudsman.eu.int/speeches/en/2005-11-30.htm5 Ibid 6 http://www.audit-scotland.gov.uk/publications/pdf/2004/Routemap.pdf

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management system developed by my office has been adapted for use by the Scottish Information Commissioner, the Welsh and Northern Ireland Ombudsmen and other bodies in Scotland and beyond. This also represents savings to the public purse.

4.6 I am currently exploring the scope for further cooperation between my office

and others in terms of sharing both accommodation and services (HR, finance, IT, procurement, etc.) and the management of complaints investigation. I am confident that such cooperation could generate significant operational efficiencies and a more coordinated service for the public.

4.7 I do not consider that shared services are necessarily dependent on co-

location. With the ongoing development of web-based systems, shared services can now be managed efficiently and supplied across different locations. This would allow office -holders to focus on fulfilling their statutory duties by drawing on the functional strength of another body.

4.8 However, our scope for joint working and sharing services has been limited

by the lack of a framework design for the administrative architecture in the first years of devolution. This limitation has became more evident as more bodies are proposed. I addressed such issues in my recent evidence to the Justice Committees on the Scottish Commissioner for Human Rights Bill7 and the proposal in the Police, Public Order and Criminal Justice (Scotland) Bill for an Independent Police Complaints Commission for Scotland8.

4.9 Creating a governance framework design would achieve a number of

objectives. First, it would facilitate more joint working; second, it would identify any gaps or duplication in the current jurisdictional framework; and third, it would avoid the likelihood of overlap and confusion of roles when creating new functions or office-holders. The Committee’s Inquiry is, therefore, timely as it offers the opportunity to take stock. It is important that this work complements the review of governance arrangements being carried out by the SPCB and other work being undertaken by the Scottish Executive. Scotland has created a new Parliament with new procedures and a new way of making policy. Now there is an equally exciting challenge of designing the future governance of Scotland.

7 http://www.scottish.parliament.uk/business/committees/justice1/reports-06/j1r06-01-vol02-02.htm#38 http://www.scottish.parliament.uk/business/committees/justice2/reports-06/j2r06-02-vol02-04.htm#15

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Summary: responses to the specific questions How can budgetary control be balanced with independence? 5.1 As noted in section 2, there are models in Scotland and elsewhere which

demonstrate that the balance between budgetary control and independence can be achieved in different ways. For my own office, I am not convinced that the current arrangements whereby responsibility for budgetary oversight is placed with the SPCB, a body within my jurisdiction, strike the necessary balance. Whichever model is agreed, it should not be forgotten that independent external audit is a fundamental element of budgetary control.

Is it possible to implement section B2 of the UN Paris Principles and retain suitable budgetary control? 5.2 Yes, provided there are the necessary checks and balances. What internal process occurs to establish your required budgets for each financial year in advance of scrutiny by the SPCB? 5.3 As detailed in paragraphs 2.5 and 2.6, the internal process for establishing

our required budget derives from the setting of our strategic objectives and agreeing the business plan. These demonstrate how we will fulfill our remit and responsibilities. My office’s core work of investigating complaints is demand led, and the budget has, therefore, to reflect the likely workload in the year ahead. The largest element of my budget is staff costs associated with complaints investigation and to a large extent other elements of the budget flow from that.

Do you have any views on how the processes for scrutinising your budgets works in practice? 5.4 In our experience, the scrutiny by the SPCB has worked satisfactorily.

Budgetary issues are discussed on an ongoing basis. As accountable officer, I formally present my proposed budget to the SPBC for consideration annually. However, we have raised the issue of potential conflict of interest at paragraphs 2.4 and 5.1.

Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent, regulatory or investigatory body? 5.5 We have sought to reduce any overlap through entering into memoranda of

understanding with other existing bodies such as the Standards Commission. There is certainly a risk of overlap in the creation of new bodies, as we noted in our evidence to the Justice Committees on proposals for a Scottish Commissioner for Human Rights Bill and an Independent Police Complaints Commission for Scotland (see paragraph 4.8 above). This needs to be addressed by reviewing the current governance framework to ensure a more coherent design in which remits and jurisdictions

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complement one another. Our primary aim should be to create a framework that is both simple and accessible for the public.

Professor Alice Brown Scottish Public Services Ombudsman 18 April 2006

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Submission by the Scottish Information Commissioner

I welcome the opportunity to provide written evidence to the Finance Committee’s Inquiry. In this submission I address the questions posed by the Committee, grouped into four sections. 1. Balancing Independence with Budgetary Control The role of the Scottish Information Commissioner is central to the independent review and appeals mechanism brought into effect by the Freedom of Information (Scotland) 2002 Act (the Act). The independence of the Commissioner was stressed in the consultation documents issued by the Scottish Executive prior to the legislation being debated in Parliament and in the course of those debates. For instance, An Open Scotland – Freedom of Information – a consultation published by the Scottish Executive in 1999 says “one of the most important elements of any freedom of information regime is the review and appeals mechanism. Experience in other freedom of information regimes shows that one of the main factors which leads to a real increase in openness is a system of independent review that is accessible, easy to use and proactive. We therefore consider that there should be an independent review and appeals mechanism and that a Scottish Information Commissioner should be appointed to promote and enforce the statutory freedom of information regime”. The key features of my role, which is quasi-judicial, are:

• Statutorily I must make a decision in relation to any appeal made to me(except in certain limited circumstances ) by any person who is dissatisfied with the decision by a Scottish public authority in response to a freedom of information request

• I have extensive powers to acquire the information necessary to come to such a decision, including the power to issue an Information Notice to a public authority

• I can issue an Enforcement Notice if I am satisfied that a Scottish public authority has failed to comply with a provision of the Act, requiring the authority to take, within such time as I specify, those steps necessary for complying with the Act.

• Where I have satisfied a Sheriff that there are reasonable grounds for suspecting that a Scottish public authority has failed or is failing to comply with the Act I can enter and search premises, inspect and seize any documents and inspect, examine or test any equipment by which information held by the authority may be recorded.

• When I have taken a decision in respect of an application by any person, that decision is final, save for an appeal to the Court of Session on a point of law.

• If I require an authority to release information as part of such a decision and the authority fails to comply with the Decision Notice, then I can refer

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the matter to the Court of Session. The Court may deal with the authority as if it had committed a contempt of court.

For the Act to operate successfully the public and authorities must have confidence that I operate independently without fear or favour and that I have the capacity to fulfil my remit, both in terms of the appropriate and proportionate use of the powers available to me and by deploying and by having the resources available to my office to carry out the investigations, come to the decisions and enforce those decisions if necessary. In this respect, the Office of the Scottish Information Commissioner has not only to be adequately resourced but must have the capacity to apply those resources without undue interference. However I wish to stress that independence of establishment and exercise of judgement does not imply a lack of financial accountability, or opaqueness in financial budgeting and spending. As a public official, I believe expectations of probity, efficiency, effectiveness and transparency should apply. The balance to be struck, therefore, is to have in place measures and mechanisms of budgetary control which are appropriate to the nature and independence of the organisation, proportionate to the scale of the budget and are consistent across bodies with similar functions. Explicit in these arrangements should be the twin requirements of achieving budgetary control and bolstering the proper independence of the Commissioner. It is important to say at this stage that in my experience that efforts so far have been made to seek to arrive at this balance and continuous refinements and improvements are being applied in the light of experience and as the relationship between the SIC and the SPCB in particular matures. The arrangements which we now have in place I think demonstrate that there are sound budgetary controls including the following aspects: Accountable Officer - The SPCB designated me as Accountable Officer with effect from 24 February 2003, as provided for by Schedule 2, Paragraph 4 of the Freedom of Information (Scotland) Act 2002. As Accountable Officer I am directly answerable to the Parliament in the exercise of the following functions.

a. Signing the accounts of the expenditure and receipts of the Commissioner

b. Ensuring the propriety and regularity of the finances of the Commissioner, and

c. Ensuring that the resources of the Commissioner are used economically, efficiently and effectively

In addition, the SPCB has provided a detailed memorandum to me as Accountable Officer, setting out specific responsibilities which must be fulfilled in the exercise of that role.

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Corporate Governance - The Management Committee of the Office of the Scottish Information Commissioner meets monthly to consider the financial performance against the budget and to develop corporate governance. (The monthly budgetary performance report is made available to the SPCB and is made publicly available on our website.) As part of the corporate governance arrangements agreed with the SPCB and Audit Scotland, I have implemented the following provisions:

• appointed an internal auditor and agreed an internal audit programme. • carried out a risk assessment and established a risk register. • created systems of internal control. • established an Audit Advisory Board of highly qualified and experienced

external advisors which has the remit of reviewing the system of internal control and to provide me as Accountable Officer with advice as to whether to appropriate assurances required for the signing of the statements on internal control contained within the Annual Accounts have been provided.

Annual Audit - My accounts are subject to scrutiny and approval by Audit Scotland. In carrying out its audit the Auditor appointed by the Auditor General has made clear that his objectives are to review and report on:

• The SIC’s financial statements including the regularity of transactions • The SIC’s corporate governance arrangements • Aspects of the SIC’s arrangements to manage its performance and secure

economy, efficiency and effectiveness in the use of resources The Audit Reports for 03/04 and 04/05 are available to the Committee. Reporting to Parliament - My Annual Accounts are laid before Parliament once they have been approved by Audit Scotland. The financial memorandum to me as Accountable Officer also makes it clear that I may be called before the Audit Committee to give evidence in respect of any report made by the Auditor General. 2. Establishing the Commissioner’s Budget Although I did not take up post until February 2003, financial provision for my office had already been made in the spending review of 2000, which provided that £700,000 per annum for the first three years should be made available for my functions. I have to say that the basis for this is both obscure and inadequate. As a Scottish Executive internal memo has made clear: “setting baselines prior to the establishment of bodies is at best an inexact science”. However, in this respect, the financial underpinning for the Scottish Information Commissioner was markedly less well considered than for comparable bodies, such as the Children and Young Persons Commissioner or the £2.3m per annum

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provided for the Office of the Scottish Charities Regulator by the Scottish Executive. However I have sought initially to work within the framework of the original projections of staff complement and structure until experience of the Act in full operation has been gained. It is quite clear already, however, that the volume of applications to me as Commissioner is far greater than that which had been anticipated prior to the Act coming into force. The consultation document An Open Scotland noted that the Parliamentary Commissioner for Administration received only 2 complaints relating to Scottish public authorities in 1998 and 1999 and that for the UK as a whole only 17 complaints were investigated by the Commissioner. It concluded therefore “it may therefore be not unreasonable to expect a similarly low level of appeal activity involving the Scottish Information Commissioner”, but then it did say that “on the other hand the volume of appeals may be higher under the statutory regime given our intention that its institutional coverage be wider than the Code of Practice”. Research carried out by the University College London on behalf of the UK Information Commissioner estimated that across the UK between 1500 and 3000 appeals would be received in the first year. On a pro-rata basis it might be expected, therefore, that between 150 and 300 appeals would be received in Scotland. In actual fact nearly 600 appeals were received by me in 2005 and the current rate of activity suggests that a comparable number of appeals will be received in 2006, more than twice the previous highest estimate. I make this point because appeals are the key driver in determining what financial resources are required to allow me to carry out my functions. Statutorily I must determine every application which is made to my office (unless these are settled, withdrawn or abandoned). It is important to recognise that these appeals are not enquiries or closed at an early stage. The majority of these appeals will be subject to full investigation and will result in a formal decision by me which has to be capable of withstanding judicial scrutiny. This is a staff intensive process. It is my responsibility to ensure that these investigations are carried out efficiently and effectively, but nevertheless there is an inescapable link between the number of appeals received and the number of staff necessary to investigate those appeals. If the staff resources are not available to carry out investigations then circumstances will arise such as were experienced in Ireland where a considerable backlog of appeals was built up and the time taken to come to decision stretches into years rather than months. This is not something that I would like to see happen in Scotland, and, therefore, it is appropriate to discuss with the SPCB and with the Finance Committee, the level of resources required to carry out my functions in the light of experience rather than that based on a historical starting point, which as I have explained, was inadequate in itself and failed to anticipate the level of activity in Scotland once the Act was in force.

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The budget is constructed by receiving submissions from my heads of department for the areas for which they are responsible, and a process of internal justification for these submissions ensues. When this is completed a draft budget submission is drawn up which will be provided to the Audit Advisory Board for comment and then submitted to the SPCB for discussion and then for approval to the Finance Committee. In establishing my budget submission to the SPCB, the key elements are:

• Staff Costs – all staff are employed by me directly. Their salaries and terms and conditions are directly equivalent to the staff of the Scottish Parliament and I apply the same annual increases to the pay scales as are determined by the Scottish Parliament for its staff. (Under the provisions of Schedule 2 of FOISA the Commissioner may appoint such staff on such terms and conditions as that officer may determine. However, in carrying out such recruitment the Act specifically requires that this must have the approval of the Parliamentary Corporation.) Staff costs including recruitment and training accounts for 66% of my budget

• Promotion – I have a statutory responsibility to promote the Act. I do this

through advertising, guidance packs, and training events. (14%) • Establishment- office rent, insurance, stationary etc (11%) • Others – legal costs, records management; case management; capital

expenditure etc – (9%)

The budget does not include any contingency element, therefore, if due to unforeseen circumstances, costs were likely to be greater than that budgeted then I would have to apply to the SPCB to draw down from the central contingency fund which it holds. At present, no provision is made in the budget for defending or pursuing cases at the Court of Session and these costs are submitted to the SPCB for funding. It is important to note that the budget, once agreed by the SPCB, is not transferred to my bank account, but, in fact, a monthly submission is made to the SPCB on the basis of need and, as a result, funds which are not required remain unspent. For instance, the Audit Report for 2004/5 notes that the total net expenditure for my organisation was £1,118,000, an underspend of £68,000 on the approved budget.

