Finance and Public Administration Committee

Meeting date: Tuesday, May 16, 2023

Official Report 697KB pdf

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Public Administration in the Scottish Government

The next item on our agenda is an evidence session with John-Paul Marks, the permanent secretary to the Scottish Government, on issues relating to public administration in Government. Mr Marks is joined by Lesley Fraser; director general corporate, Louise Macdonald; director general communities and Jackie McAllister the chief financial officer, all from the Scottish Government. I welcome you all to the meeting. Thank you for taking the time to come and see us.

Thanks, deputy convener.

I will start with three areas of focus. First is our policy advice, and particularly the revised policy prospectus that we have recently published for the new First Minister and the new Cabinet. Secondly, I will touch briefly on financial control—given inflation and the fiscal position—and thirdly I will touch on leadership of the civil service and how we are trying to build new capabilities for the long term.

First of all, through February and March there have been a new First Minister, a new Deputy First Minister, a new Cabinet and a new policy prospectus. Credit is due to the team—a lot of hard work was done to get that prospectus published and to manage a significant reshuffle in Government. As we have heard this morning, the prospectus includes three missions that respond to the context that we are in and which also set out concrete deliverables for each cabinet secretary to make progress on according to the national performance framework. They are equality, to tackle poverty; opportunity, to transform our economy and realise net zero; and community, to recover from the pandemic and secure sustainable public services.

The key drivers during the past 12 to 18 months, since I have taken up post, are the tragic events in Ukraine and what that did to inflation, and the cost of living crisis that followed. Those compounded the impacts and risks that the pandemic created. Last year, ministers quite rightly prioritised fair and affordable pay awards in order to manage the risk of industrial action, and we also delivered a warm Scots welcome and the supersponsor programme, which we have heard about this morning.

There are a few things to mention that were top of the priorities list. They include balancing the budget and protecting the things that make the biggest difference to our top-priority outcomes—an example being the expansion of eligibility for the Scottish child payment, which has enabled child poverty rates in Scotland being lower than the UK average.

There was also a revised budget tax package and an emergency budget review to balance the budget, and we have established new capabilities in our workforce to respond to new challenges. Examples of such challenges are the war in Ukraine and social care improvement. There is also a new ScotWind directorate, so that we reap the benefits of renewables.

There is a lot of focus on partnership and system leadership. In the justice system, we have seen a good reduction in our courts’ backlogs. We have kept crime rates low and the prison population is 8 per cent lower than it was pre-pandemic. There is also more criminal justice reform legislation going through Parliament now.

We are in the process, we hope, of finalising a new deal with local government and with business, as we try to establish the ecosystem for improving start-ups and scale-ups in Scotland’s economy with Techscaler, CodeBase and CivTech, and we are pushing on with our national strategy for economic transformation.

That collaborative approach shone out for me in relation to operation Unicorn, when the country came together and provided a fitting tribute to Her late Majesty the Queen.

As principal accountable officer, the key points that I would highlight are the balancing of the budget—the 2021-22 consolidated accounts—and, again, in 2022-23 the provisional outturn, which the committee will see shortly. I also highlight the need to effect in-year adjustments of more than £1 billion to achieve that in 2022-23.

We have been focusing on some core capabilities to improve value for money in the Scottish Government around governance; investment scrutiny and financial control; multiyear workforce planning and estates rightsizing; improving public body sponsorship; record keeping; and freedom of information and correspondence management.

We have embedded a private investment framework that is now published, and we are applying it every day. We are improving the data and later in May we will set out our medium-term fiscal strategy, so that is all transparent.

My final point is that, from my perspective, this is always about building the team. There is a lot of focus on professions and on going deeper on the human resources, finance, legal, risk and project management core competences, but there is also, across Scotland, a focus on public service reform and digital transformation.

Our values are genuine: we are embedding a values-based approach to our workplace culture all the time, and we have learned good lessons from the harassment reviews. Lesley Fraser has led a tonne of work on embedding new procedures and controls around propriety and ethics.

I will share a few statistics. The proportion of disabled people working in the Scottish Government has doubled from 6.4 per cent in 2013 to just under 15 per cent today. We also have a very healthy gender balance across the Scottish Government at all levels and grades, which is encouraging. Our people survey for 2022 had record numbers of staff identifying as disabled, female, ethnic minority and LGBT, and our bullying and harassment levels remain at historic lows. We are always vigilant about the culture and are improving it, but we are also proud of the diverse and inclusive culture that we are leading.

Finally, I am building my senior team. Louise Macdonald has joined the team; this is her first committee appearance, so I know that everyone will be kind. Louise has been with us for more than a year, after having worked in the voluntary and private sectors. My new director general for economy has recently come in from the private sector, and leading our work on net zero we have another DG who has significant and deep major-project expertise.

