Finance and Public Administration Committee

Meeting date: Tuesday, September 26, 2023

Official Report 736KB pdf

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National Care Service (Scotland) Bill: Financial Memorandum

Good morning, and welcome to the 24th meeting in 2023 of the Finance and Public Administration Committee. Under our first agenda item, we will take evidence from the Minister for Social Care, Mental Wellbeing and Sport on the financial memorandum for the National Care Service (Scotland) Bill. The minister is joined by Scottish Government officials Donna Bell, the director of social care and national care service development, and Fiona Bennett, the interim deputy director for national health service, integration and social care finance. I welcome the witnesses to the meeting.

I invite the minister to make a short opening statement.

Thank you for inviting me to discuss spending on the national care service programme. The Government remains committed to delivering a national care service to improve the quality and consistency of community health and social care support across Scotland. Through our summer co-design activities, we have heard from hundreds of people with experience of accessing support or delivering it, and it is clearer than ever that the system needs to change if we are to deliver the services that people need.

That said, we are in a different situation from the one that we were in when the National Care Service (Scotland) Bill was introduced in June 2022. The timings for the bill have changed. We originally expected the bill’s passage to be completed by now. The delay has given us additional time to have deeper discussions with key partners and stakeholders, and to advance the co-design activities. However, it has obviously affected the profiling of expenditure, with development activities taking place over a longer time rather than our moving to implementation.

The fiscal circumstances are also different from those in June 2022. There is increased pressure to find different ways of working to make the best use of the available public funds. During its initial stages, the NCS programme involved a small number of consultancy projects that provided research and advice, but that work has significantly reduced in the current year, and we are focusing on providing the skills that are required through our own staff.

In addition to the internal spend on developing the national care service, the Government is increasing spend on front-line social care. More than £1.7 billion has been provided for social care and integration in 2023-24, and we are committed to increasing spend on social care by at least 25 per cent by the end of this parliamentary session—an increase of more than £840 million. So far, spend has increased by £800 million since 2021-22, so we are well ahead of that target.

However, simply spending more will not deliver. In order to make the improvements that people are calling for in relation to the quality of social care support and giving people choice and control over the support that they receive, we need to change the system. I believe that the new approach that we are developing, with greater national oversight and strengthened integration at the local level, is how we will achieve that.

Thank you for your opening statement, which is very helpful. It is interesting to see where we are compared with where we were less than a year ago. It is now broadly accepted that the financial memorandum that was produced was simply not up to the job, so it is good that the Scottish Government has had a complete rethink in that regard.

It is important that we are able to effectively scrutinise the financial memorandum. On 9 May, you said that you intend to give us four weeks before the stage 1 debate to scrutinise the updated financial memorandum. Is that still the Government’s position?

Yes, it is.

Thank you. It is important to get that clarification on the record.

One of the things that concerns me—I am sure that other members will raise this issue—is that the costs that have been provided, such as those for 2021-22, 2022-23 and the current year, do not give us much more than the top-line costs. It would be useful to dig down into the costs, so I will do a wee bit of digging and I am sure that colleagues will do more of that as the meeting progresses.

In your opening statement, you talked about the need to look again at the profiling of expenditure. The annex in our papers shows the actual costs after revision, which are obviously the most important ones. In 2021-22, £1.387 million was spent on staff. In the following year, the figure increased quite dramatically to £9.8 million. One would anticipate that, because a lot more work was done to flesh out the bill. However, in the first quarter of the current financial year, the figure seems to have fallen back quite significantly to £923,000, which is only about a third of the quarterly spend in the previous financial year. Can you explain why there has been such a dramatic change in those figures?

A lot of the staff costs that are attributed to the programme relate to training and travel, and there will have been more training at the start of the transition than there will be as we progress. Fiona Bennett may want to give a bit more detail on that. Another factor probably relates to outturn and reconciliation.

There are various reasons, and we are happy to give a fuller breakdown in writing afterwards. Part of it is the reduced use of contractors. Wherever possible, we have brought in permanent staff to fill specific roles in the core team as civil servants, which costs less than using external contractors. We have been keen to upskill permanent staff, which also has an impact on cost. Again, we are happy to provide more details on the breakdown of staff costs in specific teams.

I know that consultancy figures are around £246,000 less than anticipated, but it still seems an awful lot of money for training people on a bill when we do not know how it will look. It is clear in the papers that we have received that a lot of the co-design work continues to take place. What was the staff training on?

Co-design is a new method of developing legislation. We have used it before in the Scottish Parliament and the Scottish Government, but some of the training costs will have been on co-design methods to ensure that people were aware of how to engage with lived experience and how to make sure that that lived experience made its way to the heart of the legislation.

Donna Bell can give you a bit more detail on that.