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3. Budget Scrutiny Prior to the establishment of the post of the Scottish Information Commissioner, discussion did take place within the Scottish Executive as to the provisions for submitting and scrutinising the budget. The option of being paid directly from the Scottish consolidated fund was considered not to be a practicable option as the budget allocation was too small. It was thought that the budget would have to be in the order of £10m to be a valid option to be paid directly. Consideration was given to being paid directly from the Scottish Executive block, but it was felt, (to my mind correctly), that this would expose the Scottish Information Commissioner and the Executive to the risk that the SIC cannot be independent if the Executive controls the purse strings. The conclusion, therefore, was that the budget should be provided via the Scottish Parliament. It was suggested at the time that the SPCB would accept the budget purely as an accommodation to be passed to the SIC; the SIC being identified as an Accountable Officer in his own right. Initially however the SPCB exercised a greater control over the finances of the SIC and I believe over the past 3 years we have worked to achieve a more appropriate balance of accountability and proper independence. In the first two years the SPCB paid all the costs of the SIC to suppliers directly. This was unwieldy and inappropriate. As Accountable Officer, I have all the necessary budgetary and financial controls and processes in place to be responsible for my own expenditure. However, it is appropriate, of course, that this expenditure is justified. In July of each year I am asked by the SPCB to submit a budget in respect of the following financial year. In practice, the budget is submitted with detailed annotations for each of the budget lines, demonstrating the calculation and the basis of need. In the past, the SPCB has asked me to discuss the draft budget, which tends to involve the Chief Executive of the SPCB, the Finance Director of the SPCB and a member of the SPCB itself. Once a final budget has been submitted then I am asked to attend a meeting of the SPCB in full, chaired by the Presiding Officer. The budget with any comments from the SPCB is then submitted to the Finance Committee for approval. I believe this is the most appropriate procedure, and that if improvements are to be made it should be to develop the level of scrutiny by the SPCB, to provide a high confidence level in the Finance Committee that budgets are justified. However it is essential that this scrutiny is proportionate and appropriate, and that any developments are negotiated between the SPCB and 0ffice- holders such as me. 4. Overlaps between Remits There are now a number of Commissioners and Ombudsmen, for whom financial provision is made on a basis broadly similar to that which now applies to the Scottish Information Commissioner. However, this does not mean that we have

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similar functions. Furthermore we were not all established at the same time. If there was any real capacity for sharing costs then this would have been best achieved at start-up. However this was not an issue which was presented to me in 2003, and would have certainly delayed the implementation of the Act if it was given priority over rapid start-up. In reality the capacity for shared functions and financial efficiencies are, in my experience, extremely limited. The Scottish Public Services Ombudsman and I have looked to see what shared costs or economies of scale could be achieved and have discussed our findings with the SPCB. We subsequently commissioned a consultant to look in detail at the financial, procurement and governance arrangements of the two organisations so that we could explore in more detail any possibilities of cost sharing and saving. However, this concluded that there was extremely limited scope for these, not least because we are independent organisations which have jurisdiction over each other. I can receive and must investigate complaints against the SPSO and, similarly, the SPSO must do the same in respect of complaints regarding the services which I provide. In the same spirit I have met with more recent appointees in Scotland such as the Children and Young Persons Commissioner and the Public Appointments Commissioner. However, there is little if any overlap in terms of our responsibility and such meetings tend to be on the practical operations of our offices. More recently, the SPCB has asked Audit Scotland to conduct a review of the arrangements across the office-holders. Its report is still in draft, but I understand that whilst it encourages further exploration by the existing office-holders and the SPCB of potential efficiencies and cost sharing it does not identify any strategic or significant area of cost saving. In practice, my operational engagement with other comparable bodies tends to be with the Information Commissioner responsible for UK public authorities, based in Wilmslow, England. I have a Memorandum of Understanding with the Information Commissioner and I meet with him on a regular basis to discuss matters of operational activity, legal interpretation and any cross-over of investigations. I also meet regularly with the Irish Commissioner, as a relatively near-by and well-established investigative body, to learn from her experience. These have been extremely useful collegiate meetings which have benefited both the interpretation of the legislation but also the efficient operations of my office. Kevin Dunion Scottish Information Commissioner 18 April 2006

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Submission from Commissioner for Children and Young People in Scotland

Introduction The office of Commissioner for Children and Young People in Scotland was established by the Commissioner for Children and Young People (Scotland) Act 2003. I took up post on 26 April, 2004, after a selection procedure that involved children and young people as well as MSPs. The proposal to establish the office was introduced through a “committee Bill” emanating from the Parliament’s Education, Culture and Sports Committee. Prior to drafting the Bill, the Committee undertook an extensive Inquiry into the Need for a Children’s Commissioner in Scotland, involving consultation with stakeholders, including children and young people. On 1 March, 2006, the Parliament’s Finance Committee issued a call for evidence in relation to an Inquiry with the following remit:

• Examine the growth in the number of independent, regulatory and investigatory bodies and the associated growth in funds allocated since devolution;

• Examine the adequacy of processes for setting and scrutinizing the annual budgets of such bodies;

• Examine the appropriateness of existing lines of accountability and how this process works in practice; and

• Identify whether there are any potential overlaps in remits and responsibilities of independent, regulatory and investigatory bodies and any financial implications of such overlaps.

The office of the Commissioner for Children and Young People falls within the scope of this inquiry. In a letter dated 1 March 2006, the Convener of the Finance Committee invited me to submit evidence to the inquiry. In addition to the general questions listed above, the following supplementary questions were posed:

• How can budgetary control be balanced with independence? • Is it possible to implement section B2 of the UN Paris Principles9 and

retain suitable budgetary controls? • What internal process occurs to establish your required budgets for each

financial year in advance of scrutiny by the SPCB? • Do you have any views on how the process for scrutinizing your budgets

works in practice?

9 Section B2 “The national institution shall have an infrastructure which is suited to the smooth conduct of its activities, in particular adequate funding. The purpose of this funding should be to enable it to have its own staff and premises, in order to be independent of the government and not be subject to financial control which might affect this independence.”

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• Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent, regulatory or investigatory body?

This document is my response to the Convener’s invitation.

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CONTENTS

1. The Democratic Context..................................................................................19 2. The International Context: The Paris Principles ...........................................21 3. Commissioners’ Agendas Founded on Acknowledged Public Policy........22 4. Current Budgetary Controls ...........................................................................22 5. How can budgetary control be balanced with independence? Is it possible to implement section B2 of the UN Paris Principles and retain suitable budgetary controls?.................................................................................24

5.1 Independence ................................................................................................24 5.2 Budgetary Control and Accountability ............................................................24

6. What internal process occurs to establish your required budgets for each financial year in advance of scrutiny by the SPCB? ..................................24

6.1 Budget for 2004-2005 ....................................................................................25 6.2 Budget for 2005-2006 ....................................................................................25 6.3 Budget for 2006-2007 ....................................................................................26 6.4 Budget for 2007-2008 ....................................................................................27 6.5 Future Years ..................................................................................................28

7. Do you have any views on how the process for scrutinising your budgets works in practice? ...................................................................................28 8. Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent, regulatory or investigatory body?................................................................................................28 9. Conclusion .......................................................................................................29

1. The Democratic Context In a parliamentary democracy, the will of parliament must be supreme. If parliament chooses to share its power or influence, this is both bestowed and withdrawn on parliament’s terms. In setting up parliamentary commissioners and ombudsmen, the Scottish Parliament has acknowledged the benefits of independent voices in various spheres of public life: in redressing the imbalance of power between public service providers and the individual by providing an independent route of complaint; in supporting its commitment to freedom of pubic information in the face of any resistance to disclosure by the authorities holding it; in establishing a fair and transparent system for public appointments; in ensuring that ethical standards in public life are upheld by elected members; and, in the case of my own office, by building into the fabric of public life a system of scrutiny and advocacy on behalf of children and young people, who are citizens without a vote, and duty-bearers without formal power.

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This last construction was the will of Parliament, set out in the Commissioner for Children and Young People (Scotland) Act 2003. My job as Commissioner is to promote fulfilment of that will in the life of the nation. In order to facilitate this, Parliament has bestowed authority to command access to information within the context of a formal investigation. However, there are no associated enforcement powers. My job is to report to Parliament, who will then consider whether further action is necessary. There is a sense in which, as Commissioner for Children and Young People, I am expected to be the eyes and ears of the Parliament, bringing matters to its attention for their further consideration. Clearly, this is a role also played by MSPs; however members have a whole spectrum of constituents to consider, as well as local issues. The Commissioner’s office can maintain an informed and comprehensive overview of the rights of children and young people across Scotland. In addition to its broader role, the Commissioner’s office can provide an additional route through which elected members might raise concerns for exploration within the context of national and international rights, as a support for pursuing matters within their constituencies or in Parliament. Parliament has also willed that I consult children and young people about the work undertaken by my office and that I involve them in it. This activity is designed to support the nurture of active citizens and help get matters important to them on to the public agenda. Establishment of the office of Commissioner for Children and Young People supports Scotland’s compliance with international human rights standards. The plans for the office in Scotland were welcomed by the United Nations Committee on the Rights of the Child when it considered the UK’s Second Periodic report in 2002.10

The Commissioner’s role in upholding international standards involves scrutiny of current and proposed law, policy and practice. Such scrutiny is a duty set out in section 4 of the Act of 2003. It involves welcoming and promoting what is consistent with international standards, and offering constructive critique of anything that contradicts these standards or falls short of them. This scrutiny has by its nature the potential to be challenging. Contributions to the debate preceding my nomination as Commissioner acknowledged that the views I presented “will not always be comfortable for Government, for people in authority or for Parliament,” but nonetheless needed to be heard at the highest level.11

10 UN Paper CRC/C/15/Add.188, para. 16: “The Committee welcomes the establishment of an independent Children’s Commissioner in Wales … The Committee welcomes plans for the establishment of an independent human rights institution for children in Northern Ireland and in Scotland. The Committee is, however, deeply concerned that the State party has not yet established an independent human rights institution for children in England.” 11 OR 12 Feb 2004 Col 5832, Robert Brown MSP: “The appointment of the children's commissioner is one that should bring about change. I suspect that Kathleen Marshall's views will not always be comfortable for Government, for people in authority or for Parliament. However, they are views that we have not in the past heard as effectively as we might have; they will be views that we will need to hear. The commissioner's views will have a considerable power and influence to bring about important, radical and significant changes in the interests of the children of this country. It is extremely important to have a voice at the highest level in that regard.” OR 12 Feb 2004 Col 5835, Scott Barrie MSP: The challenges that lie ahead for Kathleen Marshall are immeasurable. She is being entrusted by Parliament to be the independent voice for children and young people in Scotland. Her eking out of that role will mark her in history. It is incumbent upon all of us who voted to pass the Commissioner for Children and Young People (Scotland) Act 2003 to offer her all the support that we can in her job. Although we may not always agree

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The conjunction of this potentially critical role in upholding international standards, with the Commissioner’s role as both a creation of Parliament and an instrument of its will, sets the context for the debates on the relationship between the Commissioner’s independence and accountability to Parliament.

2. The International Context: The Paris Principles The Commissioner’s office is recognised in the international arena as a National Human Rights Institution (NHRI). “Children’s rights” are the human rights of the child, supplemented by certain safeguards and additional rights that reflect their age and stage of development and their vulnerability to abuse, neglect and exploitation. The United Nations has been encouraging states to set up institutions for the protection and promotion of human rights since 1946. Most of the current national institutions have been set up since the 1980s. The “Paris Principles” “relating to the status and functioning of national institutions for protection and promotion of human rights” were drafted in 1991 by members of a workshop established by the UN Commission on Human Rights. They were endorsed by that Commission in 1992 and by the UN General Assembly in 1993. The call for evidence in relation to the current Inquiry refers specifically to principle B2:

“The national institution shall have an infrastructure which is suited to the smooth conduct of its activities, in particular adequate funding. The purpose of this funding should be to enable it to have its own staff and premises, in order to be independent of the government and not be subject to financial control which might affect this independence.”

The call for evidence asks whether it is possible to implement this principle while also retaining suitable budgetary controls, and asks, how can budgetary control be balanced with independence? The United Nations has observed that,

“Most commissions function independently from other organs of government, although they may be required to report to the legislature on a regular basis.”12

The main aim of the Principles seems to be to secure independence of the Government (Executive) rather than the Parliament. In fact, accountability direct to the Parliament, and funding from it, is seen as a guarantee of independence from the Executive. Commissioners/ Ombudsmen should be free to pursue the

with her—because that is the nature of such things—I know from my previous work with her that she will bring a great deal of knowledge and expertise to the post and I know that she will fulfil her role to the highest standard.” 12 UN Fact Sheet No, 19, National Institutions for the Promotion and Protection of Human Rights, available at: www.onhchr.ch/html/menu6/2/fs19.htm

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objective human rights agenda without political interference, but they are still dependent upon their parliaments for resources and for their very existence.

3. Commissioners’ Agendas Founded on Acknowledged Public Policy In pursuing their human rights agendas, Commissioners are acting in accordance with the previously expressed will of democratically elected bodies, reminding them of core policy objectives to which a commitment has already been made. In my case, my central agenda, the UN Convention on the Rights of the Child, has been ratified by the UK, and is therefore a commitment in international law to which the UK, and therefore Scotland, is already bound. Ratification of the Convention constitutes:

• A promise by a society that cares about its children, that it will respect the standards set out in the Convention;

• A claim by those children upon that society, to keep it to its promise; and • A positive standard against which the quality of our children’s lives can be

measured. As Commissioner for Children and Young People, I must raise awareness of the promises that have been made and explore their implications with policy-makers and practitioners. I must do what I can to hold our society to its promises, even when the going gets tough, or when the standards that were set in the cold light of day become inconvenient or over-burdensome, or inexpedient. It is for this reason that I have adopted the slogan “Keeping Promises”, which appears on all of my literature.

4. Current Budgetary Controls Parliament has set the legal parameters within which Commissioners and Ombudsmen operate. For example, the Commissioner for Children and Young People (Scotland) Act 2003 aims for a balance between independence and accountability by certain provisions in Schedule 1 to the Act. Paragraph 2, headed “Independence”, states that, save for specified matters, the Commissioner is not to be subject to the direction or control of: a) any member of the Parliament; b) any member of the Scottish Executive; or c) the Parliamentary corporation. The Commissioner is not, of course, exempt from the control of Parliament acting as a legislative body. Parliament created the role and is free to abolish it or change its mandate. Further, the matters exempted from this freedom, and therefore explicitly subject to control, are as follows:

• the period of appointment – which may be for a maximum of 5 years, renewable once (section 2 of the Act);

• removal by Her Majesty on resolution of the Parliament (section 3(1)(b) of the Act);

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• terms and conditions of appointment, including salary (paragraph 4 of Schedule 1);

• the power to charge for services (paragraph 6(3) of Schedule 1); • numbers, terms and conditions of staff (paragraph 7 of Schedule 1); • designation of the Commissioner or a member of staff as accountable officer

(paragraph 10 of Schedule 1); and • allowances and expenses for witnesses attending formal investigations

(paragraph 8 of Schedule 2). There is no explicit reference to the setting of the budget, although the requirement for approval of numbers of staff as well as their terms and conditions sets some limits in practice. Paragraph 9(b) of Schedule 1 obliges the parliamentary corporation to pay, “any expenses properly incurred by the Commissioner in the exercise of the Commissioner’s functions.” These functions are potentially very wide. Paragraph 6 of Schedule 1 gives the Commissioner “a general power to do anything necessary or expedient for the purposes of, or in connection with, the exercise of the Commissioner’s functions”, and in particular, to “enter into contracts and acquire and dispose of property.” This could be regarded as giving the Commissioner a “blank cheque”, a situation which, in my evidence to the Finance Committee, I described as unsatisfactory:

“I am happy to be subject to scrutiny and to be questioned and I do not believe that anyone should have a blank cheque for public funds.”13

My commitment to this approach is evidenced by the fact that, in setting up the Commissioner’s office, I have sought to operate within the scale considered appropriate by Parliament, by having regard to the number of staff and scale of budget envisaged when the post was being developed. The staff structure devised on that basis was approved by the SPCB. The process leading to setting and approval of the budget has evolved to its current position, and will be described further below. The extent of Parliament’s actual control of my budget has been widened through a voluntary agreement between my office and the Parliament, set out in a Financial Memorandum with the SPCB. Paragraph 16 allows me to spend within agreed budget limits without further recourse to the SPCB. Paragraph 8 allows me to approach SPCB should I require additional funding. Paragraph 10 allows the SPCB to refuse such additional funding, with the proviso that I may thereafter raise the matter with Finance Committee by writing to the Convener.

13 Evidence by Kathleen Marshall to the Finance Committee, 22 November 2005, OR Col 3181.

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5. How can budgetary control be balanced with independence? Is it possible to implement section B2 of the UN Paris Principles and retain suitable budgetary controls?

In my view, it is possible to implement section B2 of the Paris Principles and retain suitable budgetary controls. I believe that the current Financial Memorandum between my office and the SPCB provides a reasonable starting point for achieving this balance. However, there is potential for strengthening both factors and clarifying their relationship. 5.1 Independence Independence might be strengthened by including provision for identification of a core budget allocation that would be audited but would not be questioned other than in respect of financial propriety. The expectation might be that this would be increased in line with inflation, but anything else would have to be negotiated and specifically agreed. It would always be open to Parliament to change its mind about the core functions, but that would then be a very deliberate and transparent decision. This would protect the office’s independence from the kind of substantive financial control referred to in the Paris Principles. There should be no problem for so long as Parliament’s will to have a truly independent NHRI continued. If Parliament decided to diminish that independence by reducing funding below what was regarded as a realistic level, or by introducing a power to issue directions about substantive matters, one would have to conclude that Parliament had changed its mind. The resultant institution would not be an NHRI in the eyes of the international community. That would be Parliament’s choice. 5.2 Budgetary Control and Accountability Budgetary control and accountability could be strengthened by raising the status of the core principles of the Memorandum from voluntary agreement to legislation. The advisability of such a move, and the extent of any legislation, should take account of the fact that the current voluntary Memorandum has a built-in review mechanism. It would be unhelpful were the legislative structure to be fixed too early or too broadly, before lessons had been learned from experience of operating it. Nevertheless, I would be happy to be involved in further debates aimed at achieving a more transparent and structured balance between independence and accountability.

