I would like to welcome members of the press in public to the 20th meeting of the Public Audit Committee in 2015. Can I first of all ask all those present to ensure that the electronic items are switched to flight mode so that they do not affect the work of the committee? All those can move you to agenda item number one, which is the decision in taking business and private. The question is that we take agenda items number five and six in private, but I will agree. The agenda item number two, which is our section 23 report, NHS in Scotland 2015. Can I welcome Caroline Gardner, the Auditor General for Scotland, Fraser McKinley, the director of performance audit and best value, Trisha Meldrum, the senior manager and Michael Olythont, who is the project manager of Audit Scotland. I understand that Caroline Gardner has a short opening statement to make. Good morning, convener, and thank you. Fraser McKinley is going to lead the briefing session this morning on my behalf, so I'll hand over to Fraser. Thank you, Caroline. Good morning, convener. Good morning, members. Today we have in front of you our annual overview report on the NHS in Scotland, which looks at the performance of health boards and comments on the many challenges and pressures facing the NHS. It also looks ahead to assess what progress the Scottish Government is making towards its 2020 vision of enabling everyone to live longer, healthier lives at home or in a homely setting. The national health service in Scotland continues to be one of our most valued public services, delivering a wide range of high-quality healthcare services to thousands of people across Scotland every day, but it will come as no surprise to the committee that the NHS is a system under significant pressure. Our report highlights tighter budgets, rising costs, increasingly demanding performance targets and greater demands on its services. In recent years, the cost of delivering health services has increased significantly, coinciding with a period of constrained public finances. Together, those pressures signal that fundamental changes and new ways to deliver healthcare in Scotland are required now. Spending by health boards was £11.4 billion in 2014-15, which accounts for around a third of Scotland's total budget.  However, many boards relied on one-off savings, and two boards required extra financial support from the Scottish Government to break even. Our report highlights that all territorial boards, which are those delivering the front-line services, are finding it increasingly difficult to meet performance targets and standards, with the national performance against seven out of the nine key targets and standards deteriorating in recent years. Ongoing financial pressures, combined with greater activity and demand, made achieving targets and standards more difficult. We see in the report that the number of people working in the NHS in Scotland is at its highest level. However, one of the biggest challenges facing the NHS today is the ability to attract, recruit and retain medical professionals on a permanent basis. Reasons for the difficulties include the rural location of some boards, competition between boards for specialist staff and greater demand from staff for more flexible working arrangements. Our report highlights that boards are hiring more temporary staff to help to keep services running, but that approach is increasingly expensive and provides only a short-term solution. In 2014-15, boards spent £284 million on temporary staff, an increase of 15 per cent from the previous year. Looking ahead, we found that the Scottish Government has not made sufficient progress towards achieving its 2020 vision. There is some evidence of new approaches to delivering healthcare, although it is unlikely that all the necessary changes will be in place by 2020. The Scottish Government plans to continue working towards the vision and has launched a national conversation on the future of healthcare in Scotland, but there is a need for a clear step change in pace if those ambitions are to be realised within the timescale set. We make a number of recommendations in the report. Convener, they focus on improvements that the Scottish Government and boards should make as they continue to work towards longer-term ambitions for healthcare in Scotland. Members will recall that the committee published your own report on accident and emergency in December of last year and invited the Auditor General to provide an update on A&E by the end of this year. We have therefore also brought a briefing paper on A&E to the committee today. That shows that performance against the A&E waiting-time target deteriorated over the winter of 2014-15 but then improved over the summer. However, some NHS boards are still not meeting the target and the NHS is now moving into the more challenging winter period, although judging by the weather, I think, were probably there already. Since the Auditor General last reported, the Scottish Government has implemented a better and more structured approach to improving unscheduled care and sharing best practice. As always, convener, the team and I are very happy to answer the committee's questions. I will open questions by first referring to paragraph 50 of the report. We advise that there is an increasing reliance on the use of the private sector to meet the performance targets. Can you give us specific examples of how those private companies and private sectors have been used? I will ask Michael Ollifant to come in at a moment, convener. However, as the report says, there are two main areas where we have seen the private sector being used. One is to ensure that waiting-time targets are being met as far as possible and