Saturday, 2 January 2010

Stage 1 Report

http://www.scottish.parliament.uk/s3/committees/finance/reports-09/fir09-08-vol1.htm

8th Report, 2009 (Session 3)
Stage 1 Report on the Public Services Reform (Scotland) Bill
CONTENTS
VOLUME 1: FINANCE COMMITTEE REPORT

part 3 – creative scotland

Introduction

89. Part 3 of the Bill creates a single national public body for arts and culture, embracing the creative industries, Creative Scotland. The Creative Scotland Bill fell on 18 June 2008 due to the Parliament not agreeing to the Financial Resolution, and much of the content of the original bill has now been transferred to the Public Services Reform (Scotland) Bill.

90. The policy behind this Part of the Bill was considered exclusively by the ELLC Committee. The ELLC Committee’s report can be found as Annexe B to this report.

Functions created by Part 3

Creative industries

91. The Bill establishes six general functions for Creative Scotland, as opposed to the four functions outlined in the original Creative Scotland Bill; the significant addition to these functions is for Creative Scotland to have responsibility for the creative industries and other commercial activity. The ELLC Committee concludes that a coordination and partnership approach should be the key to Creative Scotland’s success with regard to the creative industries and recommends that all necessary steps be taken to ensure that this joint working has the necessary foundations for success, perhaps through guidance issued by the Minister. The ELLC Committee calls on the Scottish Government to provide, before Stage 2, further details of how it will ensure this.

Structure

92. At the time of the ELLC Committee’s scrutiny, issues around the proposed structure for Creative Scotland were still under consideration by Creative Scotland 2009 Ltd (the limited company set up to manage the establishment of the new body). The Minister for Culture, External Affairs and the Constitution wrote to the Finance Committee on 21 October 2009, attaching a copy of the Creative Scotland Business Model,78 which contains detailed plans for the structure of Creative Scotland. The Committee comments on the financial implications of Creative Scotland in the sections of this report on the Financial Memorandum at paragraphs 194 – 201 below.

Definitions

93. The ELLC Committee notes in its report that there are differences of opinion within the creative sector in trying to define specific terms such as “art”, “culture” and “creativity” and agrees with the Scottish Government that including such definitions on the face of the Bill would be undesirable due to their likely restrictive nature. However, the Committee also notes comments from the Scottish Artists Union, who suggest that the word “artist” could be used in the Bill, or in guidance, without the need for a specific definition, as with other related terms in the Bill.

National Culture

94. Another additional function in the Bill which was not in the original Creative Scotland Bill is for Creative Scotland to provide support for “creative endeavours which contribute to an understanding of Scotland’s national culture”. Although there was some concern expressed in evidence, the ELLC Committee believes it to be appropriate as a broad and all-encompassing term. The ELLC Committee also states that it is pleased that a definition of “national culture” is included in the Policy Memorandum.

Wider policy environment

95. The ELLC Committee received a range of written evidence expressing concern about a lack of clarity around how Creative Scotland would relate to the wider policy environment.

Enterprise agencies

96. The ELLC Committee acknowledges that the Bill provides far greater clarity than the Creative Scotland Bill on the relationship between the new organisation and the enterprise agencies and the possible transfer of funds. However, the ELLC Committee goes on to note that the practicalities of this relationship, particularly with regard to responsibility for the distribution of funds, will need to evolve over time and that all the relevant partners should give such practicalities particular attention.

Local authorities

97. In its report, the ELLC Committee notes points raised in evidence regarding a potential tension between local authorities’ lead role in delivering public services and the work of Creative Scotland in relation to participation in, and access to, the arts and culture. The ELLC Committee concludes that the practicalities of this relationship would benefit from further clarification and therefore welcomes the Minister’s intention to continue to engage with local authorities on this matter. The Committee recommends that the Scottish Government and COSLA make every effort to ensure the relationship between Creative Scotland and local authorities is as clearly set out as possible, through dialogue with all relevant parties and, if necessary, guidance, with particular attention being given to the issue of responsibility for funding.

Ministerial direction/relationship with Scottish Ministers

98. The “arms-length principle” (i.e. how independent from government the new agency would be and what influence Scottish Ministers would have over issues such as artistic direction) had been particularly significant during the ELLC Committee’s consideration of the previous bill. However, the ELLC Committee welcomes provisions in the Bill to clearly establish an “arms-length principle.”

Governance

99. Some submissions to the ELLC Committee commented on the proposed make-up of the board of Creative Scotland, and suggested that places should be reserved for certain organisations. The ELLC Committee is firmly of the view that this would be counter-productive and supports the Scottish Government’s approach that the board should be recruited through fair and open competition, as outlined in the Bill and accompanying documents.

100. The ELLC Committee also considered the issue of Royal Charter status, and noted the concerns raised by the Royal Society of Edinburgh about the potential implications of this, and the Scottish Government’s response.

ELLC Committee’s overall conclusions

101. In conclusion, the ELLC Committee acknowledges that the Scottish Government has moved to address many of the concerns raised during the passage of the Creative Scotland Bill, and that it has provided greater clarity on a number of important issues. However, the ELLC Committee also notes that Creative Scotland has had a very long incubation period and the Committee is agreed that any further delay and uncertainty regarding its establishment would damage the sector. The Committee therefore believes it is important that Creative Scotland becomes fully established as soon as possible.

102. The Committee notes the conclusions and recommendations on Creative Scotland from the ELLC Committee and asks the Cabinet Secretary to respond.

[...]