In addition to the support for the co-design process, the national care service programme is quite big and complex. We have ensured that staff have a good understanding of programme management and scheduling. There has been training on financial management and various other aspects.

Another thing to add on the costs for period 1 is that adjustments have been made to what is included in the programme and what is not. Once we have that breakdown, which we will very happily provide, we can give you an understanding of changes to what has been included in the programme and what has not. I am sure that Ms Todd would be happy to expand on this, but it is difficult to differentiate between the work that is going on to improve social care and integration right now, what improvements are needed to create the right conditions for the national care service and what is specifically attributed to the national care service programme, because that is all very connected. There has been some adjustment to what is included in the programme costs and what is not.

You will understand that that makes scrutiny quite difficult. Minister, in your letter of 9 May, you said:

“It is not possible to separate costs relating to the provisions of the Bill and those which result from the wider NCS programme.”

That makes it very difficult to assess whether public money is being spent effectively. Can you give us a wee bit more information on that? One reason that the financial memorandum caused such alarm to the committee was because we were not getting those breakdowns and because of the scale of the money involved.

With the exception of a very small dedicated bill management team, the majority of officials working on the national care service are involved in teams that combine policy development, co-design and implementation across a range of areas. Those activities will inform the development of the bill and the more detailed development of the national care service, which will be set out in secondary legislation, guidance and practice. They will also inform many areas that feed into improvements of the current service.

You have heard me say many times that we do not need to wait for the bill or primary legislation but that we can make improvements in the area now, and we seek the areas that we can improve without legislation on a regular basis. Officials continue to review priorities at all times in line with the current fiscal position in order to focus on improving services for people who access social care support. I am more than happy to furnish you with as much detail as we possibly can. I want you to be able to scrutinise the bill. We are not trying to hide anything from you, and we are keen to use your scrutiny to improve what we do.

I will go into the figures in a minute or two, just before I let colleagues in, but I note that you said in your letter:

“An initial consensus proposal between the Scottish Government and Cosla (on behalf of local government) has been formed on a partnership approach that will provide for shared legal accountability. This will improve the experience of people accessing services by introducing a new structure of national oversight to drive consistency of outcomes, whilst maximising the benefits of a reformed local service delivery.”

You have also talked about the formation of a national board to provide

“national oversight and governance of social work, social care support and community health”.

How will that body actually work? When is it likely to be up and running, so to speak?

The final details are still being decided, but there is an agreement involving ourselves in the Scottish Government, the Convention of Scottish Local Authorities and the national health service that there will be shared accountability. I would envisage a board involving others, including, for example, those with lived experience, staff-side representation and the national social work agency, and it would oversee and scrutinise the national care service and what it delivered. An important point is that I would expect the board to be built with some teeth so that it could take action in the event of service delivery failure and ensure the success of that delivery.

We have not quite finalised the negotiations on the national care board, but I think that it will be an absolutely crucial part of oversight. I find it frustrating that, at the moment, I am regularly held to account for the delivery of social care across the country, even though I have no legal responsibility for it and the matter sits entirely with local government; I have no powers to change what goes on. As a result, the proposal aligns with Derek Feeley’s vision in his independent review of adult social care and with what the country told us in our consultation, which was that people want national Government to have some say in and oversight of social care.

One of the figures that draws the eye is expenditure on engagement. It was envisaged in 2022-23 that the cost would be £475,000, but it turned out to be £1,026,000. The cost has also declined to a very small £7,000 in the most recent quarter of the current financial year. Why did the Scottish Government get the figures for engagement so out of kilter, and why has there been such a decline in the costs? I would have thought that with co-design there would have been more rather than less engagement. What is the Scottish Government’s thinking in that respect?

I am not sure who would be most appropriate to answer that question—I think that it might be Fiona Bennett—but I think that it comes down to the spend being reprofiled. When we introduced the bill last year, we expected that it would have completed its passage through Parliament by now and that we would be in the implementation phase of the legislation. That has not occurred, which is why the predictions for the spend at each stage have turned out not to be the case. We have done things at a very different pace and have taken the opportunity to develop expertise in Government so that we get the best value for money as we move along.

Fiona, do you want to say more about that?

Another factor is the timing of grant funding. Part of the engagement line includes grant funding for some disabled people’s organisations in order to support engagement—I am thinking, for example, of the people-led policy panel. Part of the issue is about timing with regard to recognising that grant expenditure as the process is worked through and as the money is paid out to those who receive it. We can update that figure each month as the year goes on, but the grant expenditure is part of the reason for the change in profile.

It would have been useful to have more detail on that.

I will let in colleagues in just a second, but minister, do you agree that the bill now seems to be about evolution rather than revolution? Has the big bang that we saw last year and which hit the rocks of a financial memorandum that just did not add up been transformed? Is the Government now looking at putting in place something radically different than what it was going to put in place a year ago?