We have talked about churn this morning. Although we want to manage against that risk, we also want to bring in fresh talents, to diversify the capabilities at the top and throughout the organisation, and to ensure that the organisation reflects the country that we serve.

We are working hard on our relationships with the UK Government. We have good dialogue every week with UK civil servants and we will keep working hard on that. There are lots of strengths to build on and there is important work ahead.

We look forward to your questions.

Thank you. I will start with Lord Maude’s review of governance and accountability, which the UK Government established to recommend ways to make the Government more efficient. It is looking at the efficiency and effectiveness of the UK civil service. How will you give input to that review, given that you will be charged in part with delivering its outcomes in Scotland?

We have a number of regular touch points. For example, I attend Simon Case’s leadership team meeting every Wednesday morning and Lesley Fraser is a member of the UK civil service chief operating officers group. Those are two touch points in which we regularly talk about efficiency, governance and transparency. Only last month, there was a four-nations team meeting to discuss our learning and experience on propriety and ethics, given the experience that colleagues in Whitehall are also stepping through in applying best practice to their procedures. We are sharing all the time.

I am also a member of the civil service board, which is the most senior leadership group and is chaired by the chief executive of the civil service. It is all about workforce, estate, digital transformation and so on—everything that relates to ensuring that we are building and developing a world-class civil service that can deliver the best outcomes and advice for ministers.

On the resource spending review, the previous Cabinet Secretary for Finance and the Economy said that she wanted a return to pre-Covid levels in the public sector head count and in the size of the civil service. What is the status of that work and the policy commitment to reduce head count?

We established workforce control for the civil service last year, after the resource spending review. We have done that for the first year. We have also started to try to set out multiyear plans by DG portfolio area and directorate, so that we can understand what the trajectory looks like and the choices that can be made.

In the first year—we are still waiting for final reconciliation of the data—we have made a quite significant reduction overall in our contracted resourcing. We have also managed our permanent resourcing to a small increase. The net effect is that we are marginally smaller after the first year, but we need the final data to flow through on that and then we need to keep developing multiyear workforce plans to the end of the current session of Parliament.

Some things will naturally unwind. The Ukraine supersponsor programme will, one hopes, come to an end at some point. We also have a sizeable social security programme that will move towards “business as usual” as we conclude this session of Parliament. As Mr Greer suggested earlier, there are also some significant major programmes that we want to gear up that are to do with heat in buildings, renewables, ScotWind and other things.

We have therefore made progress in the first year, but I cannot pretend that getting back to pre-pandemic levels does not require a level of challenge and stretch. We will have to work carefully on that in the years ahead.

Given the scale of the ambition that Cabinet Secretary Forbes set out and what you are saying about additional work that has to be taken on, it does not sound as though you are on course to meet those levels.

I genuinely think that it is still doable. In terms of natural attrition, we will have around 600 to 700 leavers a year. It is therefore feasible that we could return to pre-pandemic levels by the end of the session of Parliament. However, as I said, a careful balance needs to be struck. Obviously, we have a new First Minister, a new Deputy First Minister and a new Cabinet. Through this year, I want to make sure that we agree the programme, the budget and the necessary capacity so that they are aligned and so that it is a fair challenge to deliver the programme.

For the sake of clarity, that remains the policy of the Government; it has not changed with the new Administration. You are taking the same approach that was set out in the resource spending review and the First Minister has asked you to do that. Is that correct?

I do not think that that has been publicly stated by the new Government.

But you are continuing on that basis. There has been no change of the policy that you are working to, by the sounds of things.

Do you mean in terms of workforce strategy and workforce management?

Yes.

It is deliverable, if that is what ministers still want us to achieve by the end of the session of Parliament.

But they have not given you any clarity.

We have lots of clarity for the prospectus and for 2023-24. We have not yet agreed workforce plans for 2025-26 with the new set of ministers. We still have choices for ministers to make around that.

That is interesting.

I will move on to a different issue. On 5 May, the Secretary of State for Scotland, Alister Jack, questioned the appropriateness of UK civil servants working for the new Minister for Independence. You have talked about the new regime and the new ministers. I think that the Secretary of State wrote to Simon Case at that point and that, in essence, it was bumped to you. As I understand it, it is a matter for the Scottish Government permanent secretary in the first instance. What is your response to that, please?

I have responded to a number of pieces of correspondence regarding that matter. It is for the First Minister to appoint his ministerial team, given his priorities. That ministerial team is then voted on by Parliament. It is then for the civil service to serve that ministerial team impartially.

11:30  

We serve the Government of the day. That includes with regard to constitutional reform. It has been well understood under devolution for many years that the civil service in the Scottish Government serves the Scottish Government and its priorities; we provide policy advice, including the development of the prospectus-paper series for the Government to set out its constitutional objectives. As we alluded to earlier, that is not just a theoretical debate or a strategic long-term debate; it is a here-and-now reality, whether that be regarding the use of section 35, the interaction with the United Kingdom Internal Market Act 2020 or the fiscal framework review.