Creative Scotland

Funding

194. In its report, the ELLC Committee notes that the funding of Creative Scotland was a significant concern during the passage of the Creative Scotland Bill and in evidence to the Committee on this Bill. Following completion of the ELLC Committee’s report, correspondence was received from the Minister for Culture, External Affairs and the Constitution, which notes that “whilst work on much of what you requested is currently in progress, I am not in a position to provide complete answers at present.”132 In its report, the ELLC Committee concludes that it remained concerned that the level of funding available to Creative Scotland may not be sufficiently high to enable it to achieve its broad and ambitious objectives and recommends that the Scottish Government gives further thought to how this potential shortfall might be met.

Loss of charitable status

195. The FM explains that the Scottish Arts Council will retain charitable status until the organisation is dissolved and estimates that there could be a loss of £546,000 to Creative Scotland if the new organisation does not receive charitable status itself.133 In evidence to the ELLC Committee, the Minister for Culture, External Affairs and the Constitution explained that it would be unlikely that Creative Scotland’s application to the Office of the Scottish Charity Regulator for charitable status would be successful. However, in correspondence to the Finance Committee, the bill team explained that the costs set out in the FM were a “worst case scenario” and “take no account of a range of potential options Creative Scotland may wish to pursue to absorb or mitigate any loss.”134 The bill team give a range of options that could be pursued and stated that “there will be no direct impact on grants to artists.”135

Overall level of costs and savings for Creative Scotland

196. As indicated above, the FM sets out a range of costs and savings, and a “best estimate”. In terms of Creative Scotland, if the higher estimate of costs is used, transition costs would total £4.44 million and savings at the end of 2013 would total £3.66 million.136 In response to concerns that the new organisation would not be making net savings by 2013, officials explained that, in their view, the upper estimate of costs would be “quite unlikely to happen”, due to the uncertainties around many of the transition costs (most notably the costs of the voluntary early severance/retirement scheme – see paragraphs 197 – 198).137 In addition, the bill team explained that while some savings could be quantified at this point—

“[…] we [also] expect savings to arise from streamlining of processes, but we cannot quantify them at the moment, so they have not been included in the estimated savings. However, we will expect those figures to increase.”138

Staff costs

197. A significant potential area of cost, with a wide margin of uncertainty, is provision for a voluntary early severance/retirement (“VES/ER”) scheme. The FM explains that there will be no compulsory redundancies as a result of the restructuring (in line with commitments made by the Scottish Government on the simplification programme), and that “savings will be achieved through natural wastage, redeployment and re-skilling where appropriate.”139 However, the FM goes on to state that should it be necessary, “a cost effective voluntary early severance/retirement scheme will be made available.”140

198. On the basis of the “most favourable” Scottish Arts Council terms, the FM estimates that the cost of the VES/ER will be between £500,000 and £1.5m, with a best estimate of £1.1m.141 These estimates are based on a headcount reduction of 30 full time equivalent (“FTE”) posts, as outlined in the FM. However, the Creative Scotland Business Model, published in October 2009, sets out plans for a headcount reduction of 35 FTE posts.142 The Committee appreciates the points made in correspondence from the bill team that there are a range of factors which contribute to the uncertainties around these figures, and that the VES/ER scheme will only be used when other methods have been exhausted. The Committee also notes that the Minister for Culture, External Affairs and the Constitution has already met with relevant trades unions and expects to continue discussions on this issue.143

Non-staff costs

199. The major element of non-staff costs in setting up the new body is for harmonising business systems and IT. The FM again gives a wide range of possible costs (£300,000 - £600,000) and a best estimate of £400,000. The bill team explained that there is a range of factors behind the difference in upper and lower estimates and that different levels of integration between the two bodies are possible.144 The Committee also understands that Creative Scotland 2009 Ltd is tasked with providing recommendations on this area and it is not therefore possible for the Scottish Government to provide more clarity at this stage.

Conclusions on the financial implications of Creative Scotland

200. With the publication of the Creative Scotland Business Model there is now more clarity on the future shape of the new organisation than there was when the FM was being drawn up. The Committee therefore asks the Scottish Government to consider whether it wishes to revise the cost estimates in the FM before Stage 2, especially given the proposed headcount reduction of 35.

201. Overall, although appreciating the uncertainties involved, the Committee is concerned about the wide range of figures provided for some elements of the costs of Creative Scotland and asks that the Scottish Government monitors and reports to the Parliament on the establishment of the new body at regular intervals.

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Conclusions on the Financial Memorandum

211. In general, the Committee has found the FM to be a detailed and useful document, notwithstanding its specific comments above on certain aspects of the cost implications. However, the Committee notes that the largest element of the savings involved in the Bill appear to come from the reduction in staff at Creative Scotland, and restructuring/streamlining in SCSWIS. As the intention is for staff to be redeployed within the Scottish Government in the first instance (although VES/ER schemes will be available), the Committee questions whether this does in fact constitute a saving to the public purse, and asks the Cabinet Secretary to respond.

[...]

Creative Scotland

With the publication of the Creative Scotland Business Model there is now more clarity on the future shape of the new organisation than there was when the FM was being drawn up. The Committee therefore asks the Scottish Government to consider whether it wishes to revise the cost estimates in the FM before Stage 2, especially given the proposed headcount reduction of 35.

Overall, although appreciating the uncertainties involved, the Committee is concerned about the wide range of figures provided for some elements of the costs of Creative Scotland and asks that the Scottish Government monitors and reports to the Parliament on the establishment of the new body at regular intervals (paragraphs 200 – 201).

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