I agree that it is less of a big bang, but I would also say that it is still bold and transformational. People have been very clear that they want change, particularly those people with lived experience who have accessed social care, and those who work in social care who we have engaged with over the course of the summer. They want the system to change because the status quo is not good enough. I think that what we deliver will be bold and transformative, but we will take a more phased approach. We are very keen to take people with us on the journey of transition.

09:45  

When I became minister, just six months or so ago, we were in a very different place. It was not just the financial memorandum that was causing people concern—there was also lots of opposition to the bill. We have worked really hard with our partners over the course of the summer to ensure that we all agree the direction that we are pulling in. We are now all focused on delivering that transformative change that the people of Scotland are telling us very clearly that they want.

Are you saying that the objective remains the same but that the path to it has changed?

Yes. The pace has also changed.

Indeed.

Before I ask my main questions, I want to go back to the earlier question about training. I think that Donna Bell said that some programme management training, particularly around financial management and scheduling, was involved, but from my experience as a programme manager many years ago, I know that those are the fundamentals. You cannot deliver anything without a basic knowledge of scheduling and financial matters.

Therefore, I have to say that that worried me a wee bit. What on earth made you think before that you could deliver anything without having that basic skill set in place first of all?

I completely understand—I would be worried, too, if that were the case. However, we have some very experienced people with many years’ experience in programme management. It is really important that everyone approaches the programme in the same way and that we all have a common understanding of what is required.

We have new people who are getting involved in policy development as well as people who have a background in it; the point that I was making was about upskilling everyone, instead of there being a kind of greenfield site. There is significant experience within the core group of people working on the programme.

I am pleased to hear that, but it makes me wonder what on earth was happening before if that was not in place to tackle a bill of such scale. Those are fundamental skills. I have often seen situations where the focus has been on policy but there has not been the associated rigour in respect of delivery. Minister, are you now confident that that skill set is in place across the board, given how fundamental it is to delivery?

Absolutely.

Okay.

A concern raised about the previous financial memorandum was the ability to scrutinise detail, given that it is a framework bill. How will the new approach of evolution rather than revolution, as set out by the convener, alleviate and mitigate them? What new risks will it introduce?

Gosh. For a start, we will be more able to update everyone as we go along, as there will be better communication and information flow. We are developing our approach to the bill in response to the information that we have received, and we are taking lived experience on board, too. There will also be more time to ensure that we inform those who need to know of the changes and the evolution that are occurring.

There are always risks with a bill of this complexity, and risks remain. However, I am absolutely confident that we will deliver and that we have the right people with the right skill set. We are now motoring together to deliver something that will be transformative for the people of Scotland, and it is really exciting to be involved in it.

Following on from that, I recall that one of our previous concerns about the use of secondary legislation was that such an approach lacked scrutiny of what could be significant spend over the long term. Will the new approach of evolution rather than revolution result in more secondary legislation, which might mean less on-going oversight of spend by the Finance and Public Administration Committee? Is that not a logical extension of the approach?

We have talked a little bit about the oversight of secondary legislation. Under the rules of the Parliament and the normal procedure, there is a minimum level of scrutiny for secondary legislation, but I would be very comfortable with enhancing that scrutiny to ensure that the Parliament is comfortable with what we are doing. We welcome your scrutiny—we want to work with you to make this the best bill possible, because we want to deliver improvement for the people of Scotland. We can definitely ensure that you are comfortable with the level of scrutiny that you will have across the board on all the legislation.

One of the key pieces of work that the committee will be interested in is the business case. It is a dynamic document and, as you will expect, we regularly update it. We will ensure that we keep you apprised of how the business case is looking.

I would very much welcome further opportunities for us to capture baseline costs as near up front as possible, instead of seeing them slip into secondary legislation. Please feel free to write to the committee after the meeting with any additional ideas, because I suspect that this will be a concern for all members.

Minister, you have talked about co-design, which your predecessor, Kevin Stewart, was also very keen on when he attended the committee on 8 November last year. The principles of co-design sound sensible, but the trouble is that it is an on-going process, as you have reiterated this morning. Surely, if it is on-going, that makes it very difficult to forecast in detail what the costs will be at the end of the process.

What I have been trying to describe is a dynamic process in which we take on board the co-design and then come back to the committee with more information. The business case is iterative, so we will have lots of opportunities for you to scrutinise and examine what is going on. The use of co-design in developing the legislation is fundamental to the type of change that we are delivering. As I say very regularly to people, if we have lived experience at the heart of our policy and legislation, we are much more likely to get them right. The challenge, though, always lies in implementation, so we also have a built-in mechanism for holding our feet to the fire in that respect to ensure that we not only deliver our ambitious policy and legislation but implement them appropriately on the ground.