From my perspective, there are clear, proper and regular grounds for the First Minister to appoint his ministerial team. It is necessary for the civil service to serve that ministerial team with impartiality and there is a clear set of constitutional priorities here and now on which advice is needed and which need to be tackled, because if we are going to deliver the Government’s programme—whether it be on ScotWind, the deposit return scheme or a number of energy reforms and equality reforms—we need to continue to influence and engage with the UK Government with regard to the devolution settlement and the constitution.

Ciaran Martin, who is a professor at the University of Oxford, talks a lot about the history of devolution. It is a history of change, not a history of stagnation. Therefore, to an extent, it is important that I have capability such that the civil service in Scotland is equipped to serve ministers in this Government now, while recognising that things could change in the future. We will continue to seek a section 30 order so that a referendum would be on lawful grounds, as per the last referendum in Scotland, while recognising that there will be a UK general election in 2024-25 and that in the future the constitution of the UK could clearly change again. We need to be capable and ready to respond.

Okay, thank you. You mentioned in your opening statement the harassment reviews, which this committee has previously taken an interest in. Can we have an update on changes that have been made?

I am very happy to do that. As the committee is aware, we have introduced a new complaints procedure should a member of staff have a concern about the behaviour of ministers. It has been updated in the course of this year to ensure that we can now report transparently on the number of complaints that we receive. We confirmed in our first update in December that no complaints are currently being considered and that we will publish the name and the outcome in the event that there is a complaint.

As I mentioned in the previous evidence session, we have also updated our grievance procedure so that it, similarly, is very up to date and draws on industry-wide best practice to give our staff confidence about how complaints would be addressed.

That sits within a much wider set of activity that is under way to address culture and behaviour and how people feel about being civil servants in the organisation. That is rooted in our civil service code and in our new vision for the Scottish Government, “In the service of Scotland”. That vision includes the values of inclusivity, integrity and kindness. That manifests itself in a number of different ways, including the new propriety and ethics function. Colleagues are regularly made aware that if they have concerns—whether that is a formal concern or they have an anxiety and are not quite sure what to do about it—they can get advice there and that their concern will be treated confidentially and they will be well supported through the process.

We are ensuring, too, in relation to training of our senior civil servants and all our staff, that colleagues are absolutely aware of our expectations of them and that they understand what to do and how they should respond if a concern is raised.

We are also considering how we can prevent such issues in the future. We are actively looking at, and having structured conversations on, areas where we consider that a greater level of risk might exist.

We are actively looking at our people’s survey results. If a cohort of our staff have said that they feel less safe or less able to report, we will have structured conversations with them in a safe space to find out how we can take action to improve that situation. We are drawing all that work together to form our on-going activities.

Thank you for that work.

In May of 2022, the then First Minister said that the Government was unable to release details about an investigation of bullying of civil servants by a minister. However, just days ago, the current First Minister said that he would be “happy” to check whether he could reveal details. It is a matter of public record—it was reported widely in the press, as you will be aware. There was some consternation around that comment, because the former minister had made a critical speech about the Government the previous day and there is a worry, more generally, that threatening behaviour might be taking place through the use of information that the Government had previously refused to disclose. I am looking for the permanent secretary's reaction to that in relation to what is proper and what he believes the current process is in relation to that case.

As is routine, the new First Minister will be given the opportunity to set out any changes that he wishes to make to the ministerial code and we will provide advice accordingly. As Lesley Fraser said, we have already published a revised procedure with regard to complaints that are brought against ministers. However, that is not retrospective: the revised procedure does not change historical cases for which a clear understanding of confidentiality and the procedure that was in place already existed. We have provided advice to the previous First Minister on the matter and we will do so again for the new one.

Given that the First Minister said on 3 May that he was “happy” to check, will that advice be consistent with the previous advice? Will the First Minister find the same advice if he checks?

If he checks, he will indeed find the same advice.

Has the First Minister requested revision of the ministerial code?

We were already in the process of updating the ministerial code before Ms Sturgeon’s resignation. There was a series of changes, some of which related to the procedure, which we wanted to ensure was up to date, and some of which related to ministerial business abroad. Those changes have been completed, will be shared with the new First Minister and can be published in due course, subject to any amendments that he wishes to make.

So, the First Minister has not requested any specific amendments in those areas that might permit him to reveal, or have further disclosure of, issues.

Not that I am aware of.

On the point that was raised previously in relation to the ministerial code and the interference in the Scottish civil service by the Secretary of State, I recently received a letter from a guy called Lord Pickles, telling me various things that I could and could not do and referring continuously to the ministerial code of conduct and the Government’s position. I think that he was referring to the UK Government—he seemed very ignorant of the situation in Scotland. That confusion is surely a matter of concern when it comes to situations where the Secretary of State for Scotland is trying to instruct or countermand some of the things that the Scottish Government is trying to do.