6. What internal process occurs to establish your required budgets for each financial year in advance of scrutiny by the SPCB?

As indicated above, the process for establishing the budget has evolved in line with the development of the office, becoming more specific and structured each year. This process will continue as the costs of running the office and implementing our newly formulated strategies become clearer.14

14 In the past year, staff have formulated strategies for: participation of children and young people; media and communications; and parliamentary work. We have also identified our policy priorities for 2006-2008 after extensive

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6.1 Budget for 2004-2005 Summary: I started work part way into the financial year and was not personally involved in setting the budget. I took up post on 26 April, 2004, part way into the financial year 2004-2005. Normally, the budget would have been approved before the beginning of the year. Clearly, this was not possible in my situation. I therefore drew on funds held by the SPCB, who also paid relevant invoices, taking their advice about appropriate financial commitments in terms of property and salaries. In those early days, before appointment of staff, my work was supported by the SPCB who helpfully assisted me in finding temporary and then permanent premises, introduced me to sources of legal assistance, independent advice on property acquisition, and a property development agency. I ended the first financial year with a staff of three and had been in my permanent premises for only a few weeks. In short, I was not personally involved in a budget-setting process for year one, but my expenditure was modest. 6.2 Budget for 2005-2006 Summary: The budget bid was devised in collaboration with staff of the SPCB. The budget bid for 2005-06 was worked out in July – August 2004, in close collaboration with the SPCB and in the knowledge that precision was not yet possible, given that no staff had yet been recruited or permanent premises secured. This made it difficult to estimate requirements for salaries, rent and running costs. I received a letter from SPCB dated 16 September 2004 advising me that the bid would be considered by the Finance Committee on 21 September. An annex to the letter provided the breakdown of the bid submitted to the Finance Committee, preceded by the following text:

“The Commissioner for Children and Young People in Scotland took up appointment on 26 April 2004. She has started a recruitment exercise for staff and is looking to acquire office accommodation in Edinburgh. At this early stage it is difficult to gauge exact costs but the figures below are based on the information provided in the Financial Memorandum attached to the Bill and also informed by information we have on the cost of running the office of the Scottish Information Commissioner.”

A further letter dated 30 September 2004 advised that the bid had been approved. I was not questioned on it, and I had no formal meetings with the SPCB.

consultation. We hope to implement these strategies and pursue these priorities in ways that are innovative, imaginative and cost-effective. This commitment to innovation makes precise costing difficult, but we will make every effort to be as precise as we can and to operate within agreed budget limits.

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6.3 Budget for 2006-2007 Summary and context: This budget bid was the first produced by my office. Most staff had taken up post in April and May, 2005, with two yet to start. We had moved into our permanent premises on 13 March. The premises had never been occupied before so there was no information available about running costs. We complied with all requests for information and supplied it in the form requested. The further information supplied at a later stage was in response to a request by the Convener of the Finance Committee to the SPCB. The process of budget-setting, scrutiny and approval was as follows: 1. The budget for 2006-07 and indicative figures for 2007-8 were drawn up by

Chief Executive, Office Manager and Financial Consultant, using best estimates, and in consultation with relevant staff. These were discussed at Management Team meeting of 22 June 2005.

2. 23 June 2005: an e-mail was received from the SPCB advising of the wording of the covering letter for the budget bid and the format in which the bid was to be presented.

3. 24 June 2005: I sent the budget bid and covering letter in the prescribed form to the SPCB. The letter also reminded the SPCB that no allowance had been made in the budget for formal investigations. This had been discussed previously with staff of the SPCB. It had been anticipated by Parliament that investigations would be infrequent. When they occurred, they would require special funding. If the nature and scope of the investigation was to be independent, in line with Parliament’s intention, then there ought to be a way of accessing funds that would achieve the required balance between accountability and independence. The earlier discussions with SPCB had concluded that the investigations might be funded from the Contingency Fund held by SPCB. I thought it was important to record this possible call on funds.

4. 26 August 2005: The Convener of the Finance Committee wrote to the Chief Executive of the SPCB asking for the scrutiny of Commissioners’ and Ombudsman’s budgets to include issues relating to office location and value for money in terms of the possibility for sharing services. He indicated the Committee’s expectation that the SPCB would undertake “a detailed and thorough scrutiny of Commissioners’ and Ombudsman’s budgets so that it can report to the Finance Committee on its findings and views.”

5. 31 August 2005: the SPCB sent me a copy of the Finance Convener’s letter and requested a more detailed breakdown of the budget bid for 2006-07, together with justifications for the various elements of my submission; in particular further information about ICT, capital expenditure, publicity and research. Details were also requested of the rationale for the location of my premises, and any possibility of co-location with other office-holders, as well as my willingness to share services with other Commissioners, and efforts to that end. My response was to be submitted by 19 September.

6. 16 September 2005: I provided the SPCB with all of the further information requested.

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7. 28 September 2005: I was advised that I would be invited to attend a meeting of SPCB to give evidence in support of my budget bid. No date was specified.

8. 25 October 2005: I received a letter from SPCB indicating that the aforementioned meeting would be held on 2 November.

9. 28 October 2005: I received a letter from SPCB indicating that the meeting on 2 November would look at the costs for: research and participation; capital; and ICT.

10. 2 November 2005: I attended the meeting with the SPCB, together with my Chief Executive. Our discussion was scheduled to last for 10 minutes, but was in fact extended to 20 minutes. At its conclusion, I agreed to send further information, in greater detail, which set the costs in the context of the office’s statutory functions.

11. 7 November 2005: I gave the SPCB a more detailed financial breakdown together with the following documents: - Draft Participation Strategy; - Financial breakdown relative to the Participation Strategy; - Financial breakdown relative to publicity and promotion; - The legislative basis for these activities; - Information leaflet about the office; - Voting card for the National Consultation with Children and Young People;

and - Website Home page abstract.

12. 10 November 2005: I received a copy letter from the SPCB to the Finance Committee Convener concerning my budget bid, indicating a note of caution regarding the research, participation, publicity and promotion budgets.

13. 17 November 2005: I wrote to the Convener of the Finance Committee asking to be heard in relation to the budget bid.

14. 22 November 2005: I attended a meeting of the Finance Committee, along with my Chief Executive and Head of Participation, to give evidence in relation to the budget bid.

15. 31 March 2006: I received a letter from SPCB indicating that the budget bid had been approved, taking account of some savings that I had offered when I appeared before the Committee.

6.4 Budget for 2007-2008 Summary: A more structured approach to budgeting has been timetabled, consistent with the stage of the office’s development. 19 December 2005: The Management Team Meeting at my office gave its first formal consideration to the budget for 2007-2008. It was agreed that a draft timetable for producing and approving the budget bid would be prepared for the following meeting in January 2006. 25 January 2006: the Management Team discussed the planning and budgeting process for 2007-2008, and set a timescale and tasks:

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• preliminary work leading to production of draft budgets by April; • approval of draft budgets at Management Team meeting in May; and • submission of the budget bid to the SPCB by the end of June, or otherwise,

in accordance with the timescale yet to be published by the SPCB. 6.5 Future Years I anticipate that the internal process to establish the budget bid will become still more refined and tied in to an established planning cycle.

7. Do you have any views on how the process for scrutinising your budgets works in practice?

It is difficult to make general comments because I have experience of only one scrutiny process. My feeling is that all of the scrutiny was concentrated on a short period very close to the submission to the Finance Committee and that there was little real opportunity for discussion. It would be better if it happened earlier to allow for a fuller and more informed dialogue with the SPCB. It would also be helpful if a member of SPCB could be allocated to spend time with me and my staff and get to know our legal duties and activities better. This seems to be envisaged by the Financial Memorandum, but has not happened in practice.

8. Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent, regulatory or investigatory body?

Parliament decided that the Commissioner for Children and Young People should not have a remit to investigate individual cases. There is therefore no clear overlap with the Scottish Public Services Ombudsman or other complaints-handling bodies. In terms of other established regulators or investigatory bodies, any potential overlaps would fall within the sphere of the formal investigation. Situations could arise in which there was scope for an investigation/ inquiry/ inspection both by my office and by another body such as the Charities Regulator or the Care Commission. For example, there might be an issue about respect for children and young people’s rights in the context of a residential facility, or the activities of a charitable organisation. Section 7(2)(b) of the Commissioner for Children and Young People (Scotland) Act 2003 says that the Commissioner may carry out an investigation only if satisfied on reasonable grounds that: “the investigation would not duplicate work that is properly the function of another person.” In some circumstances it would be clear that the function properly resided with the Care Commission or the Charities Regulator. In other situations it could emerge that the focus of my investigation would be different. For example, the Charities Regulator might focus on the propriety of the workings of a voluntary organisation while my investigation might focus on whether:

• the organisation respected children’s rights to have their views taken into account in decisions that affect them (in accordance with article 12 of the UN Convention on the Rights of the Child); or

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• the best interests of children had been accorded the status of a “primary consideration” in such decision-making (in accordance with article 3 of the Convention).

There could be other issues where the demarcation was less clear and there would be a need for discussion with the other agency. However, this is very unlikely to be a common occurrence. My functions are more substantively directed towards promoting and monitoring law, policy and practice for their impact on the rights of children. There is no overlap here with any existing independent, regulatory or investigatory body. Further, while proposed legislation is subject to scrutiny for compliance with the Convention Rights protected by the Human Rights Act 1998, there is no equivalent statutory requirement as regards the Convention on the Rights of the Child. In terms of proposed regulators or investigatory bodies, there would be common interests with any Scottish Human Rights Commissioner. The Commissioner for Children and Young People (Scotland) Act 2003 identifies the Convention on the Rights of the Child as the central agenda, but extends the scope of the Commissioner’s concerns to other relevant international instruments. The Scottish Human Rights Commissioner Bill identifies the Convention Rights of the European Convention on Human Rights as the central agenda, with other relevant international instruments also falling within the remit. This means that there is scope for common interests, but different voices and emphases. For example, in the recent public debate about the possibility of testing drug-misusing parents in connection with their ability to look after their children, I cautiously supported the proposal as a safeguard for the rights of the child, while a spokesperson from the more general human rights community expressed greater concerns for the rights of parents. Both voices need to be heard. One of the reasons why Scotland and many other countries (including all other UK jurisdictions) have separate offices for children’s rights is that, in the clamour of debate, especially where powerful interests are involved, the voices and interests of children can be too easily drowned out. My office has a specific statutory commitment to making sure that voice is heard and those interests respected. The involvement of children and young people is a unique characteristic of my office.

9. Conclusion There is still a long way to go before the rights of children and young people are mainstreamed in Scottish society and its law, policy and practice. In 2003, the Scottish Parliament decided that Scotland required a listening post and a powerful voice specifically for its children and young people. Karen Gillon, speaking in the debate preceding my nomination for the post, described the messages emanating from the Inquiry into the Need for a Children’s Commissioner:

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“Throughout the process, the children and young people to whom we spoke told us that they wanted someone who would speak up for them and who would act as an advocate on their behalf. They said that they wanted someone who would act without fear or favour of any political party or organisation.”15

Since my appointment, I have sought to create the structures and the processes that would deliver on that promise. I now know what children and young people want me to do for them, and I look forward to working with them and their adult supporters to get a result. In carrying out this task, I am committed to the public accountability required of any person delivering a public function or using public funds. Mindful of this, I have co-operated with the Audit Scotland review of the opportunities for Commissioners and Ombudsmen to share services. The report of that review will no doubt describe the sharing that already exists, but I should like to assure the Finance Committee that I will give serious consideration to any further opportunities that are consistent with the effective and efficient execution of my responsibilities.

15 OR 12 February, 2004, Col. 5831.

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Submission from the Scottish Parliamentary Standards Commissioner

INTRODUCTION 1. I am pleased to submit written evidence to the Finance Committee’s Inquiry into governance and accountability relating to parliamentary commissioners and ombudsmen in Scotland. As well as allowing me to comment on important issues of accountability and governance, both in relation to my own post and to these posts in general, it gives me a welcome opportunity to make clear just how low cost and good value for money is the service provided via my post. I would be happy to give oral evidence to the Committee if called upon. BACKGROUND 2. I was appointed as the first Scottish Parliamentary Standards Commissioner by the Scottish Parliament Corporate Body (SPCB), with the agreement of Parliament, from April 2003. Parliament has recently voted to support an SPCB recommendation that I be reappointed for a second term from April 2006. 3. My role and remit are set out in the Scottish Parliamentary Standards Commissioner Act 2002 (the Act). I am essentially an independent investigator of complaints that a member has breached the Code of Conduct for members or the Members Interests’ Order (MIO) (or whatever provision Parliament creates to replace that transitional order). The procedure for investigation is laid down in the Act and amplified by directions from the Standards and Public Appointments Committee. However the committee cannot direct me how to act in relation to a specific complaint (see section 4 of the Act). I have operational independence, and independent statutory powers to compel the attendance of witnesses and the production of evidence (sections 13 to 15 of the Act). Following investigation I report to the Standards and Public Appointments Committee of the Parliament. 4. The Act requires me to produce an annual report (see section 18) which is laid before Parliament. 5. The schedule to the Act provides that my terms and conditions of service are set by the Parliamentary corporation. It further provides that I may, with the permission of the Parliamentary corporation, employ staff and any person to provide services. 6. The Act allows for dismissal of the commissioner by the Parliamentary corporation so long as Parliament has voted in favour of this and the resolution is passed with the number of votes cast in favour being not less than two thirds of the total number of votes cast. The SPCB subsequently added to my terms and conditions of service grounds for dismissal by SPCB. These are that I have breached any terms and conditions of my appointment or that Parliament has lost

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confidence in my willingness, ability or suitability to carry out the functions of the office. 7. My post is part-time and home based. I employ no staff. I perform my own typing, filing etc. I receive modest administrative help from the Corporate Policy Unit of the Parliament. I am supplied with a laptop and printer, fax etc., an ISDN connection and a mobile phone. Office space, electricity for equipment and lighting, and the cost of heating are supplied by me without reimbursement from the Parliament. 8. In the Financial Memorandum accompanying the Bill, the expected budget was set at £100,000 and it remained at that level subsequently. I have comfortably operated within that level. The budget for 2006-2007 is set at £90,000 (a grand total of 1.5% of the projected SPCB £6 million revenue budget for ombudsmen/commissioners, a detail little noted in publicity about costs of these posts). The £90,000 figure does not represent a reduction: it derives from a more efficient way of dealing with contingencies by the creation of a central contingency fund for unexpected calls on budget, e.g. defending court challenges. 9. The bulk of my budget is made up of salary and related costs, with the next biggest item being the cost of independent legal advice. I have found it essential in terms of my independence and effectiveness to have legal advice from a commercial firm. A firm was selected by competitive tender in 2003 and the same firm won a further tendering exercise in 2005. 10. I am accountable to Parliament, specifically to the SPCB, by way of fulfilling the terms and conditions of my appointment and maintaining my suitability, willingness and ability to carry out my functions. I lay annual reports before Parliament though there is no formal method for Parliament to consider or debate these. I have discussed the contents on occasion with the Standards and Public Appointments Committee. 11. I also feel a considerable sense of responsibility, if not accountability, to the public, as I am under a duty to pursue their complaints fairly, objectively and robustly, without fear or favour. The raison d’etre of my post was to provide an independent element to complaint handling that would give the public confidence that complaints against members were investigated impartially1. In this context, it could be argued that my accountability to Parliament is excessive – in one sense I am not fully independent from the people I investigate since decisions on my reappointment and dismissal are ultimately made by members. This means that for the necessary goal of operational independence to be achieved, reliance must be placed on the robustness and integrity of the post holder rather than protection deriving from institutional arrangements alone. For my post, and perhaps for some others, having a single longer term of office of 5-7 years for future appointees, as recommended for the UK Parliamentary Commissioner for