the other is for specialist services that are not otherwise available within the NHS. Michael, can you give you some specific examples of those? Yes, I think that as well as the increase in the short-term capacity, it is particularly for where boards need to access specialist treatment. Quite often, that is for a small number of cases that are highly complex or individuals that require complex care, perhaps in a higher ratio of carer to patient. Those can be for complex rehabilitation requirements or for severe mental health issues. It tends to be spend on some smaller specialist hospitals such as Huntercomb Hospital in Edinburgh or the Murdaston Brain Injury Rehabilitation Centre in Wishaw, so that is where a lot of that spend goes. How specific is that? In general terms, that is the way that it has been brought forward. Is there a capacity available within the NHS public sector that is not being used and this has been filled in to meet the targets? There is an element of the private sector spend that is used for short-term capacity issues to help meet waiting times, whether it is private sector organisations using facilities perhaps over the weekend or where patients are going to use private sector facilities themselves. However, in most of the cases, it is for the specialist treatment that is required in these very complex cases. The NHS will be able to provide some element of support and care for, but where it is increasingly complex, it is the private sector that can help out on that basis. Can I go back? As you said, the Government is failing to meet the 2020 vision target that has been set. Can you give some specific examples of that and the lack of direction of travel that you have set out? It is primarily a question of pace, convener. I will ask Fraser to pick up the specifics that we were basing that conclusion on. As you know, the 2020 vision is all about trying to get people care at home in a homely setting. When we look at the evidence across the system, we can see some pockets of good practice in that area, but not at the kind of scale and pace that we would need to see. In particular, we are trying to shift resources away from spending on acute services and hospitals and dealing with people when they walk in through the door at A and E in other places and into the community. We are just not seeing that shift big enough or fast enough is the main point. Is that a political decision that is required to be taken because you talk about decisions that have to be made or is it a management decision of the various sports? What the report tries to set out is that the Government has a lot of things under way that are designed to help that, including things such as the integration of health and social care. We are producing a report, publishing a report tomorrow, and it has come into the committee in a couple of weeks to give the committee an update on progress on the integration of health and social care. Both politically and managerially, they are putting things in place to help the transition and to help the shift. I think that what we are seeing is, given the ambition of the vision that is set out for what is supposed to be achieved by 2020, that is looking very challenging. They are now looking beyond the 2020 vision. They have started the national conversation, which is about looking to the 10, 15 years beyond that. I think that we are expecting to see some stuff coming out of that in spring of next year. As well as that, a national conversation in and of itself is not going to fix the issues and the pressure that we are experiencing right now. To be fair, looking very challenging to me is a bit of an understatement. I actually thought that it was looking very depressing when I read this report. If I may say, convener, that having been here since 1999, I looked at the recommendations on page 6. Those were the recommendations in 1999, 2000, when Richard Simpson and I were on the health committee. We were actually saying exactly the same things. I looked through the report, boringly I read the whole thing, beginning to end. I was looking for a few gems of progress, but there was actually nothing there. My second point is that I thought that it was I am sorry to be on a depressing note. Exhibit 3 on page 19, national performance against key waiting times has declined in seven out of nine. I found that deeply worrying.  If we look at the health board that meets the least targets, it is NHS Grampian, and I do not think that it is any coincidence that they are the poorest funded in terms of the NRAC funding formula, I think that they are further away from the funding formula. I think that it is over 2 per cent that they should be paid. Is that a direct correlation of their lack of funding in line with the funding formula, the fact that they are able to meet so few targets? However, the other one that stood out to me and still on the calms, child and adult mental health, was Tayside, a reduction from 79.9 per cent meeting the target last year to 35 per cent. We all know that investment into mental health in children saves thousands, if not millions, in adulthood, and it is worrying that we are missing this window of opportunity in children. What does Audit Scotland do when there is one in two per cent changes and we could see that year to year? However, when it is 79 per cent to 35 per cent, that is really deeply, deeply distressing and worrying. What do you do with serious outliers like that? What should we be doing? What should NHS Tayside be doing? What should the Government be doing? I think that it is probably in that reverse order, Mrs Scanlon. I think that the board clearly has the primary responsibility for improving performance against