Given that point, given that this Parliament would not settle for its staff being told what to do by the Government or somebody else and given that no local authority would accept that its officials should be directed by somebody else, is it not a better idea just to have a Scottish civil service?

Well, that is quite a question. There is a lot of complexity in it. Our relationships with UK civil servants—for example, colleagues in the Department for Environment, Food and Rural Affairs—are very good. Tamara Finkelstein is the permanent secretary in DEFRA, and she and I talk regularly about deposit return schemes and ScotWind. She and her senior team came to Scotland to meet me and my senior team, because DEFRA colleagues understand that for them to achieve their net zero targets Scotland has to plant a lot of trees, restore a lot of peatland and deliver a lot of renewables transformation, to name but a few of the things that we discussed when we met.

It is similar with colleagues in the Department for Work and Pensions. Peter Schofield, the permanent secretary there, came to Glasgow for the day with his senior team to sit down and talk about the devolution of social security. We have a joint programme to ensure that we safely and securely transfer cases.

On social security, we get a lot of benefit from the collaboration that we undertake on the use of data, fraud and error management and building our capability. Similarly, we get a lot of value from the exchange of ideas and capabilities with DEFRA with regard to our mission on net zero. I find the dialogue at official level productive, and I get a lot of insight from being a member of the civil service board and being able to draw on that network of colleagues and the capabilities that it offers.

I completely understand your point and the value of those good relationships, but if that is the case it is very different from the experience of ministerial collaboration. For example, this Parliament is placed in various cul-de-sacs, such as the refusal of a section 30 order—the Parliament has voted for a referendum and it is just ignored out of hand—and the application of section 35 of the Scotland Act 1998.

Compare the situation now with that 10 years ago, when we had the respect agenda, which led to an improvement in relations between different Governments and ministers within them. Nowadays, I have arranged meetings with the UK Government and it has refused to give me entry to the Ministry of Defence to hold the meeting or it has continually refused to answer correspondence.

If the relationship between the civil servants is generally productive but that between the Administrations is not, would that not tend to argue for an independent civil service? I go back to a point that was made in the previous discussion. People can accuse organisations of policy capture when they are funded by the Scottish Government, although, interestingly, the Parliament is funded by the Scottish Government and nobody argues that it has been subject to policy capture. As much as anything else, is the perception not important and would it not be important to say that, as with councils and the Parliament, the civil servants who serve the Scottish Government and the public are independent and answer to them?

That is the point that I was trying to make with my first answer in relation to constitutional reform. I am the permanent secretary of the civil service in the Scottish Government and answerable to the First Minister, the Cabinet of the Scottish Government and this Parliament. I am not answerable to the Cabinet at Westminster or the Parliament at Westminster in the way that the permanent secretary working in a Whitehall department is.

My responsibility is, first, to ensure that I serve the First Minister and his Cabinet well with regard to delivering strategic policy advice and building the team with the capability to do it; then, to discharge the duties of being a principal accountable officer in the right way—I am dealing with public money and have to follow the Scottish public finance manual and the Public Finance and Accountability (Scotland) Act 2000—to deliver optimal outcomes in Scotland; and, finally, to lead the civil service in Scotland in a way that is right for this country.

We are doing our best with that all the time. I do not feel that UK Government ministers or civil servants in Whitehall are telling me what to do with regard to that at any stage. The collaboration and partnership add significant benefits that we are able to draw on to be at our best.

11:45  

However, I recognise the political context that you are referencing, Mr Brown, and the level of contention, which is clearly more acute and more complex today than it was two, three or five years ago. There is risk in that, in terms of the UK’s constitution in the long term. As I said, we will see what the future brings with regard to how that might settle down.

None of this is to do with you personally, of course, permanent secretary, although I note that the permanent secretary to the Scottish Government is appointed jointly by the principal adviser to the UK Government—the cabinet secretary—and the First Minister. It is a question of perception, and it is probably less of a question when relationships are productive and constructive. As you say, it probably comes more into view for people because of the constitutional situation and the stand-off.

When I was reading the committee papers for the meeting, there was a number of terms that I was not familiar with. I hope that you can explain some of them to us. There is the “civil service commission”, the “civil service board” and a “civil service shadow board”. Could you explain what they all do?

Was that the civil service commission, the civil service board and the civil service shadow board?

They were the ones I picked up. I am sure that there are more, but we are time constrained.

The civil service commission is to do with civil service appointments. We have a civil service commissioner in Scotland—I am looking at Lesley Fraser to keep nodding or to tell me if I have it wrong—and that is Neil Gray.

It is Paul Gray.

Sorry—it is Paul Gray; Neil Gray is the minister for the economy. Paul Gray will sit on the panel for the appointment of directors general, for example, and he is part of the civil service commission. The civil service board is a UK entity that leads the civil service overall. I am a member of it, as are the chief executives and civil service chairs. I think that it has a shadow board, and that occasionally members of the shadow board attend the civil service board.