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Standards post by the Committee on Standards in Public Life,2 would reduce this problem. FINANCE COMMITTEE INQUIRY – GENERAL COMMENTS 12. I welcome the interest taken by Parliament in the issues of accountability and governance of commissioners and ombudsmen. In addition to the Auditor General for Scotland, whose post was provided for in the Scotland Act 1998, 5 ombudsman/commissioner posts have been created since devolution whose appointment and removal from office involve Parliament and whose terms and conditions (beyond those set out in statute) are set by the SPCB. 13. A primary reason for the strong link with Parliament is to ensure that the posts, which might involve scrutiny of actions and provisions for which Ministers are responsible, are independent of the Executive. Where there are regulatory functions, it is necessary to ensure that the potential danger of interference by the Executive is not replaced by undue interference by Parliament (especially in the case of the Standards Commissioner, whose only role it is to investigate the actions of Members of the Parliament). There needs to be a proper balance between accountability to Parliament and institutional independence from Parliament. 14. Although the Scottish Parliamentary approach to such posts has been referred to by the Scottish Executive as “an acceptable and workable model”3, the posts “developed in a substantially unplanned way”4 with significant differences between posts in relation to issues which are important in terms of how independent the officers are, and might be seen to be, of those who are the subject of scrutiny by them. Such issues include method of recruitment, method of removal from office, grounds for removal, term of appointment, possibility of reappointment, grounds for a decision about reappointment and the setting and reviewing of pay and budgets. Some of these issues, including pay review and procedures for reappointments have been or are now being addressed. 15. There remains however a need, given the number of posts created and the possibility of future ones, to review and consider a common approach to these posts including such matters as independence accountability and financial control. In my view such a review should be conducted by Parliament and not, as recommended by the Justice 1 Committee5, by the Executive. A review should address the issue of how to define the boundary of posts suitable for this particular link with Parliament. Without this, the addition of more posts could prove unwieldy and burdensome and could dilute the concept of what Gay and Winetrobe4 refer to as “Parliamentary officers∗”. Gay and Winetrobe extensively discuss issues relevant to the committee’s inquiry and I commend their paper to members. ∗ The term “Parliamentary officers” has not found favour in Scotland. An alternative though more unwieldy term is “Parliament-related public office holders”.

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16. In this context, it could be seen as unfortunate that the main impetus and focus of the current exercise is a financial one. This is not to decry the importance of the issue of accountability in responsible use of public money. It is to suggest that excessive pressure from a financial direction could lead to inappropriate restriction of the independence of the posts and insufficient attention being given to how best to promote and add value to the posts so as to improve the governance of Scotland. Gay and Winetrobe4 in their 2003 paper considered it too early for the current posts to be evaluated but offered the view that “The real test of their success will be whether the link with Parliament offers any real added value to their work”. 17. The committee needs to be mindful that members’ pronouncements tend to lead to negative press reporting (“soaring cost of tsars” and suchlike) with no counterbalancing statement from Parliament about why it created and /or voted for the posts in the first place and gave them their particular remits. Such coverage tends to give the idea that these posts were somehow foisted on the Parliament rather than voted into existence by it and commissioners are seen to be criticised for carrying out the very remits given to them by members. In my view, Parliament and the SPCB should be more willing to explain the value of these posts and to support their intentions. It would help to explain more clearly that the posts are related to Parliament and its budget rather than to the larger budget of the Executive in order to avoid any interference by the Executive in their independence of operation (which might involve scrutiny of Executive action). (In my own case it is also because the role relates directly to Parliament.) Such posts are a recognised feature of mature democracies. 18. I wonder if it would help to see the posts conceptually as associated with the Parliamentary budget, or ancillary to it, rather than as part of it, even if technically they are part of it and under its overall financial control. In other words, Parliament is “hosting“or “sponsoring”, as a national service, these posts which are not a direct part of it. It might then be seen as misleading to refer to the cost of commissioners etc. as 10% of the Parliament’s budget. SPECIFIC QUESTIONS How can budgetary control be balanced with independence? 19. It would clearly be wrong for any commissioner or ombudsman to be able to claim any size of budget irrespective of other claims on public spending and of the relevance to their remit. While one might expect that the recruitment of individuals to these posts would result in post holders who could be trusted to observe this, I accept the need for some sort of scrutiny and approval mechanism to ensure and demonstrate responsible use of public funds within the broad remit of the role.

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20. At the same time, Parliament needs to delegate to some body the function of taking an interest in the work of commissioners/ombudsmen, explaining their role and needs to Parliament and protecting their independence against undue financial constraints. 21. It would be efficient for most of these roles to be held by the same body or committee, with the addition of specific reporting where necessary to a relevant subject committee. As an example, the Scottish Commission for Public Audit (composed of MSPs) examines the proposed budget of Audit Scotland and takes an interest in its work programme; and the UK Electoral Commission budget is overseen by the Speaker’s Committee in the House of Commons. 22. Gay and Winetrobe,4 and Gay6 in another paper, point to the example of the New Zealand “Officers of Parliament” Committee, a specific committee designed to oversee constitutional officers on behalf of members. They recommend such a solution for the Scottish Parliament4. The committee could:

• agree the appropriate budget for each office holder and arrange for auditing of expenditure (except in my case where I come under SPCB auditing);

• ensure that the annual report of each office holder is debated in an appropriate committee;

• take responsibility for ensuring that there was regular communication between office holder and Parliament, usually through the medium of a relevant committee; and

• be responsible for the arrangements preceding the formal appointment of an office holder and be the forum for any proposals to create a new office holder.

23. However, it might be considered that the scope and extent of the committee system since 1999 has imposed a significant burden on Parliament, its members and staff, so I believe it unlikely that the suggestion of a new committee for Parliament-related public office holders would find favour. The alternative is for this role to be conducted by the SPCB, which already is carrying out some of these functions. 24. If the SPCB is able to carry out the above range of functions notwithstanding all the other demands on its time and resources, then that is the most realistic solution. If this is not so, then consideration should be given to the establishment of a new, dedicated committee. 25. As indicated above, office holders will also have a need to report to other relevant committees, e.g. the Standards and Public Appointments Committee in the case of both me and the Commissioner for Public Appointments in Scotland. Such committees should remain separate from the budget setting process. The office holder may at times need to take a position in public different from that of the Committee, in keeping with the independence of their role.

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Is it possible to implement section B2 of the UN Paris Principles and retain suitable budgetary controls? 26. I am not sure that I would fit the definition of a national human rights institution as described in the Paris Principles, but the same considerations apply in any case. For all the posts in question, the relationship to Parliament achieves the aim of independence from Government. In this respect I am in sympathy with the response on this issue given by the SPCB to the Justice 1 Committee5 (Para 131). It is also necessary by analogy however, especially in my case, to protect from interference by Parliament those posts which may involve criticism of the action of Parliament or its members. 27. As laid out in the answer to the previous question, budgetary control can be provided so long as this is done in a sympathetic and informed way and not so as to impair independence of functioning. What internal process occurs to establish your required budgets for each financial year in advance of scrutiny by SPCB? 28. I am invited by Corporate Policy Unit/Head of Financial Resources to submit a proposal which I then discuss with them. SPCB approval is specifically and directly required for particular issues, e.g. engagement of legal advisers. SPCB approves my budget. Do you have any views on how the process for scrutinising your budgets works in practice? 29. I have encountered no difficulty to date; but then my needs have been simple and fairly predictable. Were my workload of complaints significantly to increase in future, I would need to employ investigative and office staff and rent premises, resulting in a significant increase in costs for which I would need to seek funds via SPCB. Were the effective performance of my duties to be impaired by financial restrictions, I would feel it my duty to make this known as strongly as possible within the Parliament and ultimately to the public if necessary. Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent regulatory or investigatory body? 30. In terms of my remit I do not. The case that was made by Parliament, first by the Standards Committee,1 and then in carrying through a committee Bill, for a statutory, independent Standards Commissioner to deal exclusively with members of the Parliament, remains valid. The Standards Committee carried out a nine-month long enquiry before reaching its recommendation and it gave

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reasons for discounting the idea of merging the Commissioner role with another body such as the Standards Commission for Scotland. I do not see any significant overlap with a proposed Human Rights Commissioner; complaints to me are couched in terms of conduct of members as potential breaches of the Code and MIO, not in human rights terms. 31. In terms of premises and use of services, I have expressed the following views to the review currently being conducted by Audit Scotland for the SPCB. 32. As regards premises, I cannot share costs as Parliament has no accommodation costs in relation to me. I use a commercial legal firm as independent legal advisers and I value this service highly in assisting me in my role. The firm I use has particular experience and expertise in Parliamentary matters. Having worked with them for two and a half years, a lot of groundwork has been done and there would be a loss of cost efficiency in moving to any new firm, with which some issues would have to be addressed afresh. It was good in this context that the re-tendering exercise in 2005 led to a clear decision, even setting aside the cost benefits of continuity, to continue with this firm. While there may be an argument in theory therefore for sharing of legal services with other office holders, I would not see an advantage in my case, whether of cost or otherwise, in such a move. Dr J A T Dyer Scottish Parliamentary Standards Commissioner 7th April 2006 REFERENCES 1. Standards Committee Fourth Report 2000. Models of Investigations of Complaints. 2. Committee on Standards in Public Life. Eighth Report (Cm 5663, November 2002). Standards of Conduct in the House of Commons. 3. Scottish Executive Consultation paper, 4 February 2003. The Scottish Human Rights Commission. 4. Gay, O and Winetrobe, BK (2003). Officers of Parliament – Transforming the Role. The Constitution Unit, UCL, London. 5. Justice 1 Committee. Stage 1 Report on the Scottish Commissioner for Human Rights Bill. 6. Gay, O (2003). Officers of Parliament – a Comparative Perspective. Research Paper 03/77, Parliament and Constitution Centre, House of Commons Library.

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Submission from the Office of the Commissioner for Public Appointments in Scotland

1. How can budgetary control be balanced with independence? 1.1 The answer to this question depends on what is meant by “budgetary control”. Is the control in question the determination and allocation of a total budget, or control over how a budget is expended? My experience to date is that the Scottish Parliamentary Corporate Body (SPCB) determines my total budget, so I will answer this question as it applies to me. 1.2 The Financial Memorandum accompanying the Public Appointments and Public Bodies etc. (Scotland) Bill states that the estimates of start-up and ongoing costs of my office were based on information provided by Baroness Fritchie, who at the time was Commissioner for Public Appointments, and on knowledge of the costs incurred in establishing similar bodies. Thus, the notional figure approved was based on detailed knowledge and has proved a sound basis for determining the overall limit of expenditure. 1.3 The total budget provided to any organisation will naturally affect the ability of the organisation to fulfil its functions. The duties and responsibilities placed upon me by the Public Appointments and Public Bodies etc. (Scotland) Act 2003 (the Act) are to:

• prepare and publish a Code of Practice for Ministerial Appointments to Public Bodies in Scotland

• promote compliance with the Code • report to Parliament instances of non-compliance which I determine to be

material to the outcome of an appointment process • examine the appointments process and investigate complaints • prepare and publish a strategy to ensure that appointments (and

recommendations for appointment) are made in a manner which encourages equal opportunities.

I operate independently within the agreed budget, prioritising work to ensure the necessary outcomes are achieved. 1.4 Any proposed action which will have implications for my total budget is agreed with the SPCB. For example, mindful that a financial memorandum is an estimate of costs, not a target for expenditure, I analysed the costs required to fund the work of OCPAS Assessors. I believed that these costs could be absorbed into my budget, rather than continuing the practice of payment by the Scottish Executive, and agreed this approach with the SPCB. This approach was designed to underline the Assessors’ independence from the Scottish Executive and to provide greater value from my agreed budget. The sum absorbed into my budget was £55,000.

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1.5 It is not unusual to balance budgetary control with independence of operation in this way. In two of the three organisations I ran before becoming Commissioner I worked to a similar model: an overall figure was set, within which I was required to establish, develop and deliver a service to pre-determined outcomes. 1.6 How best may this be achieved? In practice, balancing budgetary control with independence may be done through:

• identification of the outcomes - and timescales for these - required of the particular body or office to which the funds are allocated

• creation by the body of a comprehensive business plan describing priorities, objectives and action required to deliver the above within the budget available

• recognition – which may be enshrined in some form of service-level agreement or memorandum of understanding – that the post-holder is the subject expert and the funding body is the guardian of the public purse

• negotiation, based on a sound business case prepared by the body, when circumstances indicate a change to the level of resource is required.

1.7 I do not believe it would be appropriate for the SPCB, having agreed the total budget, to then determine how the budget will be expended. This would remove the independence of operation of the post-holder. 2. Is it possible to implement section B2 of the UN Paris Principles and

retain suitable budgetary controls? 2.1 My response to this question is again made in the context of controls which agree an overall budget, as opposed to controls on how a budget is expended. The thrust of section B2 is to ensure that national institutions are properly and adequately resourced. If budgetary controls are such that a total budget is agreed within which a post-holder may establish an appropriate infrastructure, then there would not appear to be a conflict between section B2 and budgetary controls. If, however, such budgetary controls result in inadequate funding, staffing or premises, this may affect the institution’s ability to be effective. Thus, the “smooth conduct of its activities” may be compromised. 2.2 As Accountable Officer I must:

• submit my budget proposals to the SPCB • discuss my proposals with the SPCB before a final budget is established • manage the operation of my office within the established budget • ensure effective governance and robust financial controls so that I can

demonstrate the budget has been spent wisely and efficiently in the discharge of my duties

• report to Parliament on the functions of my office and the outcomes of our work

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• prepare annual accounts according to the direction from the Scottish Ministers

• submit to external audit.

The above are suitable budgetary controls which have not, to date, compromised the independence of my role or the smooth operation of my office.

2.3 If, however, budgetary controls refer to how a budget is to be expended, I think this could be viewed as a performance issue. If it becomes clear that funds are not being directed towards the fulfilment of a post-holder’s functions, duties and responsibilities this would be a question of performance management not budgetary control per se. 3. What internal process occurs to establish your required budgets for each financial year in advance of scrutiny by the SPCB? 3.1 In March I conduct a full review of the current financial year’s activities; I determine the priorities for the next financial year and set general objectives for the financial year thereafter. Once priorities for the coming financial year are determined I produce a business plan. This details the objectives, the specific actions to be taken to achieve these objectives, who is responsible for each and the timescales for completion. As part of the business planning process I assess the risks to the achievement of objectives of failing to budget appropriately. 3.2 As I review the current’s financial year’s activities I scrutinise spend to determine the cost of each activity undertaken and to estimate the likely future cost if the activity is to be carried forward. I also attempt to quantify the cost of work which we have not engaged in previously. This may be through inviting quotes, referring to similar work we have done or by speaking to colleagues who have conducted work of the same nature. 3.3 Based on the business plan and the action described at 3.2 I refine the budget which was discussed with the SPCB the previous November. There is seldom a perfect fit between the plan and the budget. Hence, I review priorities, objectives, actions and the costs of these to decide how best to translate proposed expenditure into the achievement of objectives. 3.4 In May of each year I begin the process of estimating the costs of the objectives set for the following financial year. A total budget, set within general headings, is prepared and submitted in June to the SPCB. 3.5 In September I conduct a mid-year review of progress in delivering the current business plan and assess the potential impact on the current or future budget of alterations or additions to the plan.