What I am trying to say is that co-design is a core part of the national care service. I would expect that, once we have delivered it, it will continue to evolve, much like the NHS has. It will not be fixed in stone, just as the NHS was not fixed in stone when it was introduced in 1948. Having co-design at the heart of the development and at the heart of the service itself means that the voice of lived experience will continue to be involved in its evolution, even after we deliver the legislation. However, I agree that the approach makes it more difficult for you to scrutinise costs.

That is the point for this committee. I absolutely understand why co-design could be beneficial—particularly from the point of view of getting the input of many who feel that the existing system is not satisfactory—and I understood it when Kevin Stewart spoke to us, too. My concern is that the process of engagement is still going on, and we know from our previous consideration that, although many on the front line of the service were concerned about the change, lots of others involved in the delivery of the service were also quite critical—in fact, very critical, in a few cases—of what the Scottish Government proposed.

My point is that it is a bit like putting the cart before the horse. If the co-design continues—for good reasons—should we not finish that process before we come back with the detail of the bill and, therefore, the forecast of the costs? Would that not be an easier way of doing it?

That might be an easier way of doing it, but we can deliver both. We can have co-design at the heart of our development of legislation and ensure that this committee and others are comfortable with the financial scrutiny.

How do you propose to put in front of the committee what the true costs will be? We all accept that no financial memorandum can be 100 per cent accurate, but it will have to be much more accurate than the one with which we were presented before. I do not see how we will be able to get to that situation when engagement is on-going that might produce many more suggestions about how to improve the bill. Do you accept that, as a result of that, it is difficult to get to the cost structures that the committee needs to scrutinise?

I am confident that we will be able to provide you with an updated financial memorandum that will give you sufficient comfort four weeks before the stage 1 debate.

To reassure you, Fiona Bennett can give you a little bit more information about what we are doing and how we will do it.

As noted, the revised financial memorandum will contain the sort of range of assumptions and cost estimates that would be expected at this stage while the co-design work continues.

We mentioned the business case process, which is important, and we expect optimism bias to be built into the programme business case stage and strategic outline business case stage in line with green book guidance. That approach complies with how we should do things. As we move into the outline business case and full business case stages, the costs will narrow and become much more specific and detailed.

We will follow the business case processes through. However, at the start of this process, there will be uncertainties as we work through the co-design process and the agreement with COSLA, and there will be a range of assumptions set out in the financial memorandum as well as risks as the cost profile narrows through the business case process.

Minister, how long do you envisage the co-design process taking? How many more months will we be doing it?

Co-design is a core part of the national care service. I do not expect it to finish by Christmas; indeed, I expect it to continue throughout the bill’s development and to be a fundamental part of the national care service in future.

Donna Bell can give you a little bit more information.

As you will expect, given the bill’s content, we prioritised over the summer the areas that are key to the development of the legislation and the provision of information to Parliament and others, as well as the things that are most important to people. Five co-design themes are specific to the bill’s development. Coupled with the engagement with local government, the trade unions and the NHS, that work will give us a better understanding of what people want from the process and what partners want to contribute to the legislation. Although the co-design process will be a long-term, enduring and key part of the national care service, we are prioritising the areas that will have the most impact on the bill, and that will enable us to provide you with the assurance that you need.

Will you tell us what those themes are?

They are keeping care local; information sharing; models of care; and—oh, gosh. I am sorry—I have had a mental block. Perhaps Fiona Bennett happens to have them in front of her. I am sorry—I should know them. I have been at multiple co-design events.

We have sent a letter.

I will find them. There are particular issues around keeping care local and information sharing—which, interestingly, has been the most popular theme.

Doing that prioritisation work and carrying out an iterative co-design process have been helpful in ensuring that the bill is suitably framed. As we get into more detail on the framework and the secondary legislation, the approach will allow us to engage proactively on additional detail in the co-design process.

It is important to point out that we are not talking about the design of service delivery. We are not setting out how specific services will operate at the local level—that will be for the local partnership arrangements in future. This is just about getting the broad frame right and making sure that we have the information and input that we require.

10:00  

Thank you.

My final point is on one of the difficulties that we had this time last year, which was the strong criticism that we heard of the Scottish Government’s proposals from people on the front line of delivery, including some in council authorities and care services. There was a bit of a contrast between what they were saying and what those who had experienced care were saying. Have you consulted in great depth those who were critical of the proposals, because they felt that the costs had not been fully set out and, indeed, told you that the bill for the whole thing was going to be much more than you had predicted? Do we have some statistics for the figures that COSLA and local government said were a bit of a concern? Has that arithmetic been done?

The focus of the discussion with COSLA has been not on cost but more on its concerns about the transfer of staff and its wanting to maintain its statutory responsibilities for commissioning and procurement. In other words, the focus was less on financial costs and more on power and assets. We have worked closely with our local authority partners, and the Verity house agreement has helped us in that respect.