targets. It is worth saying that the overall performance around the children and adolescent mental health services number, which you will see took a dip in last year, is due in part at least to a change and a more challenging target. We set out that that is one of the targets that has been made tougher in terms of the time that is to wait. That explains some of the national change. I will ask Michael Ortrish if he has any specifics on the Tayside number, colleagues. Do we know what happened there? It is 81 per cent, which is pretty poor, but 35 per cent has to be very worrying. Michael Ortrish is by way of comparison. We mentioned at paragraph 47 where we talked about where the target became more tougher during 2014-15. The comparable figure to the Scotland figure that you see in Exhibit 4 for the CAMHS target is 88 per cent, so it still is a decrease, but not as much as 81 per cent. Do we know anything about the specifics of Tayside? We can have a look at that, Mrs Scanlon. In answer to your question about what should be done about it, I am sure that you are aware that all the heat targets are managed very closely, both within boards and within the Scottish Government. When there is a dip in performance like that, we would absolutely expect a plan to be put in place to turn it around, so we will see what we can do to find out a bit more about that. You would be asking NHS Tayside what they are doing to address that very worrying situation. I have just got two questions under one that I have asked previous times that you have been here. Sickness absence is one that I tend to keep a bit of an eye on. I was surprised that the highest sickness absence rate was the Scottish Ambulance Service, but it has been consistently high over a period. Paragraph 67, page 29. However, the service has been higher than other services in NHS, apart from NHS 24, for many years now. Are there any reasons why the Scottish Ambulance Service should be over 7 per cent? Why is that such an outlier? If we could come back to another favourite of mine, page 39, paragraph 95, the backlog maintenance. The committee has asked you about that quite often. Despite all the assurances that that was going to be addressed, it is pretty disappointing that the backlog maintenance is still £797 million, but what we are more concerned about is the significant risk of the backlog maintenance with a significant risk, which is 35 per cent, £279 million. I think that I am right in saying that it is where you have backlog maintenance with a significant risk. It is not just a risk to staff, but my understanding is that that is also a risk to patients. We have about £280 million backlog maintenance with a significant risk. Could you perhaps tell me why that figure is still so high given our assurances? Could you perhaps also define for my memory what significant risk means in terms of health and safety? The main reason that we have cited in the report is to do with high levels of musculoskeletal complaints, which is about how the people in the ambulance service have to work in the unique demands that working in the ambulance service puts on people. I think that that is the reason. That does seem to be stubbornly high, and we would expect the board to continue to look at ways of mitigating that while absolutely accepting that it is a very physically demanding job if you are a paramedic or working in ambulances. You are absolutely right, Mrs Cannon. You make a really interesting point about the similarity of the recommendations that we have made over the years. On one hand, we make no apology for that. We will keep plugging away and keep making the same points. No, I know, and I didn't take it as such, Mrs Cannon. For us, those are really important things. They are becoming even more important now. There have been some areas of progress and improvement in some places if you look back at that over that period of time, waiting times, for example, have got better. More recently, we are seeing a real squeeze and all the pressures. We are referring to one of those significant pressures. Undoubtedly, it is the maintenance backlog. It is a classic case of spinning lots of plates at once where you are trying to invest in, as we mentioned in the report, new assets, new buildings and new hospitals to make it more fit for purpose for a 21st century health service at the same time as dealing with increasing demand and rising costs and needing to try to make inroads into the backlog for maintenance. I am not absolutely sure of the significant risk point. I will ask Michael if he can help with a definition of that, and if not, we can come back to you. I do not have a definition to handle the significant risk. It is something that the Scottish Government publishes as part of the assets and facilities report that I think the next one will be due out early next year if the timeline is the same as previous years. You mentioned the figure of £279 million, which is considered as a significant risk. Of that, £80 million relates to properties that are expected to be disposed of within the next five years, and £65 million relates to replacements planned in the next five years. The Scottish Government, in the report that I mentioned, will have a plan in place on how to reduce the backlog for the next five years. The nature of backlog maintenance is that there will always be an element of backlog maintenance, and I think that the focus from the Scottish Government's perspective is to try and bring it down as much as possible. I think that they are looking at a five-year horizon to make some large movements in that. Can I just pick up the backlog thing a little further? 