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3.6 SPCB’s formal scrutiny of my budget submission for the next financial year takes place in November. This enables me to discuss and build in any alterations necessary to the budget submitted in June following my mid-year review. 3.7 In March I receive confirmation from the SPCB of my total budget for the next financial year. 4. Do you have any views on how the process for scrutinising your budgets works in practice? 4.1 I have only been involved in one full round of budgeting, so my experience of this is limited. The scrutiny process appears to be appropriate given my experience of business planning and budgeting. It has been supported by guidance provided by staff of the Corporate Policy Unit. 4.2 My use of public funds is subject to external audit, a further scrutiny mechanism. 4.3 Scrutiny of both spending proposals and actual spend is to be encouraged. Scrutiny by the SPCB of a post-holder’s expenditure is legitimate in determining whether the post-holder is performing satisfactorily. The SPCB can determine whether or not funds are being directed towards fulfilment of a post-holder’s functions, duties and responsibilities. The Procedures Committee is currently examining the process for the reappointment of Crown Appointees and has identified a need for information on performance during a post-holder’s first term. Information on their use of public funds may be one element which can be supplied by the SPCB. 5. Do you consider there to be any overlaps between your remit and the remit of any established or proposed independent regulatory or investigatory body? 5.1 The issue of a separate office for the Commissioner for Public Appointments in Scotland was considered at length. In June 2001, “Public Bodies; Proposals for Change” noted the Scottish Executive’s proposal to merge the Commissioner’s office with the new Standards Commission. However, in February 2002, the Executive’s Consultation Paper, “A Scottish Commissioner for Public Appointments”, proposed that it would not be appropriate to merge the Commissioner’s office with the Standards Commission, as appointments to the Standards Commission are made by Ministers and the Executive were at that point proposing that the Commissioner be appointed by the Queen on the recommendation of the Parliament. The independence of the Commissioner from Ministers was seen to be crucial, as the Commissioner would be regulating and monitoring Ministerial powers. During stage one consideration by the Local Government Committee of the Public Appointments and Public Bodies etc (Scotland) Bill the question of whether an overlap existed was discussed in some

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detail16. The committee, in its 15th report, stated that it “found clear distinction between these public offices “. 5.2 I do not believe that there is any overlap between my role and the existing or proposed independent regulatory or investigatory bodies. I am required to create the Code of Practice for Ministerial Appointments to Public Bodies in Scotland and to monitor its application. When I believe that a Minister has deviated from the Code in a material regard, I investigate. If my investigation confirms such non-compliance I report the Minister to Parliament. I am the only Commissioner whose regulatory powers are confined solely to Ministers. 5.3 I do believe that the functions of my office, for example the investigations we conduct, are similar in nature to the work conducted by other bodies and therefore believe that we could share services such as:

• accommodation • administrative services • ancillary services • personnel functions • intellectual assets • IT services • certain policy functions • certain process functions

It should be possible to make such savings without affecting the integrity of the individual post-holders and it may also be possible to benefit from economies of scale. Karen Carlton Commissioner for Public Appointments in Scotland April 2006

16 Official Report, Local Government Committee, 10 September 2002, c 3186

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Submission from the Scottish Parliamentary Corporate Body (SPCB) Thank you for your letter of 1 March informing the SPCB of the above mentioned inquiry and inviting the SPCB to submit evidence to the inquiry. The SPCB very much welcomes the announcement of this inquiry, particularly with the statutory role the SPCB has in relation to Crown appointees. As you are aware the establishing legislation for Crown appointees has been introduced in a piecemeal fashion over the last six years. This has resulted in a number of differences between the establishing legislation (details of which are set out in a table in the attached annex A) and has also meant that there has been little scope for the co-location of these new offices and any resulting savings, although this is something the SPCB is constantly looking at and as you know, we have commissioned Audit Scotland as part of its governance review to look specifically at this. We will of course share this report with you as part of your inquiry when we have received the report and considered any response we may wish to make to it. The SPCB considers that given the recent scrutiny by the Finance Committee of the officeholder budgets and the committee’s recommendations in its report of Stage 2 of the Budget Bill for 2006/07; the Justice 1 Committee consideration and report on the proposed Human Rights Commissioner Bill and the report of the Procedures Committee on Crown Reappointments, now is a good time to take stock of the current position in relation to parliamentary-nominated officeholders and to consider whether any changes are required to ensure that the provisions relating to the officeholders are consistent and that the appropriate checks and balances are in place to enable proper scrutiny and accountability to the Parliament. In the attached annex we address the specific questions raised by the Committee and would be happy to accept an invitation to give oral evidence later in the year to expand on this. Yours sincerely GEORGE REID

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ANNEX A

1. The Executive has proposed in the Bankruptcy and Diligence etc (Scotland) Bill that a Scottish Civil Enforcement Commissioner be set up as an NDPB to enable it to be independent. What are your views of the model of having Commissioner and the Ombudsman under the control of the SPCB? Since 2000, 8 officeholders have been nominated by the Parliament and appointed by Her Majesty The Queen. They are the Auditor General for Scotland, the Scottish Public Services Ombudsman and 3 Deputy Scottish Public Services Ombudsmen, the Scottish Information Commissioner, the Commissioner for Children and Young People in Scotland and the Commissioner for Public Appointments in Scotland. To ensure that Crown Appointees are independent from government and political pressure in the exercise of their functions, they are nominated by the Parliament and appointed by Her Majesty and they can only be removed from office by Her Majesty in pursuance of a resolution of the Parliament. The SPCB’s role in relation to a Crown Appointee apart from the Auditor General (see below) is to determine his/her length of appointment; to set his/her terms and conditions of appointment; approve determinations; pay his/her salary and allowances and any expenses incurred by the Crown Appointee in the exercise of his/her functions and to designate an Accountable Officer who is answerable to the Parliament for ensuring that his/her finances have been used properly, efficiently and effectively. The SPCB’s role in relation to the Auditor General is to determine the amount of his/her salary and allowances but the salary and allowances and any expenses incurred by the Auditor General in the exercise of his or her functions are to be paid by Audit Scotland. The Auditor General is the only Crown Appointee whose appointment is not fixed for between 1 to 3 periods of up to 5 years each. The Public and Accountability (Scotland) Act 2000 provides that the Auditor General is to vacate office on attaining the age of 65, or on such later date as the Parliament may by resolution determine. The establishing legislation provides that in the exercise of their functions (as set out in legislation) the Commissioners and Ombudsman are not subject to the direction or control of any member of the Parliament; any member of the Scottish Executive or the Parliamentary corporate except where otherwise indicated in the Act for example where the Parliament may give the Ombudsman directions as to the form and content of his/her Annual Report. The model for a Scottish Civil Enforcement Commission is fundamentally different in that the Bill provides that in the exercise of its functions, the Commission must act in accordance with any directions given to it by the Scottish

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Ministers and the Scottish Ministers may by regulations confer, remove or modify the functions of the commission. Membership of the Board is prescribed and those appointed will be appointed by Scottish Ministers who will determine the member’s terms and conditions of appointment. Scottish Ministers may remove a member from office if they consider that the member is unable or unfit to discharge their functions or that they have not complied with their terms and conditions of office. Scottish Ministers will approve the Commission’s determinations and the Scottish Minister may pay grants or make loans to the Commission of amounts that they determine. 2. What (if any) differences exist between the various commissioners and ombudsman in terms of accountability and budgetary control? For ease of reference, we have answered this question by way of the table below which we consider provides a list of the differences:-

Act Provision Other Acts Note Public Finance and Accountability (Scotland) Act 2000

Scottish Commission for Public Audit - Section 12 provides for a body to be known as the Scottish Commission for Public Audit. The Commission is to consist of the convener of the Audit Committee and 4 other members of the Parliament. The Commission’s main areas of responsibility are: (a) to examine Audit Scotland's proposals for the use of resources and expenditure and report on them to the Parliament; (b) to appoint a qualified person to audit the accounts of Audit Scotland; and (c) to lay before the Parliament and publish a copy of Audit Scotland’s accounts and the auditor's report on them.

No equivalent provision in any of the other Acts establishing Officeholders.

Other Acts silent on budgetary approval

Public Finance and Accountability (Scotland) Act 2000

Auditor General for Scotland – Section 13 provides that the salary and allowances and any expenses incurred by the Auditor General in the exercise of his/her functions are to be set by the SPCB and paid by Audit Scotland.

The SPCB meets the cost of salaries and allowances and expenses incurred by all the other Officeholders.

Commissioner for Children and Young People (Scotland) Act 2003

Financial Provision - Schedule 1 para 9(b) provides that the SPCB is to pay any expenses properly incurred by the Commissioner in the exercise of the Commissioner’s function.

Other Acts provide that the SPCB is to pay any expenses incurred by the Commissioner in the exercise of the Commissioner’s functions

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Commissioner for Children and Young People (Scotland) Act 2003

Staff – Schedule 1 para 7(1) provides that the Commissioner may, with the consent of the Parliamentary corporation as to numbers, appoint staff to assist in carrying out the Commissioner’s functions.

Other Acts provide that the Commissioner/Ombudsman may appoint such staff on such terms and conditions as they determine subject to the approval of the SPCB.

The Commissioner for Children and Young people is required to seek the SPCB’s consent as to the number of staff he/she appoints.

1. Commissioner for Children and Young People (Scotland) Act 2003 2. Scottish Public Services Ombudsman Act 2002

Allowances and expenses – Schedule 2, paragraph 8 provides that the Commissioner’s determination to pay to persons giving evidence or producing documents requires the SPCB’s agreement. Investigation procedure - Section 12 (5) provides the Ombudsman may pay to a person such allowances in respect of expenses properly incurred by the person and by way of compensation for loss of time, as the SPCB may determine.

No equivalent provisions in the Freedom of Information (Scotland) Act 2002 or the Public Appointments and Public Bodies etc (Scotland) Act 2003.

SPCB scrutiny of allowances and expenses rates paid by the Commissioner and Ombudsman to individuals.

Scottish Public Services Ombudsman Act 2002

Advisers - Schedule 1, paragraph 10 provides that the Ombudsman’s determination to pay for advice from a qualified adviser requires the SPCB’s approval.

No equivalent provision in the other Acts for Commissioners to obtain the SPCB’s approval to pay for advisers.

The SPCB has given the Chief Executive of the Parliament dispensation to approve expenditure up to £1,000. For sums in excess of £1,000, the Ombudsman must obtain the SPCB’s approval. This should ensure scrutiny of spend on external advisers.

Public Appointments and Public Bodies etc. (Scotland) Act 2003

Assessors – Schedule 1, paragraph 9 provides that the Commissioner may appoint assessors to assist him/her in the exercise of his/her functions. The Commissioner determination as to the fees and allowances payable to assessors requires the SPCB’s approval.

Assessors are unique to this Commissioner.

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3. Has SPCB scrutiny changed and/or developed as more commissioners have been established? As the number of officeholders has increased and the cost to the Parliament has increased, the SPCB has been striving to put in place, within the parameters of existing legislation and the officeholder functional independence, appropriate mechanisms to ensure that the officeholders are accountable to the Parliament in particular for the use of public funds. These include the following:- • A protocol was agreed between the SPCB, the Finance Committee and

officeholders which provides that the SPCB shall scrutinise the annual budgetary proposal from an officeholder prior to forwarding it to the Finance Committee as part of the SPCB’s overall budget. The SPCB may call on officeholders to give evidence to them in support of their budget proposals.

• A Memorandum of Understanding between the SPCB and the officeholders on access to the Officeholder’s Contingency Fund held by the SPCB was agreed which provides for occasions when proposed exceptional expenditure will be incurred by an officeholder which cannot be met from their agreed budget allocation for any given year. This was put in place to alleviate the need for each officeholder having a separate contingency within their individual budgets and thus reducing their overall cost to the Parliament.

• A Financial Memorandum Manual was prepared in consultation with the

officeholders. This provides a framework within which the officeholders, as Accountable Officers and the SPCB are required to operate to ensure the officeholders have access to appropriate funding to enable them to undertake their functions.

• The SPCB agreed a proposal from the officeholders, with the caveat that it

be reviewed annually, that they establish their own financial and audit systems to enable them, as Accountable Officers, to have more control over their financial processes. The officeholders financial and audit system went live on 1 April 2005. A review will be undertaken in due course to establish costs and to identify any potential for savings.

• The SPCB invited Audit Scotland to undertake an independent review of

opportunities for the officeholders to share services and the issue of office location. As mentioned in our covering letter we are awaiting Audit Scotland to conclude their review.

• We have also allowed access to the independent members of the SPCB’s

Advisory Audit Board to officeholders to assist them with their internal control and budgetary arrangements. This offer has been taken up by 2 of the officeholders with the others wishing to put their own mechanisms in place

The SPCB has also promoted and encouraged the use of shared services; the use of G-Cat and S-Cat for procuring and contracting for a wide range of management consultancy services and has met with officeholders on an ad hoc basis to discuss such issues.

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To facilitate proper financial scrutiny, accountability and governance, the SPCB consider the following is required:-

• to put beyond doubt the SPCB’s role in relation to financial scrutiny, the SPCB consider that it should have a statutory role to formally approve or otherwise, an officeholder’s budget proposal;

• that the officeholders should to be required to prepare 3-year Strategic

Plan and to submit this to the SPCB;

• when an officeholder lays his or her Annual Report, it would be helpful if one or more relevant Committee’s could scrutinise it and invite the officeholder to speak to it; and

• Officeholders should be appraised annually by an independent assessor

on their stewardship of funds, goals met as identified in the Strategic Plan and the content of their Annual Reports and a report should be sent to the SPCB. This would also provide evidence to inform the SPCB’s decision as to whether the officeholder should or should not be considered for reappointment.

If such a process was in place then this would provide a meaningful and joined-up procedure for proper scrutiny which would not impinge on the officeholders’ functional independence. 4. How can budgetary control be balanced with independence? The SPCB consider that budgetary control can be balanced with the functional independence of the officeholders and indeed that it is essential that such control does exist to ensure that they are accountable for the use of public funds. There is a requirement in primary legislation that budgetary provision for public bodies should be subject to approval and we have noted the recommendation by the Finance Committee in its report on the financial memorandum on the Bill for the proposed Human Rights Commissioner, that the SPCB should have a directional power for budgetary approval which would provide the clarity necessary to both the Parliament and the officeholders in terms of budgetary approval. We would not anticipate that in having the SPCB approve the budget of the officeholders that this will in any way impact on the functional independence of their posts. It is for the officeholders to determine how they undertake their statutory functions within an agreed budget for a particular year. In agreeing a budget for any financial year, the SPCB enters into a dialogue with the officeholders over their budget proposals. Based on this dialogue, the SPCB would normally expect the budget proposal to be put to the Finance Committee as part of the SPCB’s overall budget proposals.

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FI/S2/06/16/1

Should for whatever reason, the SPCB have reservations about the size of the budget proposed, for example if it considered a programme of work (regardless of its nature) as being over ambitious for a single financial year when taking account of all the other activities proposed as part of the budget submission, then at present the SPCB would draw this to the attention of the Finance Committee as part of the SPCB’s overall budgetary submission as part of the existing protocol in place. Having a strategic plan will assist this process as it will identify where and for what purpose the budgetary provision will be required. At the end of a financial year, in addition to the normal accounting arrangements, the SPCB will be able to identify where any of the budgetary targets have not been met and question the reasoning which can inform the budgetary discussions for the next financial year. In the event of failure to achieve agreement, the existing protocol provides officeholders with a right of appeal to the Finance Committee to justify their proposed budget bid. 5. Is it possible to implement section B2 of the UN Paris Principles and retain suitable budgetary controls? In response to this question we would draw your attention to the attached copy of the SPCB’s letter to the Justice 1 Committee which sets out why the SPCB considers that it is possible to have budgetary control over the officeholders without impeding section B2 of the UN Paris Principles. At this present time we have nothing further to add to this letter.