I could pursue that, but I will not, as I think I would get out of my depth quite quickly.

Some of this touches on decision-making issues that we discussed earlier this morning, so forgive me if it overlaps a bit with that. One issue that came up was with bill teams in the civil service. As I understand it, they are generally kept together through the progress of a bill, but might be disbanded afterwards, which can impact on the putting into practice of the new policies or legislation. Can you explain how that works?

Yes, and I will bring in Lesley Fraser as well, if I may, because this is all about building deep professional capability in the organisation. Ultimately, once a bill concludes, the team that is providing briefing on amendments, committee stage, impact assessments and the like might find that the work is concluded. We do not want them to have nothing to do, so it is right that they are given the next opportunity that they want to take on.

On your point about the end-to-end implementation of change, clearly there is a lot of advantage in having people who understand the detail of a piece of legislation going through into the major change programme or even into the delivery of that change over time. Social security is an example. Some of the senior leaders who are in that area have tracked right through from the legislation and development of the devolution of social security, through the pathfinding to the setting up of the agency and then the delivery. That continuity of capability clearly has a lot of advantages.

Lesley Fraser might have something to add to that.

It is a really good point. It is important for us to strike the right balance. Very often, bill teams are made up of experts who thrive on the cut and thrust of the legislative process, together with subject matter experts. Those subject matter experts will often stay as part of the implementation.

We recognise the value of building up expertise in legislation and in understanding how to work with stakeholders and the Parliament on that process. We also recognise the value of subject matter expertise and knowledge, and a deeply embedded understanding of the policy area’s impact on people. Taking all of that through the process is absolutely vital, as well, because when that is well built in, that is when the system works at its best.

Is that related to the suggestion that the HR system is now going to categorise all civil servants into professions?

It is. Part of our people strategy and the development of a workforce plan is to introduce a new system that will give us much augmented capabilities and give everybody job families. That means understanding whether someone is a policy expert, a legislative expert or a lawyer, and so on. We have 21 different professional groupings in the civil service in Scotland already. Some of those are quite mature—the data and digital professions and the legal profession, for example—while the change management profession is a growing area for the Scottish Government.

We are seeking to augment professions by taking a holistic look at the way in which we manage professions across the organisation and in a number of our public bodies, which is where a great deal of our professional expertise sits. The new system will help us with that. It will also help with sharing expertise for career development and with how we look after people and offer them attractive career pathways through the Scottish Government. Public service in Scotland is an area that will offer very rich potential for the future.

Thank you.

I am a little unclear about what we can cover today. Are the consolidated accounts something that I can raise?

Yes.

The chief finance officer is ready.

I saw that she had not said anything so far.

My first question is quite general. Why are some bodies included in the consolidated accounts, while others are not included?

That is determined by the classification of the body and the accounting boundaries. Ministerial bodies, for example, will be within the consolidated accounts. Each body will have its own classification, and that will determine whether it sits within or outwith the consolidated accounting boundary.

Is that fixed for ever or does is change over time?

It is based on the classification of the public body, and that can be reviewed at any time by the ONS. It routinely reviews that, but there would need to be a trigger for a change of classification.

So, the ONS decides that classification, which means that it is very consistent throughout the UK.

Absolutely.

That makes sense. I think that some people expected to see the reserve balance in the consolidated accounts, in which there is a limit of £700 million, but I do not think that that figure actually appears. Is that correct?

Yes and no. The Scotland reserve is linked to our HM Treasury budget, which is driven by the fiscal framework. You are absolutely right that we have a limit of £700 million there, but that is not the same thing as the consolidated accounts.

As you pointed out, the consolidated accounts are our statutory accounts for the bodies within the consolidated accounting boundary. We report against the budget that is set by the Scottish Parliament in the parliamentary budget, which is then adjusted at the spring budget revision. They are not exactly the same things, but at the front of the accounts, on pages 9 to 11, is an explanation of why they are different.

In the accounts, we also have the provisional outturn. You will see on pages 9 to 11 that, for 2021-22, we have the provisional outturn of £650 million against the headroom of £700 million. In April this year, we wrote to the committee with the final outturn information, which we were able to do only after the final accounts—which are linked to the HMT budget, so that goes beyond the consolidated accounts—were complete. We were waiting for the Scottish Public Pensions Agency accounts to be completed.

Okay. This is quite a complex area. We might need a meeting on that alone, but I will ask one other thing. If I am reading it correctly, there is resource borrowing of £319 million, but there is also an underspend. Why do we need to borrow if there is an underspend?

We set out our borrowing plans in the medium-term financial strategy and we set them out in our budget. We then review those as we move through the year. There are different reasons why we can borrow, particularly on resource, which are around reconciliations and reconciliation movements in-year.