96 per cent was high risk, as opposed to a significant risk, but it would be interesting and useful, perhaps, if we could get figures that showed the turnover, because they will be dealing with some of the high risk that was there, but new high risk will be coming in, and your report does not make that clear. Given that there is a 57 per cent reduction in capital between 2008-9 and 2014-15, the consequences of that in terms of the maintenance backlog is, again, something that I am quite surprised that you did not comment on, because, if we are not investing in new structures sufficiently with such a massive reduction in capital—which I know is a result partly of the UK Government's reduction, but it is also transferring to revenue—it might be useful to get a slightly fuller report on the inputs, outputs and the consequences of the capital risk. I do not know if you want to make any comments just now or come back to us on that. I am happy to just comment briefly, Mr Simpson. That is a very good question. I suppose that, every year, when we do the overview report on the NHS, we are always looking for things that we might want to drill into a bit further for future work on behalf of the Order of General, so we can absolutely look at maintenance in the estate, managing the estate as part of that programme development activity that we do, so I am very happy to take that on board. We can also divide out the unused buildings, because they are unused. They may have some public safety issues, but they are not really—even if there is a high risk within the building—it is not affecting the clinical care. I am really interested in the fit for purpose part of the estate, which is in your report, and it is not very high—it is about 65 per cent—of the percentage that is fit for use. However, if I can turn to the main thing, we have this debate about the health budget, whether it is increasing or decreasing. Of course, both figures are in your report. The point 7 reduction in real overall terms in health spend in Scotland between 2008, 2009 and 2014-15 is the overall reduction in capital and revenue, with an increase in revenue and a decrease in capital. However, I wonder how that 2.2 per cent increase in revenue relates not to real terms, which is what you have given us, but to the fact that the NHS deflator is always different and always higher. That does vary a bit, because, for example, I know that pharmaceuticals have been not increasing by the amount that has been previously expected, but, on the other hand, recently there have been a big increase. However, trying to get a handle on that NHS deflator, you have not commented on that at all. I know that it is difficult, but, historically, we should at least have some indication figure, I would have thought from you, as to what the NHS deflator has been over this period of time. The statement of a headline reduction in real terms is already obviously a very big political issue, as well as a concern to the public that health spending in Scotland has gone down in real terms. However, getting that division, can you give us a further comment on that in relation to the NHS deflator? I will ask Michael to come in on some of the specifics, Mr Simpson, but I am always struck at how the answer to a simple question, such as whether the money going up or down, can be a very complicated answer. You have just explained that extremely clearly. We say in the report that costs are increasing. We have reported in the past about some of the specific nature of inflation in the health service. From where we are coming from, it is important—again, we will take that feedback on board for future reports—that it is important for us to use numbers that are absolutely reliable and robust and understandable that everyone can sign up to and recognise. As you say, coming to a figure for NHS inflation is quite a tricky thing. Having said that, I will ask Michael to help with any specifics. The health care inflation historically is a bit more volatile than perhaps the GDP deflator would be, but its phraser allege to the GDP deflator is probably better recognised in terms of looking at the overall budget figures. The health budget largely relates to staff costs, which would fall in line more with the GDP deflator than perhaps the health care indexes would show. One of the key components of why specific health care inflation might be more variable is the drugs costs. Paragraph 27, the first bullet point is that looking ahead boards are planning for average cost increases in primary and secondary care drugs of 5 to 16 per cent, respectively, which is looking at a drug's budget of about £1.4 billion. It is still a decent chunk of the overall NHS budget, but it is not necessarily—you would not be able to apply those rates to the whole budget. I understand that. The hepatitis C costs are one of the major factors in the performance useful. I am really quite impressed by the agency versus bank staff costs. Agency costs at £42.97 per hour are three times the level of bank staff, but if you look at the very helpful exhibits that you have given us on that, the numbers of bank staff do not rise, and yet the numbers in the agency staff do. The highest cost was £57 in Dumfries and Galloway. From a financial perspective, the potential for putting a national cap on, as they have done in England, is with that work. The second thing is what should the boards be doing to try to convert some of the agency staff into bank staff, which would produce some considerable savings? The increase in the number of agency staff and midwifery staff increased by 53 per cent in agency nursing staff increased by 53 per cent in 2014-15. With the vacancy rates running at the levels that they are, which has again been deteriorating every year