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Letter from the Scottish Parliamentary Corporate Body to Pauline McNeill, Convener of the Justice 1 Committee January 2006

Dear Pauline, Budgetary Arrangements for the Proposed Scottish Human Rights Commissioner May I firstly thank you for the opportunity to give evidence to the Committee with the SPCB’s views on the proposed Scottish Commissioner for Human Rights Bill. One of the questions posed by the Committee was in relation to our proposal that greater clarity be put on the face of the Bill that the SPCB should have a directional power for budgetary approval of the Commissioner’s proposed budget on an annual basis. I agreed at the Committee meeting that I would formally write to you about how we see this proposal sitting with the UN General Assembly resolution 48/134 (the ‘Paris Principles’). Under the proposed legislation, the funding for any expenditure by the Commissioner in undertaking his or her functions, together with office and staff costs will be met by the SPCB as part of its overall budget. Under the Public Finance and Accountability (Scotland) Act 2000, section1 on the use of resources provides that:

(1) The use of resources by –

(a) the Scottish Administration, and (b) each body or office-holder (other than an office-holder in the Scottish

Administration) whose expenditure is payable out of the Scottish Consolidated Fund (“the Fund”) under any enactment,

for any purpose in any financial year must be authorised for that year by Budget Act and must not exceed any amount so authorised in relation to that purpose.

There is therefore a requirement in primary legislation that budgetary provision for public bodies should be subject to approval. At the end of the year the Accountable Officer, whether it is the Commissioner or another appointed person, will be accountable to the Parliament for any monies spent and will have to produce annual accounts which will be subject to audit by the Auditor General for Scotland. In considering the issue of budgets, we recognise that section B2 of the ‘Paris Principles’ provides that: “The national institution shall have an infrastructure which is suited to the smooth conduct of its activities, in particular adequate funding. The purpose of this funding should be to enable it to have its own staff and premises, in order to

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be independent of the government it need not be subject to financial control which might affect this independence.” We consider within the proposed legislation these elements of adequacy and independence will be met. The draft legislation clearly states that the Commissioner will have his or her own staff and premises, although the staff complement, the associated terms and conditions and the location of premises will be subject to the approval of the SPCB. Clearly the Commissioner will be independent of government given the role of the Parliament. The financial review functions of the SPCB do not undermine independence. The SPCB has no powers of veto to prevent activities being undertaken by the Commissioners but its powers rather support the principle of adequacy of funding. While we recognise that the ‘Paris Principles’ are a particularly helpful marker in establishing national human rights institutions, it is important to recognise that they are advisory in nature. This is reinforced in the recognition of choice throughout the principles. The principles ascribe aspirations and broad deliverables/goals but do not define the method or mode of delivery as it needs to reflect the local environment. This recognises that a balance needs to be struck – in this case a balance between the need to be able to monitor and account for expenditure and achieving independence. Having regard to this, it is our view that the Parliament must also have regard to the wider issue of public accountability for the use of public monies. There has been discussion recently about the growing expenditure of Commissioners and the need for Parliament to be able to control such expenditure. We consider therefore the SPCB’s suggestion, which is also recommended by the Finance Committee in its report on the financial memorandum on the Bill, for a directional power for budgetary approval would provide the clarity necessary to both the Parliament and the Commissioner in terms of budgetary approval. As stated above, we do not anticipate that in having the SPCB approve the budget of the Commissioner this will in any way impact on the functional independence of the post. It will be entirely a matter for the Commissioner to determine what enquiries or promotional work it should undertake within an agreed budget for a particular year. In agreeing a budget for any financial year, the SPCB would enter into a dialogue with the Commissioner over his or her budget proposals, as it does at present with the existing Commissioners and Ombudsmen. Based on this dialogue we would normally expect the budget proposal to be put to the Finance Committee as part of the SPCB’s budget proposals. Should for whatever reason, the SPCB have reservations about the size of budget proposed, for example if it considered a programme of work (regardless of its nature) as being over ambitious for a single financial year when taking account of all the other activities proposed as part of the budget submission, then

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we consider the SPCB should have the power not to agree the budget and to invite the Commissioner to present a revised budget which can be agreed. In the event of failure to achieve agreement, the existing protocol provides Commissioners and Ombudsman with a right of appeal to the Finance Committee to justify their proposed budget bid. We also consider this would not preclude the Commissioner making a further bid for additional monies during the financial year should it become apparent that an urgent inquiry, for example, was necessary which could not have been foreseen at the time the budgets were being agreed. The SPCB has already agreed, with the existing Commissioners and Ombudsmen, provisions to take into account occasions where additional funds to the original budget for any financial year are required on an exceptional basis. The procedure for this provision is set out in a Memorandum of Understanding on Access to the Officeholders’ Contingency Fund held by the SPCB should be followed. This provides that any bids should be submitted to the SPCB by way of a certification explaining the purpose of the funding. Where there are insufficient funds in the Officeholders’ contingency fund then the SPCB shall consider whether it is possible to meet the additional funding from elsewhere in the SPCB’s overall budget. Where additional funding cannot be met from the SPCB’s resources, a bid for additional funding will be submitted to the Finance Committee as part of the in-year budget revision process. In summary, therefore, we do not consider that the checks and balances which are in place with regard to: the approval by the SPCB of budgets; the Finance Committee's role; the duty of the Accountable Officer; the powers of Audit Scotland; and the obligation to lay reports before the Parliament, are in any respect, in conflict with the ‘Paris Principles’. Indeed, we consider that the arrangements as structured give assurance of operational independence to Commissioners whilst, at the same time, providing accountability for the expenditure of public funds. I hope this explanation will be helpful to the Committee but should you require any further information please do not hesitate to contact me. Yours sincerely Nora Radcliffe

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Scottish Parliamentary Corporate Body Ombudsman/Commissioners Shared Services

April 2006

www.audit-scotland.gov.uk

Audit Scotland is a statutory body set up in April 2000 Under the Public Finance and Accountability (Scotland) Act 2000. It provides services to the Auditor General for Scotland and the Accounts Commission. Together they ensure that the Scottish Executive and public sector bodies in Scotland are held to account for the proper, efficient and effective use of public funds.

1

Scottish Parliamentary Corporate Body (SPCB) Ombudsman/Commissioners Shared Services _________________________________________________________________________________________

Introduction 1. At the request of the Corporate Body’s Accountable Officer, we have undertaken

a review of the opportunities for Commissioners and the Ombudsman to share

services, including the associated issue of office location. We have also

reviewed the processes for scrutinising the budgets of the Ombudsman/

Commissioners, including an examination of the existing lines of accountability

and how they work in practice.

2. The Ombudsman/Commissioners covered by this review are:

• Scottish Public Services Ombudsman (appointed September 2002);

• Scottish Information Commissioner (appointed February 2003);

• Scottish Parliamentary Standards Commissioner (appointed April 2003);

• Commissioner for Children & Young People (appointed April 2004);

• Commissioner for Public Appointments (appointed June 2004).

3. The projected combined annual costs of the five offices in 2006/7 are £6million.

Of this, £3.5 million is for direct staff costs and £0.5 million is for

accommodation. Almost half of the planned total spend is earmarked for the

Ombudsman. The Information Commissioner and the Children & Young

People’s Commissioner each account for 22% of the total with the Public

Appointments and Parliamentary Standards Commissioners accounting for 6.5%

and 1.5% respectively.

4. It is important to recognise the office holders are not a homogenous grouping.

Some have jurisdiction over each other and the SPCB itself; some operate in a

quasi-legal capacity, while others have more of an advocacy/advisory role; some

are more able to determine their workload and priorities while others have

workloads that are predominantly demand led.

2

Key Findings 5. The optimum time for achieving efficiencies in shared services and

accommodation costs is generally when organisations are being established.

This was not a primary objective when the existing Ombudsman and

Commissioner organisations were established.

6. Decisions on the location of premises were a matter for the office holders with

no specific guidance/directions on how this should be handled, other than a

general expectation that value for money should be achieved.

7. The Ombudsman/Commissioners, supported by the SPCB, have been proactive

in considering the scope for sharing common services. However, there is scope

to undertake value for money reviews on a more systematic basis as part of a

wider business planning and performance monitoring regime.

8. There is a perceived tension within the legislation that established the

Ombudsman/Commissioners. On the one hand, the SPCB has certain statutory

obligations in relation to the Ombudsman and Commissioners (e.g. payment of

pensions) and it has endeavoured to discharge these effectively. On the other

hand, by statute, the Ombudsman/Commissioners cannot be subject to the

direction and control of the SPCB or any member of the Parliament. While the

SPCB has sought to discharge a scrutiny and challenge function, it does not

believe it was given adequate powers to fully hold the

Ombudsman/Commissioners to account for business operations.

9. While stressing the importance of functional independence, all of the individual

office holders provided evidence of high levels of commitment to demonstrating

accountability to stakeholders and the wider public and to ensuring that their

actions were transparent and open to scrutiny. However, existing lines of

accountability for spending by the Ombudsman and Commissioners are not

straightforward.

10. In its report on the 2006/7 Budget, the Parliament’s Finance Committee noted

“very serious concerns over potential gaps in accountability in respect of all

parliamentary commissioners and ombudsman”. We concur with the view of

the Finance Committee that “it is critical that all parties – including the

Commissioners themselves, the Executive, the Parliament, the SPCB, and the

public - have a common understanding of the accountability mechanisms that

3

operate with respect to such bodies”. This requires a clear appreciation of what

constitutes “core functions” where office holders need to act independently (and

be seen to be doing so), as opposed to those functions that can be regarded as

“business operations”.

11. While the Procedures Committee recently recommended changes to the re-

appointment process for Ombudsman/Commissioners (2nd Report 2006), there

is no clear framework covering the arrangements for reviewing the remuneration

of the office holders . This impacts on control and accountability and has the

potential to create unhelpful tensions between the office holders and the SPCB.

Recommendations 12. The Parliament (and the Executive as appropriate) should:

• Ensure that the scrutiny of the costs of new bodies and the scope for

achieving efficiencies from shared common services are an explicit and

integral component of the pre-legislative scrutiny phase when establishing

such bodies. This should also include considering whether the role being

created is complementary to the responsibilities of existing office holders and

could therefore potentially be subsumed into existing organisational

structures.

• Use existing structures, systems and processes whenever possible in order to

provide clarity, minimise bureaucracy and avoid creating unnecessary

organisational machinery.

• Give the SPCB explicit responsibility and the necessary powers and

resources to oversee the business operations of the Ombudsman and

Commissioners in a strategic and proportionate way while building in the

necessary checks and balances to (a) protect the independence of the office

holders and (b) minimise the risk of any perception that office holders’

independence could be compromised.

• Consider whether the legislation that created the Ombudsman and

Commissioners needs to be amended to implement the proposals arising

from this review. This consideration may also be extended to include similar

4

bodies that have been established since devolution that are within the

Scottish Executive structure (e.g. The Standards Commission).

13. The SPCB should:

• Scrutinise the annual business plan/budget projections from the Ombudsman

and Commissioners. This should be a strategic review and be part of the

annual budget round that feeds into the Finance Committee’s annual budget

deliberations for the whole of the Scottish public sector. The scrutiny should

be designed to avoid any suggestion that the SPCB can compromise the

independence and integrity of the office holders.

• Review the strategic business performance of the Ombudsman and

Commissioners on a systematic basis. Given the relative size and nature of

the individual business units and in recognition of the operational control that

already exists through individual office holders, it may be judged sufficient for

this monitoring to occur quarterly or half yearly.

• Provide an added independent dimension to the scrutiny arrangements and

enhance the capacity, expertise and experience available to the Corporate

Body by, for example, extending the remit of the Advisory Audit Board and

increasing the independent external expert capacity.

• Establish a Remuneration Committee [comprised substantially of independent

experts] Amongst other things, the Committee should review the

remuneration and terms of reference of office holders and make

recommendations to the parliamentary authorities.

14. The SPCB and the Ombudsman/Commissioners should:

• Continue to explore opportunities for sharing services and co-location that:

- take account of the experience of the early years of operations of all

five offices and likely future needs;

- draw on the findings in the consultant’s report on shared services

(dated June 2005) that was commissioned by the Ombudsman;

5

- further develop the role of the operational group that is already

established to share expertise, experience and best practice in this

area;

• where appropriate exploit opportunities that may emerge from the Executive’s

Efficient Government Initiative (the SPCB is not subject to the Efficient

Government Initiative but intends to parallel this, where appropriate).

• Undertake a cross cutting examination of all costs of the Ombudsman and

Commissioners (not just shared services and accommodation costs) which

takes account of current and future business needs of the individual office

holders. It is recognised that this may have additional resource implications

for the SPCB.

• Ensure that proposals for shared services/co-location are proportionate to

the size of the body and the potential benefits to be gained from more

efficient and effective business delivery;

• Explore the potential for sharing services beyond the Ombudsman,

Commissioners and the SPCB as there may be more business advantage to

be had in working with other organisations outside this circle.

• Consider extending the scope of the SPCB Advisory Audit Board to

encompass the audit scrutiny arrangements for all of the Ombudsman/

Commissioners, with the Board’s terms of reference amended, if necessary,

to deal with any potential conflicts of interest. It is recognised that, as

matters stand, extending the AAB remit in this way will require the

agreement of the Commissioners/ Ombudsman.

• Revise the existing Financial Memoranda between the SPCB and the

Ombudsman/Commissioners to become broader based Memoranda of

Understanding that reflect the changes to the governance and accountability

arrangements arising from this review. The Memoranda should make clear

the parameters of the scrutiny arrangements including specifying any

mechanisms that need to be put in place to safeguard the independence of

the Ombudsman/Commissioners.

6

15. The Ombudsman and Commissioners should:

• Continue to have control over their budgets and any changes to the scrutiny

arrangements should not dilute their clear responsibility to demonstrate that

funds are required for the effective discharge of their responsibilities and that

they are achieving value for money.

• Further develop the role of the operational group that already exists to share

expertise, experience and best practice across the Ombudsman/

Commissioners. One of the key objectives of this group should be to

minimise the extent to which office holders need to get involved in routine

operational delivery issues, thereby allowing them to focus on their core

functions.

• Use the proposed Remuneration Committee of the SPCB in an advisory

capacity to support them in dealing with strategic staffing matters including

pay and terms and conditions.

7

Background

16. At the request of the Corporate Body’s Accountable Officer, we have carried out

a review of the opportunities taken by the Ombudsman and Commissioners to

share services. The background to this request was the Finance Committee’s

consideration of the 2006/7 public spending budget process and the

Committee’s concern with the rising costs associated with the growing number

of Commissioners. The Committee also noted the potential tension between the

statutory independence of Commissioners and Ombudsman and their

accountability for expenditure of public funds.

17. As part of the review, we have also examined the scrutiny and accountability

arrangements for the five offices. The Ombudsman/Commissioners covered by

this review are:

• Scottish Public Services Ombudsman (appointed September 2002);

• Scottish Information Commissioner (appointed February 2003);

• Scottish Parliamentary Standards Commissioner (appointed April 2003);

• Commissioner for Children & Young People (appointed April 2004);

• Commissioner for Public Appointments (appointed June 2004).

18. The projected combined annual costs of the five offices in 2006/7 are £6million.

Of this, £3.5 million is for direct staff costs and £0.5 million is for

accommodation. Almost half of the planned total spend is earmarked for the

Ombudsman. The Information Commissioner and the Children’s Commissioner

each account for 22% of the total with the Public Appointments and

Parliamentary Standards Commissioners accounting for 6.5% and 1.5%

respectively. (table 1)

8

£000s SPSO SIO SPSC CCYP SCPA Total

Staff 1,830 830 56 583 161 3,460

Accommodation 320 111 0 69 42 542

Other Costs 585 367 33 537 191 1,713

Total running costs 2,735 1,308 89 1,189 394 5,715

Capital costs 147 29 1 84 3 264

Table 1: Ombudsman & Commissioners’ Budgets 2006/7. (Source: Finance Committee)

Audit Approach

19. We examined the relevant legislation establishing each of the Ombudsman/

Commissioners and the arrangements surrounding the initial set up. We

reviewed the information contained in the SPCB’s submission to the Finance

Committee and more detailed supporting information provided by the

Ombudsman/Commissioners. We also had helpful discussions with each of the

five office holders.