For 2021-22, which is what you are talking about, we would have built our borrowing plans on the basis of our funding and our spending plans. You will recall that we were still well within the pandemic at the time. In 2021-22, we got very late notification from the Treasury of some very significant consequentials, which subsequently changed our carry-forward assumptions and our funding for that year.

I will leave it at that.

Ross Greer has a question on that point.

On the point about the underspend, I am interested in whether the Government thinks that there is a presentation issue, because the single biggest chunk of the underspend related to variation in the student loan market—not a pot of cash that went unspent. We regularly have stakeholders engage with us who are frustrated that their priority did not get the spending that they believe that it deserves, and they see reports that £2 billion was not spent. Is there a basic presentational issue with regard to the terminology when we talk about underspend?

That is a really good point. We will continue to look at that and at how we can improve the transparency around it. I hope that you noted from the final outturn report that we have tried to make the connection between the reserve and the outturn, and cash and non-cash, a little bit more than we have done in the past. However, you are absolutely right: almost half of the underspend for 2021-22 was non-cash.

To go back to the point about Treasury budgets, there is about £500 million of adjustments that we would have made to the Scottish budget through the spring budget revision had the HMT supplementary estimate process been concluded. There were late adjustments because of the timing of that. Therefore, we had a significantly larger underspend than we otherwise would have had in any other year. As you have said, some of that was to do with valuations that were index linked and, of course, there was significant movement in the retail prices index. I think that some of those went from plus 13 to minus 4, so you can imagine what that did to the calculation on those valuations. We thought that that was quite unprecedented. However, we will certainly look at how we present that information, and we will look to improve the transparency of that going forward.

Audit Scotland has made a range of observations, criticisms and constructive suggestions about transparency for this set of accounts and others, which the permanent secretary will be well aware of. The committee would appreciate a response to the issues that were raised. That might help to deal with some of the issues that Mr Mason and Mr Greer are raising. We have concerns about those on-going transparency issues, so if you could set that out for us in a letter from the permanent secretary, that would be appreciated.

Douglas Lumsden is next.

First, I have a quick question on the underspend. Obviously, it is down as being £2 billion but, as Ross Greer pointed out, that is not the figure, because it includes student loans that you cannot really take out. How much money—if any—was handed back to the UK Government at the end of the year?

There was no loss of spending power to the Scottish Government. The final outturn, which you received in April, showed that we came in just below the £700 million cap for the Scotland reserve, so there was no loss of spending power.

I guess that that goes back to the reporting issue. It looks as though there is £2 billion but, when you dig a bit deeper, you see that it is not as bad as it seems.

The consolidated accounts and the budgets that we spend within are not just about our day-to-day spending. They are about our valuations of our assets, our liabilities and our provisions, and we need budget for all those movements. The £2 billion underspend is the variance against all those budgets. We will always have underspends—we are simply not allowed to overspend against any of our budget categories—and a lot of the non-cash budgets can be quite volatile and are linked, as I mentioned earlier, to inflation, which is completely outwith our control. For those types of budgets, particularly the non-cash, we will always ensure that we have enough budget to avoid any unforeseen movements that would lead us to a breach of the budget and a qualification of our accounts.

12:00  

That is good to hear.

I will move on to record keeping. We faced issues to do with vessels 801 and 802—it was difficult to find out who had approved the spend on them. Permanent secretary, will you explain what has changed in that regard? Can we as a committee feel comfortable that proper processes are in place so that that does not happen again?

I will bring in Lesley Fraser, as she will be able to take you through the detail of the approach.

As I said earlier, those incidents, which are in the past, are regrettable. We want to make sure that we have learned from them and that we get the fundamentals right so that they cannot happen again.

Obviously, a raft of engagement goes on with the Scottish Government all the time. We are working very hard to get the consistency right. I cannot provide a cast-iron guarantee that we will never trip up in the future, but we are determined to ensure that all ministerial decisions are documented for the record, and certainly for things such as commercial procurement decisions, which you have referenced.

As I alluded to, last year, we published our private investment framework, which sets out clearly the due diligence that you would expect to see from us with regard to those investments or future investments. That needs to be consistently applied.

Lesley, will you talk us through the progress on record keeping?

Yes. That is a fundamental point for the civil service. We must be able to account for and track decisions that are made and the way in which those decisions are made.

We have made changes to culture, systems and practices. I am leading a new information governance programme, which has been running for the past 18 months. I chair a board on a quarterly basis. We are looking at all the changes across staff training, our systems and the procedures that we have put in place so that we can increase the consistency of best practice being carried out in the organisation. That includes training for colleagues. It also includes changes to some practices, such as how we record decisions that come out of ministerial offices, track those and check that they have been acted on, for example. We have also changed some of the system storage arrangements. That enables us to be much more up to date, and it is much easier for us to track and retrieve information in a logical way.