since 2011, the increase in vacancies is accelerating, not decelerating. That is an area that really concerns me. Are there any suggestions that you can make as to how the board should be addressing this issue, or how the Government should be addressing this issue nationally, other than the national locum provision, which you have as one of your recommendations? It concerns us too, Mr Simpson, which is why this year we have focused quite heavily on the workforce issues, because we have recognised in the past couple of years that it is an increasing pressure. As Michael said a minute ago, it is a people business in lots of ways in the NHS. First of all, it is not for us to say whether a cap is a good thing or a bad thing. I think that that is a policy decision rightly for the Government. I guess what I would say is that before you get into a conversation about caps, there is a lot that could be done. You have just mentioned some of those things. In particular, being able to convert some of the agency staff into bank staff would actually save quite a lot of money, and it would be a good place to start. Agencies are used to plug some short-term gaps. You need to do that sometimes, but shifting the balance would be important. We make the recommendation in the report about the need for a more co-ordinated and national approach. One of the things that struck us looking at the plans in more detail is that, given that it is a national service, delivering broadly speaking the same services across the country, we might have expected more by way of national co-ordinated workforce planning. That is why we have the recommendation in there, and we will be very interested to see what the Government's response is to that. They have the new workforce plan. I do not want to be too critical, but it does seem fairly nebulous, and it is all very aspirational. There is not much detail. Revitalising the bank system and having better retainers for the bank system and support in training, which has already been done, but treating it as an auxiliary workforce rather than the traditional bank that I certainly used to be involved in might do it. I would like to come back later, but I think that I have had my say for the moment. I am looking at Exhibit 3 on page 19 and I am looking at delayed discharges, which have been an issue that has exercised this committee in the past. I am looking at the progression of 2012-2015, which looks like a fairly dramatic deterioration. However, I am looking also at the target that has become very challenging. It has gone from 42 days to 28 days to 14 days. Is it a deterioration in the patient experience, as the headline figure would seem to indicate, or is it simply the target that has become more challenging and more difficult to meet? It is difficult for us to know whether the patient experience has deteriorated. I think that the patient survey that we mentioned in the A&E report suggests that overall patient satisfaction and patient experience is improving slightly. However, the target around delayed discharges, because people recognise that it is a major problem for individuals and for the system, has been toughened up significantly. That is partly why the performance is as you see it. I think that it is also worth pointing out, and Michael will help me with the exact reference here, is that we also say in the report that the number of people experiencing very long waits has also been increasing. I think that that can be a good thing. It is difficult for me to say definitely that it is one thing or the other, but there is no doubt that it is no coincidence that the delayed discharges is one of the two targets that have been significantly hardened up in recent years. Continuing on the delayed discharge, obviously delayed discharges arise from a variety of reasons. To what extent is it the impact of partners that are causing delayed discharge? Again, it is difficult to be specific about that, but what is absolutely clear about delayed discharges is that it is a systemic issue. It is not just about the hospital, it is not just about social work, it is about all of that working together. As I mentioned earlier, the integration of health and social care is in part designed to help with just that. The Scottish Government has been investing in reducing delayed discharges. We think that there are some examples of good practice that can be shared and shared more widely and more quickly, but you are absolutely right that it is not a thing that one bit of the system can fix on their own. It needs everyone to be working together to improve it. Looking at paragraph 40 on the page before, it says here that inpatient cases have increased by 13 per cent between 2010 and 2015. To what extent has that impacted on actual bed nights in terms of stays in hospital? Has it impacted on any strain on the available beds? Would it have any knock-on effect into the delayed discharges? We do not have any specific analysis that would back that up. We are flagging it up as another pressure in the system, as well as having demand and targets. There is also rising activity, as well as demand for healthcare. The inpatient cases that you mentioned and outpatient appointments are both examples of where we are seeing increased demand for healthcare, so it adds to the pressure of the system. Clearly, in increased inpatient cases, they will impact on overnight stays or times in hospitals, available beds and potentially delayed discharges. We are doing some detailed modelling at the moment for a report that is due for publication in 2016 around changing models of health and social care, which will shine some light on both your questions, Mr Beattie. It is a complex system and