Legislative background and initial set up

20. When the present Ombudsman/ Commissioner bodies were set up, the

emphasis was on establishing independent and autonomous post-holders. In all

cases (with the exception of the Scottish Parliamentary Standards

Commissioner) the separate legislation that established the Ombudsman/

Commissioners explicitly stated that:

“in the exercise of that officer’s functions, …is not subject to the direction or control of:

(a) any member of Parliament

(b) any member of the Scottish Executive

(c) the Scottish Parliamentary Corporate Body”

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21. The Acts of the Scottish Parliament, that established individual Ombudsman/

Commissioners, specified the responsibilities of the SPCB as follows:

• Determining the terms and conditions of the Ombudsman/ Commissioners,

including salary and allowances.

• Paying the salary and allowances and any expenses of the Ombudsman/

Commissioners.

• Making arrangements for the payment of pensions.

• Designating the Ombudsman/ Commissioner (or a member of staff) as the

accountable officer

• Ombudsman/ Commissioners may, with the approval of the SPCB, appoint

staff, on such terms and conditions as that officer may determine, and may

also appoint and pay advisers with the approval of the SPCB.

22. The legislation specified that Ombudsman/ Commissioners must lay before

Parliament each year a general report on their functions.

23. Operationally, Ombudsman/ Commissioners were established to undertake

specific functional responsibilities often against tight deadlines. With the

exception of the Scottish Public Services Ombudsman, newly appointed

commissioners were operating initially without staff or existing offices.

24. By contrast, the Ombudsman assumed responsibility for three existing

organisations (including a live caseload) with separate accommodation and

separate staff on separate terms and conditions.

25. Office holders were clear that the location of office accommodation would be a

matter for the Commissioners, although in the case of the Ombudsman,

Ministers stated that staff of the predecessor bodies would be accommodated in

a single location. Staff from the SPCB worked with the Ombudsman/

Commissioners to assist them in establishing their offices, and systems and

there has been favourable comment from Ombudsman/ Commissioners for this

support.

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Accommodation

26. We discussed accommodation arrangements with each of the Ombudsman/

Commissioners. The current arrangements and accommodation costs in each

of the ombudsman/ commissioner bodies is shown in table 2.

Location

Tenure

Annual rent

£000

Lease

end date

Scottish Parliamentary Standards

Commissioner

No separate office (note 1)

N/A Nil N/A

Commissioner for Public Appointments in Scotland (note 2)

St Andrew Square Edinburgh

Rented (short term)

40

(incl.services)

-

Scottish Information Commissioner

St Andrews Fife

Rented 36 2021

Commissioner for Children and Young People in Scotland

Holyrood Road Edinburgh

Rented 50 2019

Scottish Public Services Ombudsman

(note 3)

Melville St. Edinburgh

Rented 120 2018

Table 2: Ombudsman & Commissioners’ rent costs 2006/7 (Source:Ombudsman/Commissioners)

Note 1 The Scottish Parliamentary Standards Commissioner (SPSC) does not have a separate office. He works

from home and, where necessary, uses the facilities of the Scottish Parliament to conduct meetings etc in Edinburgh.

He therefore, incurs no separate accommodation costs.

Note 2 The Commissioner for Public Appointments in Scotland (OCPAS) operates from serviced offices in St

Andrew Square, Edinburgh. The Commissioner took a conscious decision to enter into a short-term let of serviced

accommodation to allow her to focus on operational activity in establishing her role and functions, and to allow

maximum flexibility in determining longer-term accommodation arrangements. The Commissioner has held

discussions with other Commissioners and the Ombudsman about the scope for sharing office accommodation and

other services.

Note 3 All of the Commissioner organisations were new organisations. By contrast, the Scottish Public

Services Ombudsman (SPSO) took over the responsibilities of three predecessor organisations: the Scottish

Parliamentary and Health Service Ombudsman, the Local Government Ombudsman for Scotland and the Housing

Association Ombudsman for Scotland.

27. Each of the SPSO’s three predecessor organisations occupied separate offices

in Edinburgh and employed separate staff on separate terms and conditions. In

addition to her functional responsibilities and the need to deliver “business as

11

usual”, the integration and rationalisation of these separate arrangements was a

major challenge for the Ombudsman when she was appointed in 2002. The

Ombudsman sought independent advice on options for future accommodation

including relocating the existing three offices into one location. Based on that

advice, the Ombudsman examined a number of options for rented office

accommodation and entered an agreement for the existing offices in Edinburgh.

28. The accommodation costs being incurred by each office seem reasonable in the

circumstances, although the CPAS recognises that there is a need to look for a

more permanent solution to her accommodation needs and this is in hand.

Three of the largest bodies are committed to long leases and therefore the

scope for reducing costs in the foreseeable future are greatly reduced as any

early break in lease is likely to incur considerable costs.

29. The Ombudsman has held discussions with other Commissioners on the

feasibility of sharing accommodation and other services, and is currently

progressing detailed discussions with the Commissioner for Public

Appointments.

Sharing of services

30. There is evidence that the Ombudsman/ Commissioners have worked together

on a voluntary and “collegiate” basis and have had regular exchanges on the

running of their respective offices. A cross cutting operational group has been

established to share expertise, experience and best practice in relation to

business matters.

31. An independent consultant was appointed by the Ombudsman to document and

assess the process used in establishing four of the five bodies listed above (i.e.

SPSO, OSIC, OCPAS and SCCYP). The consultant’s report considered the

subject under the headings noted below, which we have updated to reflect the

current state of affairs:

• Financial systems

32. The Ombudsman and three commissioner bodies purchased the same financial

system and used the same advisor to install the system and train staff on it.

This gave rise to economies of scale, as well as providing back up for

contingencies.

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• Accounts support

33. A self-employed consultant was appointed under separate contracts with

OCPAS and SCCYP to undertake monthly and year-end accounts and to

provide general financial advice as required. There is scope for further

rationalisation in financial services, although any financial benefits are likely to

be at the margins.

• Banking

34. The commissioner bodies must maintain separate accounts, but have elected to

use the same bank, in order to maximise the quality of service they receive and

minimise the learning curve the bank must go through to understand the nature

of their business.

• Procurement

35. All office holders have access to S-CAT and make use of these facilities for

procurement of goods and services. They are also alert to opportunities to

benefit from economies of scale from contractual arrangements negotiated by

either the SPCB or the Scottish Executive.

• Payroll

36. Three of the four commissioner bodies use Home Office Payroll and Pensions

Service (HOPPS) as its payroll provider. Due to its small size, OCPAS had to

source an external payroll bureau and carries out many payroll tasks internally.

There is scope to develop a common service here but any savings will be very

marginal.

• Internal audit service

37. SIC and SCCYP have decided to use Scottish Enterprise’s audit service: the

SPCB acted as reference site for this decision, as Scottish Enterprise currently

provide the SPCB with an audit manager on secondment. SPSO will take a

decision on its internal audit provision this summer. OCPAS is keeping the

question under review for the time being, given its small size. Again, there is

scope to rationalise around a single provider, although any benefits are likely to

13

come through a more efficient, effective and joined up service rather than result

in significant cash saving.

• Office services/Facilities management

38. The office holders believe that the scope for sharing support staff is very limited

due to their different locations and remits but are committed to find ways to do

so where practical and beneficial.

• HR

39. The Ombudsman and Information Commissioner, as the two longer established

bodies, are sharing their HR experience in relation to standard documents and

terms, and the SCCYP Commissioner is drawing upon these in establishing her

office. The SCCYP Commissioner has also formally adopted the OSIC

Handbook.

• Legal and other expert advisers

40. Lawyers, marketing professionals and other specialists are difficult to procure

jointly, as requirements will vary and may be difficult to predict. Consequently, it

was felt that, as a rule, individual commissioner bodies would make their own

arrangements under the normal procurement and tendering terms in their

Financial Memoranda. The Ombudsman/Commissioners will use S-CAT

wherever possible, and will also seek to ride on the back of arrangements

negotiated by the SPCB, in order to create the greatest possible economies of

scale.

ICT developments

41. The Ombudsman has developed a bespoke case management system. The

system has been adapted for use by the Scottish Information Commissioner,

with significant savings over a stand-alone procurement contract. The SCCYP

also plans to make use of this system and adapt to its circumstances. There is

scope for some more collaboration in software development but any benefit is

likely to be at the margins.

42. As part of the budget scrutiny process for 2006/7, the Scottish Public Services

Ombudsman re-affirmed to the Accountable Officer of the SPCB that the SPSO

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has explored opportunities for operational efficiencies and shared services with

a range of organisations.

43. The Ombudsman has indicated that, as a result of the upgrade of its functional

capability during 2005/6, her office now has processes, systems and controls

that are capable of cost-effectively supporting other bodies, even when they are

located outwith Edinburgh. Every effort should be made to explore these and

other opportunities to share services and to generally streamline how business

is conducted.

44. The Ombudsman/Commissioners recognise that sharing of services is not

restricted to their own grouping. There is also scope for sharing of services with

the SPCB; with the Scottish Executive; other similar organisations in Scotland;

and between Scottish Commissioners and their counterparts elsewhere in the

UK.

45. The Ombudsman/Commissioners, with the support of the SPCB, should

continue to explore opportunities for sharing services and co-location. Amongst

other things this should:

• take account of the experience of the early years of operations in all three

offices and likely future needs;

• draw on the findings in the consultants report on shared services (dated

June 2005) that was commissioned by the Ombudsman;

• further develop the role of the operational group that is already established

to share expertise, experience and best practice in this area;

• where appropriate, exploit opportunities that may emerge from the

Executive’s Efficient Government Initiative (the SPCB is not subject to the

Efficient Government Initiative but intends to parallel this, where

appropriate).

46. Any review of costs should be cross cutting and include all costs (not just shared

services and accommodation costs). It should be systematic and take account

of the current and future business needs of the individual office holders. As

such, it should be part of a wider business planning and performance monitoring

regime that supports office holders in the achievement of their objectives and the

effective discharge of their functions. It should also enable office holders to

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demonstrate effective accountability to the parliamentary authorities and the

wider public through a corporate governance framework that is proportionate

and fit for purpose.

47. Any proposals for shared services/co-location need to take account of the size of

the body and the potential benefits from more efficient and effective business

delivery.

Scrutiny Arrangements

48. The maximum scope for achieving efficiencies in accommodation and sharing of

services occurs when new organisations are being established. At the time

when existing Ombudsman/Commissioners were established, this does not

appear to have been a primary objective. Legislation specified that

Ombudsman/Commissioners were not subject to the direction or control of the

Parliament and there was an assumption that Ombudsman/Commissioner

organisations would be both functionally independent and largely operationally

autonomous.

49. Scrutiny of the costs of new bodies and consideration of the scope for achieving

efficiencies from shared common services should be an explicit and integral

component of the pre-legislative scrutiny phase when establishing such bodies.

We note that, in its Report on the Financial Memorandum of the Scottish Human

Rights Commissioner Bill earlier this year, the Finance Committee scrutinised

and challenged the financial arrangements for the proposed new Commissioner.

This included a recommendation that the SPCB should in future be given

sufficient time to properly scrutinise proposed costs before new bodies are

established.

50. In its report on the 2006/7 Budget, the Parliament’s Finance Committee noted

“very serious concerns over potential gaps in accountability in respect of all

parliamentary commissioners and ombudsman”. While stressing the

importance of functional independence, all of the individual office holders

provided evidence of high levels of commitment to demonstrating accountability

to stakeholders and the wider public and to ensuring that their actions were

transparent and open to scrutiny. However, existing lines of accountability for

spending by the Ombudsman and Commissioners are not straightforward.

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51. While the SPCB has sought to discharge a scrutiny and challenge function, it

does not believe that it was given adequate powers to hold the ombudsman/

commissioner to account in respect of their business operations. The SPCB has

continued to offer support to the office holders, despite its view that it does not

consider it has a formal role in specifying the framework for the activities of the

Ombudsman/ Commissioners (in the way that the Scottish Executive would

establish a “sponsor division” to oversee the activities of a NDPB).

52. Consideration should be given to the most appropriate body to undertake

scrutiny of Ombudsman/Commissioners. There are a variety of potential

governance models. Possibilities include:

• Through the SPCB: The Corporate Body already has a number of

responsibilities in statute for the Ombudsman/Commissioners. Financial

Memoranda are already in place and the expenditure of the

Ombudsman/Commissioner bodies feature in the Annual Accounts of the

SPCB. There is a question over whether the SPCB has the requisite powers

to assume a greater scrutiny role, although this can be overcome through the

creation of broader based Memoranda of Understanding or, if necessary

through changes in the legislation. Some concern exists over safeguarding

the Ombudsman/Commissioners’ independence. This particularly acute

where the Ombudsman/Commissioners have jurisdiction over decisions

taken by the SPCB. We believe it should be possible to build checks and

balances into the system to deal with any concerns, both perceived and real.

This may involve introducing more independent scrutiny through the

appointment of external advisers to the SPCB as happens currently through

the Advisory Audit Board;

• Through a separately constituted group akin to the Scottish Commission for

Public Audit (which exists as part of a wider governance framework for Audit

Scotland): This is understood to be a satisfactory mechanism for reviewing

the planning and funding requirements of Audit Scotland and would provide a

buffer between the office holders and the SPCB. However, a new group

would have to be constituted (or the existing Commission’s terms extended).

The Commission also meets infrequently and is constituted of MSPs so any

potential “conflict” issues that exist for SPCB are likely to remain.

• Reporting direct to the Finance Committee or another committee of the

Parliament: While this is an option it would entail the Finance Committee

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getting drawn into a level of detail that is perhaps inappropriate. As for other

subject Committees, it would again be involving them in unnecessary detail

and would perhaps blur the distinction between core functions and getting

drawn into operational delivery issues.

53. We note that the question of balancing independence and control was given

careful consideration recently by the Parliament’s Procedures Committee when

it considered the arrangements for the re-appointment of the Ombudsman/

Commissioners. Amongst other things, the Committee examined the role of the

SPCB and also how the performance might be assessed as part of the re-

appointment process. The SPCB will no doubt wish to draw on the Committee’s

Report (2nd Report 2006) given the clear linkages to the issues raised in this

report.

54. Every effort should be made to use existing structures, systems and processes

in order to provide clarity, minimise bureaucracy and avoid creating more

organisational machinery. Against this background, we recommend that:

• the SPCB should be given explicit responsibility and the necessary powers

and resources to oversee the strategic business operations of the

Ombudsman/ Commissioners.

• the SPCB should scrutinise the annual business plan/budget projections

from office holders. This should be part of the annual budget round that

feeds into the Finance Committee’s annual consideration of the Budget for

the whole of the Scottish public sector. The scrutiny arrangements should

be sufficiently transparent to avoid any compromise to the independence of

office holders. While it is for the Finance Committee to determine what

evidence it requires as part of its Budget scrutiny, it is assumed that it would

take assurance from the SPCB’s scrutiny and not get drawn into the detail of

office holders’ spending proposals other than in exceptional circumstances.

• the SPCB should review the strategic business performance of the

Ombudsman/Commissioners on a regular basis. Given the nature of the

individual business units and in recognition of the operational control that

already exists through individual office holders, it may be judged sufficient for

this monitoring to occur quarterly.

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• Provide an added independent dimension to the scrutiny arrangements for

the Ombudsman/Commissioners and enhance the capacity, expertise and

experience available to the Corporate Body by, for example,

- extending the remit of the Advisory Audit Board and increasing the

independent external expert capacity.