We have also worked closely with unions that have been critical of our approach. As I have said, I feel that we are now in a much healthier place; we are working closely together—although we do not always agree—and our eyes are firmly on the goal of delivering an improved service that works for the people who access care and for those who work in care.

That is important, but it is even more important for the costs that go along with those changes to instil confidence in people that the bill will be deliverable. That is the area that concerns the committee, and I suggest that there is still an awful lot of work to be done before the next financial memorandum comes back to the committee to give us a much better idea of the costs, given the divergence of opinion.

Before I let John Mason come in, Michelle Thomson has a supplementary question.

I want to pick up on the point that Liz Smith made. As well as finance, the committee is concerned with public administration, and we all know that the public purse is right under the cosh and every penny is a prisoner, if I may use that terminology. That suggests that the relentless focus on cost and value must be accentuated, but I am not necessarily sure that I am confident about that yet. For example, we all concur that the Verity house agreement is about a positive process but we do not yet understand how the fiscal framework will operate, because that work has not been done.

I suppose that the question is whether, as well as the top-down, policy-driven and thematic approach that you have outlined, you are doing the work to ensure that every single funding line is managed very tightly. That underpinning will give the committee confidence, not just on the finances but in terms of the public administration part of our remit.

When we come back to you with the financial memorandum, I would certainly expect you to be able to have absolute confidence in what we produce.

I have a wee point off the back of that. We have not discussed the national care service board and the governance therein today, although we may well at some point in future but, in the light of the current situation, I would expect to see the same rigour in its financial governance as in the policy element and standard governance. Again, I ask that you give that just as much attention, with a bottom-up as well as a top-down approach.

Absolutely. I am confident that we can improve the local scrutiny of spend. At the moment, there are times when it is hard to follow the money, and that is sometimes the explanation for challenging situations on the ground. If we empower our local structures and provide them with adequate data and the ability to scrutinise where money is going in the system, we will have a system that operates much more efficiently and that delivers much more effectively for people.

Being able to follow the money will work for us, I sense.

One of the quotes that the convener used earlier was from your letter from July, which talked about “consistency of outcomes”. I presume that that is one of the main aims. Sometimes, there is a bit of tension between consistency of outcomes nationally and doing things locally, which you have just referred to, and I wonder how that will impact on costs. For example, in the Highlands, distances are greater, so if somebody is going to visit a person at home, that will take longer. It is also further to get to hospital, which is a different issue. However, by contrast, in Glasgow, there is sometimes a feeling that people have to be in greater need to get an intervention than is the case in other authorities, just because the overall need is so huge.

At the moment, COSLA and the councils get their funding through a formula. Will the national care service override that formula? Will finances be targeted at areas of greater need? How will that work?

You are absolutely right—you have picked out one of the real tensions in the bill and in the idea of national oversight of the social care system. You are preaching to the converted on that. I come from the rural west Highlands and I represent the northernmost and biggest mainland constituency in Scotland, and I absolutely recognise that care cannot be delivered in exactly the same way in every part of Scotland. NHS Highland, which is the health board in the area where I live, has its own model of integration—we have the lead agency model and the rest of the country has a different model. In Ullapool, where I live, accessing care is a very different experience from accessing care in Inverness, which is a city and is much more like Edinburgh.

There are fundamental differences throughout the country, but we are focused on the unnecessary variation. The thresholds of need should not vary quite as much throughout the country, and there should not be a variation in quality throughout the country. It is not acceptable that people in one part of the country have to accept a lower quality of care. We want the standards to be high everywhere. There are variations in pay and conditions, which are really challenging and threaten service delivery in parts of the country. For example, the social work profession, unlike nursing or teaching colleagues, do not have a standardised approach to their pay and conditions. Working through the national social work agency, we will be able to improve that.

I will use Shetland as an example, because I really enjoyed visiting there as I had not been back for a number of years—since pre-pandemic—and it was a pleasure to go back to an area that I used to represent. Shetland has integrated health and social care very well, so was fairly healthily sceptical that the national care service would offer it anything. It is doing things pretty well as things stand, but we were quickly able to identify certain areas in which a national approach could support local delivery, including support with social work training and legislative changes to information sharing, which will vastly improve the experience for people on the ground. I agree that there is tension and that it needs to be done very carefully, but it is possible to raise standards generally and to reduce unnecessary variation without impacting too much on the way that people do things locally.

It might be down to the part of the country that I represent, but another very important thing to consider is that young people with disabilities who access care packages can find it impossible to move freely around the country because their care package does not follow them. We need to improve the system to make it more straightforward for them. I want young people in the Highlands to be able to go to university, and that almost inevitably means going away. I want them to be able to access education and to be able to choose employment that suits them. They need to be able to move around to do that. The national care service could definitely improve the situation with transition across the boundaries that we currently have, which are impossible for young people to navigate.