We underpin, through our “In the service of Scotland” work, that that is fundamental to good civil service craft. It is how we expect people to work. We tell colleagues, “It’s not a boring bit of what you do; it’s absolutely essential, and you must do it well.”

All those elements are coming together, and the work is overseen by a senior group in the organisation on a regular basis.

Were the past failures relating to vessels 801 and 802 because of a failure in the process? Was no process in place, or were people not following the process that they were meant to follow?

Let us stand back for a moment. I cannot remember the total quantum of documents that we have published on vessels 801 and 802, but it is about 200. There have also been two inquiries, which have set out recommendations that you have accepted. We have put in place a whole new programme on information record keeping; we have set out a whole new approach to private investment due diligence and the framework that we will apply; and we are building new capabilities in the organisation, including using external commercial forensic capabilities where we need to, to inform advice.

Mr Lumsden is being quite specific. He is asking about what happened at the time and whether there is a reason for that. He is not asking about what will happen in the future.

I guess that you are asking me to describe what happened in 2015, but I arrived in 2022. That was seven years before I was appointed. The honest truth is that all I can do is read the inquiry reports, the recommendations and the response, and get the response right. I am not able to provide further insight into what occurred seven years ago beyond what those inquiries have already offered.

We have talked about lessons learned. Surely, on reflection, lessons must have been learned about that and why the situation arose.

I have derived the learning from the inquiries, the recommendations that they offered, and the processes and capabilities that we have put in place to respond to them. I think that you are asking me specifically about why a particular decision regarding the procurement of the vessels was not recorded seven years ago. I cannot offer a great deal of insight beyond what the inquiries have already concluded.

I am trying to work out whether a process was missing or was not followed, or whether there was a culture—that has been mentioned a good few times during this meeting—in the organisation of not giving two hoots about the process that was meant to have been followed.

I do not know what more I can say. I joined the organisation in 2022, and you are asking me about events seven years preceding my arrival. There have been two inquiries about the ferries, a lot of deep learning has been done, and a lot of change has been implemented. I cannot provide an accurate, evidenced-based description of what went on in 2015 with the procurement of vessels 801 and 802. I can understand why you might be keen to draw me in to offer an opinion on that, but my opinion is derived from the recommendations from the inquiries. I do not have any other insight.

I mentioned the meeting that took place between Nicola Sturgeon and Jim McColl in May 2017. No civil servant was present at that meeting; a special adviser attended. They talked about the significant issue of expenditure. Would that have been an allowed practice at the time, or was that a decision that was taken by a minister?

I do not think that there is anything further that I can add in relation to that specific meeting or on that specific point. I am sorry that I cannot help.

Okay. I do not think that we are getting any further on that.

No. I will change the subject.

We have heard that three harassment reviews took place in session 5. The First Minister asked whether one of those could be looked at again. What about the other two? Was it just that one in particular? Whom did he ask?

I think that the First Minister was specifically asking for advice about whether the legal considerations around complaints that had been made against former ministers could be revisited. We have been able to provide that advice to the First Minister.

My question is whether the First Minister was asking for advice about all three harassment reviews or just one in particular.

The three harassment reports that the committee has been monitoring the results of are the report to the Parliament by the Committee on the Scottish Government Handling of Harassment Complaints, a report that was undertaken by Laura Dunlop on behalf of the then permanent secretary, Leslie Evans, and the report by James Hamilton on Ms Sturgeon’s self-referral under the ministerial code. Those were the three reports, which all produced recommendations that we and the former Deputy First Minister have reported on to the committee during the past 18 months.

Okay. When the First Minister said that he was happy to check that he could legally reveal findings of a previous investigation, was he referring to only one of those investigations or all three? Whom did he ask?

That was a different, specific matter relating to a complaint against a former minister. It did not relate directly to those three reports, as I understand it.

Whom did he ask?

He asked civil servants in my area for advice.

I have just a couple of quick questions, because I know that we are coming to the end of the session.

Permanent secretary, you have been in post since 2022, as you have pointed out, and you have been able to make a pretty fair assessment of what you noticed at the start. What now keeps you awake at night, and why?

That is a good question. As I reflected in my opening remarks, the context of the past year has been really tough for the country and for partners in the voluntary sector and business. One minute we were responding to operation unicorn, and the next minute we were standing up a supersponsor programme, which—credit to the team—was a remarkable effort but was obviously not what we planned for when we did the resource spending review.

It has also been really hard for everybody, including councils, public bodies and the Scottish Government, to manage the impact of inflation on fixed budgets. The overall impact on the wellbeing of not just our teams but partners and the systems that we serve gives me a lot of concern. A lot of resilience has been drained, first by the pandemic and then by the cost of living crisis and everything that is associated with it.