• The Ombudsman/Commissioners should continue to have control over their

own budgets and be accountable to the SPCB (and the Corporate Body’s

Accountable Officer as appropriate) for the finances and general business

operations of their offices. The existing Memoranda of Understanding

between the SPCB and the Ombudsman/Commissioners should be revised

to reflect the proposed changes to the governance and accountability

arrangements. The Memoranda should also make clear the limitations on

the scrutiny arrangements in terms of protecting the independence of the

functions of the office holders and specify any necessary mechanisms that

need to be put in place to safeguard this independence.

55. Consideration should be given to amending the legislation that created the

Ombudsman/Commissioners, if necessary, to support implementation of the

above proposals. This would include giving the parliamentary authorities

explicit powers to hold the office holders to account for the effective running of

their business operations while protecting the independence of the office

holders.

Audit Scrutiny

56. Currently, the independent members of the SPCB’s Advisory Audit Board

undertake a similar role for OSIC and SCCYP. OCPAS and SPSO are

currently considering the best arrangements to suit their circumstances.

Synergies will arise through common membership of audit committees, but it is

recognised that the Ombudsman/Commissioners may wish to take independent

advice from time to time on audit matters

57. The scope of the SPCB Advisory Audit Board should be extended to encompass

the audit requirements of the Ombudsman/Commissioners. This should dovetail

with the recommendations we have made above on clarifying and formalising

the SPCB’s governance role. The Advisory Audit Board’s terms of reference

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and membership can be amended, if necessary, to take account of this wider

role and also to deal with any potential conflicts of interest.

Remuneration Committee

58. The responsibilities of the SPCB include determining the terms and conditions of

the Ombudsman/ Commissioners, including salary and allowances. The SPCB

also have a role in relation to recommending the appointment and re-

appointment of office holders. There is scope to improve the existing

arrangements by adopting best practice that exists in both the public and private

sectors in this area.

59. The SPCB should establish a Remuneration Committee (comprised substantially

of independent experts) that, amongst other things, should consider matters

associated with the remuneration and terms of reference of office holders,

making recommendations to the parliamentary authorities as appropriate. We

note that the Procedures Committee recently reviewed the arrangements for the

re-appointment of Commissioners. The Committee has made a number of

recommendations that include the role of the SPCB and the use of independent

assessors. The SPCB may wish to draw on the deliberations of the Committee

to ensure that matters of appointment, reappointment, performance and

remuneration are effectively aligned, where appropriate.

60. The Remuneration Committee could also be used by the Ombudsman/

Commissioners in an advisory capacity to support them in dealing with strategic

staffing matters including pay and terms and conditions.

Conclusion

61. The Ombudsman and Commissioners, supported by the SPCB, have made

significant inroads into embracing a shared services agenda. There is scope for

more streamlining and sharing of services and it is evident that the machinery

and willingness already exists at an operational level to make that happen.

There is limited scope for achieving greater efficiency through co-location of

office holders. This is partly as a consequence of timing but it is also due to the

scope for shared services not being a consideration when these bodies were

first established. However, lessons have been learned in this respect and are

already being actioned.

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62. There is scope for greater clarity in terms of the governance and lines of

accountability. This can be addressed through the development of the existing

business framework, while recognising and respecting the crucial importance of

the office holders being able to deliver their core functions independently. The

mutual jurisdiction across the bodies accentuates the importance of

independence but it should be possible to design suitable checks and balances

to mitigate this

63. It should also be a key principle that the governance and accountability

framework is proportionate and fit for purpose – and does not distract the

Ombudsman and Commissioners unnecessarily from carrying out their core

functions on behalf of the public and other stakeholders.

Acknowledgement

64. We are grateful for the co-operation and assistance received from the

Ombudsman and Commissioners and staff of the SPCB during the course of this

review.

FI/S2/06/16/3

Finance Committee

16th Meeting 2006, Tuesday 6 June 2006

Scrutiny of Legislative Costs

Introduction 1. The purpose of this paper is to outline the recurring concerns raised by

the Finance Committee in relation to the standard of information provided within financial memoranda (FMs), to consider the possible variance between proposed costs and actual costs of legislation and to consider options for further action in relation to these issues.

Background 2. When reporting on bills, the lead Committee must report on the

Financial Memorandum (FM) and in doing so, has to take account of any views from the Finance Committee. In 2001, the Finance Committee commissioned some external research as part of its 2003 Financial Scrutiny Review, and as a result of this, has undertaken more detailed scrutiny of the financial implications of all legislation.

Standard of information provided in financial memoranda 3. Since the Review, the Committee has found itself frequently

dissatisfied with the quality of the information provided within the FMs scrutinised. Recurring issues which have been raised in a number of reports on various financial memoranda include: a lack of detail on the basis for substantial sums contained in FMs; the absence of information on the potential financial implications of provisions detailed within subordinate legislation; and large ranges of potential costs which were not more specific due to a lack of consultation or sufficient preparatory work.

4. The Committee has written to the Executive on a number of occasions

flagging up concerns in relation to the information provided within financial memoranda.

5. In a letter dated 23 September 2004 from the Finance Committee

Convener to the then Finance Minister, it was stated:

“There is concern that assumptions underpinning calculations in FMs are not always correctly quantified or evidenced. An example of this would be the National Health Service Reform (Scotland) Bill. The Committee had been concerned about the lack of financial information that could be given in relation to the creation of new bodies such as Community Health Partnerships (CHPs) as well as the lack of detail in relation to subsuming NHS Trusts.

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6. Later, in a letter dated 8 March 2005 from the Finance Committee convener to the Minister for Parliamentary Business it was stated:

“Bills such as the Transport (Scotland) Bill and the Smoking, Health and Social Care (Scotland) Bill have uncosted elements due to the fact that consultations are still ongoing and/or that Ministerial announcements are awaited.”

7. The Executive produce guidance on the preparation of FMs

accompanying bills. However, on a number of occasions it would be appear that the guidance is not being adhered to and the Committee has made recommendations in a number of reports on the financial implications of legislation which call for Bill teams to produce FMs in line with internal guidance.

Post-legislative scrutiny 8. Concerns have been raised in the past about the proposed costs of

certain legislation considered by the Scottish Parliament being at variance with the actual costs of legislation when enacted. For example, the Parliament’s Audit Committee made the following criticisms of the financial planning and tracking of the costs of free personal care (passed via the Community Care and Health (Scotland) Act 2002):

• Allocations to councils for free personal and nursing care must be

made on the basis of a realistic and accurate assessment of need – estimated costs must not be calculated to fit allocations;

• Expenditure to 05/06 could be greater than estimated by the Scottish Executive Health Department (SEHD);

• Given the limitations of the information provided by local authorities, SEHD could not know with any certainty how much local authorities were spending on personal care, it seems therefore that the Department is not able to determine how much the policy has cost to implement;

• In providing regular data to SEHD, a number of councils continue to provide either no information at all, or estimates;

• The SEHD is not able to separate out the costs to show local authority spending on care prior to implementation of the Bill, so that like for like comparisons can be made;

• The Committee considers that SEHD has failed to monitor the actual costs of the free personal care policy following implementation;

• The SEHD took no systematic risk assessment on the consequences of inaccurate estimates. Projections of a range of estimates would have been better than a single estimate given the uncertainty involved.

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Possible further action 9. With the Scottish Parliament now seven years old (and the 100th Bill

having recently been passed), the new Executive FM guidance (see Annex) having had the chance to bed-down, and the Finance Committee having had a period of time scrutinising FMs at its agreed three different levels, it would appear to be an apt time to undertake work looking at the actual cost of legislation against the proposed costs detailed within FMs considered by the Finance Committee.

10. While there has been no systematic research on the cost of legislation

passed by the Scottish Parliament, it is important to check that the Executive is adequately following up the actual costs of certain bills passed by the Parliament. This is crucial from a financial planning point of view, because in a situation where there is a finite level of money, if planned costs over-run in one area, there are consequential effects elsewhere.

11. Given that it is probably too early to conduct a systematic analysis of

the proposed versus actual costs of a number of bills where the Committee has undertaken detailed scrutiny, it might be useful for the Committee at this stage to consider the options for further action detailed below.

12. The Committee could write to the Executive asking for details on how

the costs of legislation are monitored and tracked once the legislation is enacted.

13. Once the Committee has had a chance to consider the response on

the processes which exist, it could consider conducting an evidence session looking at one particular Bill which has passed, comparing proposed (from FM) and actual costs. This might be done by taking evidence from the FM team for a particular Bill, the Head of Finance in the Executive department responsible for the legislation when implemented, and any other bodies with a responsibility for enforcing the legislation – for example, local authorities. In doing this, the Committee could choose a Bill that has been enacted and has had time to bed down. A choice could be made from the following Acts:

• Mental Health (Scotland) Act (2003) • Water Environment and Water Services (Scotland) Act (2003) • Criminal Justice (Scotland) Act (2002) • Regulation of Care (Scotland) Act (2001) – although has been well covered by Audit and now Health Committees • Housing (Scotland) Act (2001) • Transport (Scotland) Act (2001) • Education and Training (Scotland) Act (2000)

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14. If, following correspondence and an evidence session, the Committee feels that further work needs to be done on tracking costs, it could then write to the Executive highlighting any remaining areas of concern. If appropriate, the Committee could also suggest commissioning a joint research project with the Executive that would have the purpose of improving the production and scrutiny of FMs, which in turn will feed into better legislation and more careful consideration of the allocation of finite financial resources. It is envisaged that future research in this area could consider the following phases:

• Select a sample range of bills; • Compare the proposed and actual costs of the selected bills; • Identify the reasons for any variance; • Suggest ways to improve the production of FMs.

Conclusion 15. The Committee is invited to consider:

• Writing to the Executive to ask what processes are in place to track the actual costs of legislation once enacted; • Holding an evidence session with Executive officials and other bodies responsible for implementing the legislation (if appropriate); and • Suggesting that research could be commissioned jointly between the Executive and the Committee as outlined above.

Ross Burnside Susan Duffy Senior Researcher – SPICe Clerk to the Committee

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ANNEX 1: FINANCE GUIDANCE NOTE 2004/06

FINANCIAL MEMORANDA

Purpose

1. This note provides guidance on the preparation of the Financial Memoranda that accompany Scottish Executive Bills. This note supersedes Finance Guidance Note 2003/9.

Key Points

2. Financial Memoranda are required so that the Parliament (and the public) can have the best possible information on the financial implications of proposed legislation. Estimates of costs (and savings) are therefore required regardless of whether budgetary provision has been agreed internally.

3. In preparing a Financial Memorandum, the Bill Team, in conjunction with the relevant departmental Finance Team(s), must ensure full compliance with the requirements set out in the Standing Orders, in the Bill Handbook and in this Finance Guidance Note.

4. Departmental Finance Teams must obtain formal clearance of Financial Memoranda from Finance: Standards & Guidance before giving Bill Teams the go-ahead to seek clearance from the Minister for Finance and Public Service Reform.

Background

5. Under rule 9.3.2 of the Standing Orders of the Scottish Parliament, an Executive Bill must be accompanied by a Financial Memorandum setting out the best estimates of the administrative, compliance and other costs to which the provisions of the Bill would give rise. It must also include best estimates of the time scales over which such costs would be expected to arise, and an indication of the margins of risk and uncertainty in such estimates. The Memorandum must distinguish separately such costs as would fall upon (a) the Scottish Administration; (b) local authorities; and (c) other bodies, individuals and businesses.

6. The Finance Committee has taken the view on more than one occasion that Financial Memoranda that accompany Executive Bills should have contained fuller information than had been provided. It is open to the Committee to ask for a revised version but this would slow up the legislative timetable which is something that both the Committee and the Scottish Executive would be keen to avoid. Financial Memoranda are required so that the Parliament can have the best possible information on the financial implications of the proposed legislation, and not just for expenditure under its control. They should, therefore, be comprehensive and include sufficient detail on the basis of figures to enable the Parliament to come to a view on their robustness. Costings should be provided on both a gross and a net basis together with details of any anticipated savings on existing costs and any related income.

Preparation

7. The Bill Handbook requires Financial Memoranda to be prepared by Bill Teams in conjunction with their Finance Teams. In preparing a Financial Memorandum the Bill Team and its Finance Team must ensure full compliance with the requirements set out in the Standing Orders, in the Bill Handbook and in this Finance Guidance Note. Where a Bill proposes new duties, it should not be difficult to give full financial information since that ought to have formed part of the policy considerations leading to a Bill. If necessary, it could form part of the consultation.

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8. Where a Bill proposes powers, or implementation is dependent on the detail in secondary legislation (or further primary legislation), it may not be possible to be precise. In these cases, the Memorandum should say so. But this should be supported by an outline of the Executive's current intentions, the financial implications of these intentions, and the effect of varying the major assumptions.

9. If, however, the implementation of a Bill is to be dependent on secondary legislation and that legislation will be accompanied by a Regulatory Impact Assessment (RIA), it will be acceptable to give a broad indication of the likely financial implications in the Financial Memorandum. It will however be necessary to explain that further detail will be put before the Parliament in a RIA when it is asked to consider secondary legislation.

10. In order to assist the Finance Committee's deliberations a Financial Memorandum should include a table summarising the additional costs attached to the Bill, cross-referenced to relevant paragraphs in the main document. Financial Memoranda should also include relevant cross-references to any consultation exercise. The Committee will be particularly interested in consultees' views on the financial implications of the proposed legislation and on where the additional costs will fall.

Giving Evidence

11. The Finance Committee may require persons to attend its proceedings for the purpose of giving evidence. Any official likely to be called before the Finance Committee to answer questions about Financial Memoranda should therefore be comfortable with the content and be prepared and able to explain the basis of figures and defend their robustness. Witnesses should also be able to defend the absence of figures in circumstances where estimates have not been provided and be able to differentiate between start up and ongoing costs.

Clearance

12. It is a requirement of the Bill Handbook that Financial Memoranda must be cleared by the Minister for Finance and Public Service Reform. All submissions from Bill Teams must be copied to the Scottish Executive Finance Director and the Head of the Finance and Central Services Department, in addition to other interested parties. Submissions accompanying Financial Memoranda must state that formal clearance has been obtained from Finance, as described below.

13. Departmental Finance Teams must obtain formal clearance of all Financial Memoranda from Finance: Standards & Guidance in respect of compliance with relevant sections of the Standing Orders and the Bill Handbook before giving Bill Teams the go-ahead to seek clearance from the Minister for Finance and Public Services. Clearance by Finance Standards & Guidance must be recorded in writing and copied to the Principal Finance Officer and the Assistant Director in charge of Finance Standards & Guidance.

14. The Bill Teams and Finance Team(s) concerned must submit the draft Financial Memorandum to Finance Standards & Guidance at least five working days before an initial response is required. Once an initial response is received, sufficient time should be allowed to address fully any points raised or amendments requested before re-submitting the revised draft to Finance Standards & Guidance for final clearance.

15. Once final clearance has been obtained, in cases where more than one subject Minister is directly concerned, the Bill Team and Finance Team(s) must then seek formal agreement in writing from each Minister concerned on the financial implications of the Bill before clearance of the Financial Memorandum is sought from the Minister for Finance and Public Service Reform.

16. Departmental Finance Teams not immediately involved in the preparation of Financial Memoranda should also be consulted where the provisions of the Bill might impact on the budgets for which they are responsible.

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Revised / Supplementary Financial Memoranda

17. Where amendments are made at Stage 2 that substantially alter the cost implications of a Bill as described in the original Financial Memorandum, a revised or supplementary Memorandum should be prepared by the Bill Team / departmental Finance Team. The clearance procedure should be essentially the same as for the original Memoranda but allowing for the very limited amount of time that may be available. A revised or supplementary Memorandum should objectively address both Executive and non-Executive amendments even where the Executive may seek to remove or revise the non-Executive amendment at Stage 3.

Scottish Executive Finance December 2004

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Sources Scottish Parliament Audit Committee (2005). Report on Community Care. Edinburgh: Scottish Parliament Audit Committee. Available at: http://www.scottish.parliament.uk/business/committees/audit/reports-05/aur05-02-01.htm

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