That was a very full answer, which I appreciated and largely agreed with. Have we got to the detail of how the finances would work for that? If, for example, a young person has a care package in Shetland and then they go to university in Aberdeen, would the money move with them? Would that be up to individual councils or would it be so nationalised that it would all come out of a national pot?

On your point about the funding formula, NHS boards are currently funded through the NHS Scotland resource allocation committee funding formula and local government is funded through the grant aided expenditure formula. One of the questions that we are working on with COSLA ahead of the bill is whether reformed integration joint boards will receive direct allocations and, if so, what funding formula that would be on. We are all in agreement that the formula would need to take cognisance of rurality and of demographics in local areas.

On the specifics of the funding following the individual, we would need to work on a mechanism by which to allow the transparency to follow the money and to allow the barriers that the minister spoke of to be broken down. The detail has to be worked through, but it is fundamental to increase transparency through the funding formula to make it clear what services will be funded via which route, so that we can follow the funding.

Okay, so we will learn more about that in due course; that is great.

The minister wrote to me on 16 June, when I was in my temporary role as convener of the committee, and mentioned working

“on policies to support improvement in the delivery of social care support that are not reliant on the NCS legislation”.

Has the split between what we can do now and what we need the legislation to do changed—or is it in the process of changing—so that we are less reliant on the bill and could do more without it?

We are always looking for opportunities to improve the system, and I point to the increase of the minimum wage to £12 per hour, which did not require us to wait for legislation. The decision was made by the Scottish Government to deliver that from the next financial year, and I am so delighted that we are able to deliver that without the need to wait for primary legislation. There will be other areas that we can improve on, and some will require primary legislation, but we are always looking for opportunities to improve.

10:15  

This week—tomorrow, perhaps—we will get a review of scrutiny and inspection. We will consider that publication keenly to see what we can do and how we can take its recommendations on board. The regime of scrutiny and inspection is a tool that we can use to improve quality and consistency. If we think about the outcomes from the bill that we are aiming for, we can see that the review will be a crucial piece of work. I cannot pre-empt the report, which I think will be published tomorrow, but I imagine that not every recommendation will require primary legislation to effect change. We will look for changes that can occur without the legislation, because we are keen to set ourselves on a trajectory of improvement of delivery from day 1—from now.

I want to ask about one minor point, for clarity. In the annex to the letter of 16 June, figures were quoted for 2021-22 and 2022-23, but for 2023-24 it says “period 1”. Is that the first month or the first quarter?

It is the first month. We now have figures for periods 1 to 4, so we can give an update on those original figures.

If I wanted to find the annual figures, could I multiply the period 1 figures by 12, roughly?

Roughly—yes.

I apologise. When I was asking questions earlier, I assumed that the figures were based on a quarter, but I now realise that they were monthly.

Minister, you will be aware that the Government’s medium-term financial strategy projects a shortfall of £1 billion in 2024-25 and £1.9 billion in 2027-28. What has the Cabinet Secretary for Finance told you that the country can afford to spend on the national care service?

We are working closely together on defining the needs of the country and what we can deliver. I will be candid and say that the cabinet secretary has not set a ceiling. We are looking to deliver a social care system that meets the needs of the population.

So, she has not given any indication of the spending envelope that might be available.

As you will know, we set out a financial memorandum this time last year. That was the envelope that was put forward with the original draft legislation, but it is changing as we develop the legislation. We are determined to develop a system that meets the needs of the population. You will be aware that there is a commitment at Government level to do that. I will continue to work closely with the Deputy First Minister to ensure that we are able to afford and deliver a national care service that works.

When the medium-term financial strategy was published, the Scottish Parliament information centre, the Fraser of Allander Institute and the Institute for Fiscal Studies all commented that figures for the policy were missing from those projections, so whatever you are being given to spend to make the policy happen is not included in them.

It comes down to the question of what comes first. You are saying a lot about co-design and putting the right system in place, but I am not getting a sense of real confidence that we are working in a financially prudent way to think about the financial limitations. How far are such limitations informing the co-design process?

I am not sure whether Fiona Bennett wants to come in on that. I think that we will be able to reassure you when we publish the financial memorandum.

What is missing from your question is the value of social care; in some ways, you are looking entirely at the acquisition cost. If we get social care right, what it delivers is of huge value to the nation. I would expect that a national care service will make a difference not just to the individuals who access care but to their families and communities.

There are some gains to be had from spending more. I would expect to see an increase in productivity. For example, I would expect that all the people who tell me that they cannot work because of their caring duties could be supported into employment.