For me, success will be when I am before this committee at the end of this parliamentary session—if I am still here—having got the long-term capabilities and resilience that I referenced right. That will mean that the backlog in our courts will have come down, that we will be delivering a timely experience in our justice system, and that crime and our prison population will have been kept low. It will mean that we will have made progress on the long-term missions of which Scotland can rightly be very proud, because, unlike others, we have statutory targets to tackle child poverty and accelerate progress to net zero.

We understand what we need to do, but those challenges are clearly made harder by double-digit inflation and the need to spend significant additional amounts in areas that we were not planning to. It is about the resilience of the system to deliver reform and about our capability to, I hope, create a more stable operating environment so that people can focus on the day job and on delivering better outcomes.

Clearly, there is a lot of change ahead. The UK election will talk to the experience of devolution one way or another, and I am sure that a lot of my engagement with the UK Government next year will relate to whatever transition takes place and how we respond well to whatever the future brings.

I have a couple of quick questions off the back of what you have said. You talked about the speed of change, which everyone recognises is accelerating. How well equipped is the civil service, since you joined it, to deal with that speed of change, which ain’t going to stop any time soon, as we all know?

Everyone keeps stepping up and getting the job done. Delivering a new policy prospectus in 10 days, which involved creating a version a day for 10 days in what was going to be a recess period, was a remarkable effort.

The way in which the team handled the reshuffle was exceptional. I have been through a lot of reshuffles in my life—including those down south at the end of the new Labour Government and during the Conservative-Liberal Democrat coalition—but the First Minister and the Deputy First Minister leaving at the same time, with all the experience of Nicola Sturgeon and John Swinney, represented a significant change, and the team stepped up and did an incredible job.

My responsibility is to keep refreshing the team and to bring in and build new capabilities relating to ScotWind, hydrogen, heat in buildings and deposit return schemes so that we have the programme capabilities to execute reform. However, we are doing that in a very tight fiscal environment in which every pound matters. Things are also contested, because everybody, quite reasonably, wants to do more, so prioritisation is essential.

I have good confidence in the capability of the civil service here. Its values are excellent and there are deep capabilities, but we have to look after wellbeing.

12:15  

You mentioned earlier, and I read in the stats, that more than 55 per cent of your employees are female, which is great. You also said that there is a very healthy gender balance at all levels. Do you have, or could you supply the committee with, a breakdown at all levels? I am particularly interested in the most senior levels.

I will make one last wee point. A wellbeing economy, which has a gendered lens as a focus, is, of course, a priority of the Scottish Government. I am aware of the time. You may want to give us some more flavour of how you are able to apply that, because it is obviously about so much more than simply the percentage of the gender split. We could start to look at procurement and so on. It depends on time, convener.

We do not have time for that topic, but could we have that information in writing?

Of course.

Yes—to get some flavour of that.

Permanent secretary, I want to take you back to the start of your short statement. You said that the third aspect is leadership of the civil service. It was put to us by former members of the civil service that one of the problems with the current civil service is that there are too few people who have ability in relation to commercial expertise. Do you agree with that?

All feedback matters, so if that was the view of a colleague or former colleague, we need to reflect on that.

We have a fabulous director of our commercial team, who works for Lesley Fraser. We are doing a lot of work on building that profession and on a commercial value-for-money programme. That is one of the core capabilities that we are building. I hope that that will respond to the experience from that individual and mean that all teams can access commercial experts when they need them—they do not always need them to make a procurement, to issue a grant or whatever. That is a shared capability and service in our corporate team that we are developing.

Lesley, do you want to add anything to that?

That covers things very well. It is a small team, but it is very good at building that capability and capacity, and at offering that not only within the Scottish Government but across public bodies. The frameworks and support that it provides already generate savings of in excess of £100 million per annum. We are always looking at different ways in which we can extend and expand that. I am sure that we would be happy to—

It was put to us in the context that, when it came to various procurement issues—whether in relation to Burntisland Fabrications, Prestwick airport or various other things—it would have helped if there had been more civil servants who had experience of the necessary decision making.

In responding to the learnings of the past, one change has been that we have pulled together a strategic assets unit, which manages all of those strategic capabilities. If there was an interest in undertaking such a future investment, we would apply what is now a published framework for undertaking due diligence, procurement and investment.

We have absolutely sought to establish that capability. Louise Macdonald worked with me on that last year, and it is being further taken forward this year. Part of that is about using external advisers where we want to get additional due diligence or capability in-sourced to undertake a value-for-money assessment or help to develop a business case. That is work in progress on improving, but we always want to remain vigilant on that.

Okay. So you do not disagree that there has been an issue there.

One of the lessons from the Ferguson’s experience is the need to establish expert commercial private asset management capabilities in the Scottish Government that draw on independent advisers. That is what we have now done, and I think that that will stand us in good stead for the future.

I thank all of you for your evidence and for answering all our questions.

That concludes the public part of today’s meeting.

12:19 Meeting continued in private until 12:29.