Increasing the wages of the lowest-paid people in our country will bring an economic benefit. You are looking only at one side of the balance sheet at the moment but I expect there to be another side of it. Of course, as well as current ways of raising money, there may well be different ways of raising money in the future. However, that is well outside my portfolio. Fiona may want to add something.

You have covered it, really, minister. We already spend £4 billion on social care; as much if not more focus has to be on ensuring that we are getting value out of that large amount of expenditure that is in the system. Yes, in the current fiscal framework we have to look at minimising additionality of spend in creating the national care service. We have to drive the value through the expenditure that is in the system and, looking at the balance across health and care, we have to think about how we can invest in prevention, which will better meet demographic needs in the long term and will be a more financially sustainable system.

I assume that in the business case and the policy evaluation we would see that great social benefit, the preventative money and where we would save money. I am in full agreement, minister, with regard to those huge, varied benefits, but the reality is that we have to be able to pay for them.

I will give one simple example. Over 10 years ago, the Christie commission told us to spend money early instead of pulling people out of the water and we want to spend money preventatively. If an elderly person is admitted to hospital and gets a care package, that care package will, on exit from hospital, cost twice as much as it would have cost had we managed to catch them before they went in. There will be efficiencies if we do this well. I need to provide you with that assurance.

I think so, because we all know the huge costs of the failure to eliminate delayed discharge.

Absolutely.

Have you decided on the inclusion of children’s services?

No.

Do you have any indication of the costs that are associated with that? That is thousands of staff, isn’t it?

There will be a decision on that point towards the end of the year.

That will be stage 1. Will the cost impacts be included in the financial memorandum?

Yes.

In your letter to us, you committed to completing stage 1 by 31 January 2024. The convener has it on the record that the financial memorandum should be provided four weeks prior to that date. Working back, we are looking at your having to provide the financial memorandum—by my reckoning—by around 11 December. Do you have a date in your diaries for when you will send the financial memorandum to the committee?

No. You will appreciate that when stage 1 happens is not entirely in my control but more in the Parliament’s control. However, we will certainly furnish you with a financial memorandum four weeks before, as promised.

What I am working towards here is that that is not very far away.

No.

It feels to me as though there are an awful lot of moving parts. There have been questions from colleagues about our still being in the depths of co-design and our not having taken a decision on the inclusion of critical areas such as children’s services, around which there are huge financial issues. Taking into account recess, we are looking, by my reckoning, at having to receive that memorandum roughly on 11 December, which is just weeks away. Do we have a draft of the financial memorandum?

May I come in? Part of the spend that you see on staff, which is included in the figures that you have, is about the groundwork to support the decision making. As Ms Todd has said already, the business case and the financial memorandum continue to iterate. We do have a draft, but it might not be in its final form at this point.

A significant amount of research has been done on children’s services and on justice services, some of which has already been published and more of which will be published towards the end of October and the beginning of November. That will allow ministers and the cabinet to reach informed conclusions. The groundwork is really important in order to ensure that those decisions are informed by the best information possible.

My last question relates to that specific issue. One of the issues with the inclusion of children’s services was the fact that most social work practitioners in Scotland had no idea that this was being proposed or that they might, as a result, be transferred from their current employers into some different form of employment that had yet to be decided. Has any proper engagement happened with the profession in that respect?

There is a lot of engagement with the profession, but there is no proposal to transfer employment. With the agreement between us and COSLA, that will no longer be necessary for any staff.

That is good to hear. Thank you.

Good morning to the minister and her colleagues. I am fairly new to this committee and, although this is not the first time that I have seen this proposal, I have not looked at it in this depth of detail and was not here for the previous discussions.

Michael Marra has rightly said that, for all the value that this brings, it still has to be paid for. I am not sure of the exact wording that you used, but I think that you hinted at or suggested other ways of generating revenue. Does that mean having to introduce new taxes, increase taxes, bring in new fees or whatever to pay for taking this forward, if the costs are higher than expected?

I will be working very closely with the Deputy First Minister to design a social care service that works for the people of Scotland and, as with every area of spend, she will be ensuring that we have sufficient funding to put behind it. However, that is definitely outside my remit.

Have there been discussions about the need to find new ways of generating revenue for the scheme?

There are always discussions in Government about how to generate revenue for public spend, particularly at a time of constraint as we have at the moment. I would expect discussions to be on-going in that respect. You will be aware of the public statements that have been made on care and the balance that needs to be struck in that respect, but that is absolutely outside my portfolio.

Michael Marra rightly suggested that a number of areas have not been fully considered in the bill. The original financial memorandum estimated the costs of the bill over the five years between 2022-23 and 2026-27 as being between £644 million and £1,261 million. Are those still the estimates, or are the figures considerably higher?

As I have said, we will bring forward a revised financial memorandum—

Is that something else that is being looked at?

The figure will be considerably lower over the time period that you have quoted, because of the rephasing of, in particular, the introduction of the local structures.

It will perhaps be lower over that period, but do you expect it to be higher going forward?

That depends on the decisions that are taken. Table 8 of the first financial memorandum included the significant costs for the potential transfer of staff; now that that proposal is off the table, you will expect those costs to disappear. We therefore expect the figure to be lower overall.

The rephasing will probably mean less spend, as there will be less of a need for external consultants.

That probably answers another question that I was going to ask. With regard to the £971,000 figure for the costs in period 1 of 2023-24—that is, for just one month—I think that the Deputy First Minister said in February that the figure for 2023-24 was likely to be no higher than £50 million. You therefore expect the figure to be considerably less than that.

Yes. That figure is reasonably close to the lower end of the range, given that, with the initial financial memorandum, we were expecting the bill to go forward and complete its passage by summer, with the work ramping up and being phased in a completely different way. A lot of work would have been going on in that financial year, but that is now not needed as a result of the extension of the bill timetable and things being spread over a much longer time. The process with regard to expenditure is still being worked out.

It is down to evolution rather than devolution or anything else.

Yes.

Okay.

My last question was on the potential VAT liability, about which concerns were raised. Can you give us an update on where that stands at the moment?

I will ask Fiona Bennett to answer that question.

I am happy to do so. In our last update, we said that, if IJBs were to be reformed—this brings us back to the point about direct allocation—they would need section 33 status as VAT bodies if there were to be a full recovery model.

10:30  

We engaged early with HM Treasury to understand its viewpoint before introducing the changes that we are looking to make. That will be an on-going process. On the co-design point, as that is worked through and we understand the final format of integration joint boards and what they may become, we will keep abreast of that from a VAT perspective. However, we are clear on the boundaries around what would trigger a VAT liability, and we are having very early discussions with the Treasury on that.

That figure was originally estimated to be around £32 million; is that correct?

That figure was calculated in relation to the Public Bodies (Joint Working) Act 2014, so we expect it to be, with inflation and increased costs in care, between £50 million and £80 million of potential liability.

That is a £50 million to £80 million liability, subject to discussion with HMRC.

That would be the case if we were not able to get a section 33 body, but we do not consider that we would take that option.

A lot of the correspondence between the committee and you, minister, has been on the lack of available data. You said that you will provide more information to the committee, but the information that was provided was fairly limited. Why was more information not provided, if it is available?

I was not minister at the beginning of the bill, but going forward from now, I am certainly very keen—

During this meeting, your colleagues have said that they will provide further information. We talked about period 1, and you said that four months of information are available. Was that not available when the information was requested for this meeting?

When we sent the letter back in July, we had the period 1 figures, and we now have the period 4 figures. We have split it by year and by staff and non-staff categories. We can split it into a range of sub-categories, and we are happy to drill down into that information.

We are keen to work with you—those letters back and forth are very helpful—and we will try to furnish you with whatever information you need to scrutinise the bill, because we want the bill to be the best that it can possibly be.

That concludes questions from committee members, but I have one or two questions to wind up. I assumed that period 1 meant quarter 1 and I know that other members of the committee also thought that. If it just means April, why does it not just say April? We are talking about transparency and that is a pretty basic thing. Just put April 2024 for period 1, and put July 2024 for period 4. We all need to talk in simple straightforward language if we are going to talk about transparency.

We have talked about this being a framework bill and there has been much discussion about primary and secondary legislation. Given the changes that we have seen in the evolution of the bill in recent months, has the balance shifted between primary and secondary legislation? Will the bulk now be primary or secondary legislation? Where has that balance moved over the past few months?

Donna, do you have a longer-term view than I do? It is still a framework bill, so we expect the detail to be in the secondary legislation.

The balance may shift slightly, but the framework nature of the bill remains. We are still working through this with colleagues from COSLA and the NHS more broadly, but there may be some more detail in the primary legislation on, for example, the national board, which does not appear in the bill at the moment.

The original principles of flexibility that the former minister set out remain, such as the ability to be more agile in the development and iteration of the national care service. Ms Todd referenced the multiple changes that have occurred over the lifetime of the NHS. We expect the balance to be probably around the same, but we are not at the point of concluding that.

What is that balance? Is it 30:70, 20:80 or 40:60? What are we talking about?

We still have to work through the secondary legislation. As you can see from the current construction of the bill, it is high level. The detail will be set out based on discussions with COSLA and the NHS and on the co-design process, so I cannot give you a percentage at this point in time.

I hope that we will get more detail on that in the financial memorandum. I do not expect you to say, for example, 63.5 per cent, but it would be helpful to know the ballpark shares that we are talking about—perhaps two thirds or a half.

I appreciate the time given by the minister and her officials. In order to prepare for the next evidence session, we will have a wee break.

10:35 Meeting suspended.  

10:41 On resuming—