there are trends pulling in very different directions. For adults with acute needs, length of stay is still continuing to shorten increasing levels of day surgery. For older people, there is a group of people who, once they have been admitted, are very difficult to discharge safely. The question is not just about social care to get them home properly, but about health and social care services to avoid the need for that admission in the first place where it is possible. It is a really complex thing and I hope that the work that we are preparing at the moment will give a bit more insight into what is happening there. I turn to some of the comments that have been made throughout the report. There is repetition of the word greater flexibility in managing finances. What do you mean by greater flexibility? Again, something that we have reported on regularly in this report, Mr Beattie, is in a sense the way that I have heard it described is that meeting the financial targets at the year end is a little bit like landing a jumbo jet on a penny piece. It is a very difficult thing to pull off. As we explain, there is quite a lot of movement in the year and there is quite a lot of things happening towards the year end to try to balance the books. I think that what we are saying in terms of flexibility is that, if boards did not have to do that every year, they could take a longer-term perspective on investment, on where to invest in different services or redesigning how healthcare is delivered and give them a little bit more room for manoeuvre, a little bit more freedom to plan into the longer-term. We have a section in the report that talks about new powers coming to the Scottish Parliament and ultimately to the Scottish Government, as well as the potential to raise more taxes. That also gives a bit of flexibility to use existing money more flexibly for the health service. The Auditor General has recommended that for a number of years. We are still very keen that the Government has made some moves to that end, so boards are able now to keep surpluses that they might make in the year. We think that there is more to do there, and it is critical if they are, in a sense, trying to ride both horses of keeping the service running day to day, but also investing in redesigning services for the future. We think that something needs to be freed up there. Just one last question. On paragraph 25 on page 15, you referred to non-recurring savings. You said that 25 per cent of boards' savings in 1415 were non-recurring. Obviously, that is a concern as to sustainability. Are you satisfied that the boards are addressing that? Are you satisfied that they are aware of the need for non-recurring savings to be replaced by them? I think that they are aware of it. I think that they are finding it very difficult to do. That would be my short answer. Michael, do you have anything to add to that? I think that quite often, looking at the LDP financial plans and some of the projections around recurring and non-recurring, the balance probably looks a lot more favourable in terms of recurring. However, as the financial years get closer, the non-recurring element increases to more than what it anticipated. There is very fair ability between the boards, as you would expect, but it is a key pressure. I think that boards would like to address that balance more in favour of the recurring. It is better for the longer-term financial sustainability of the board. Looking at the headline figure here, it does not look like, over the past two or three years, that there has been a great deal of progress in that. Do you find that there is an underlying trend? You are very much looking at trend analysis and everything here. Is there an underlying trend to improve that? In terms of the trend, as we said, the pressure has been there and continues to be so. Obviously, the non-recurring savings can only be made once. That is the key thing. There will be a limit to the extent that non-recurring savings can be used as boards might look to sell assets. I think that the boards have used them quite a bit over the past few financial years. It will be even more challenging as we go ahead for them to find non-recurring savings. There will be more pressure on boards to find recurring savings to ensure that they meet their savings targets. The 25 per cent is 4 per cent and 3 per cent higher than the last couple of years. I know that that is not going very far back, but that might signal at least the beginning of a trend. You will be considering some reports later from the order general on specific boards where that is very much part of the story. Although we are not at all saying that one-off savings is a bad thing, because, obviously, if you can sell a surplus asset or surplus building and get a capital receipt for that, that is a good thing. Our concern is the extent to which boards are relying on that to break even. As I said, there is at least one report later on the agenda where that has been the case. Can I start with a plea, please? I go back to Exhibit 3 and the data on delayed discharges. I understand that you are reporting against targets that are moving, but can I just make the plea that, to me, those numbers turn out to be meaningless because the target has moved? Is there any possibility that you could generate data that sticks to the same target over a period? There are comparative long-term figures, even if it is not the Government's target at the time. I am asking that as a question, because I recognise that they may report against their targets and not against the old targets. The answer might be no, you cannot, but sitting here does not help. Could I then turn on, please? The underlying data is available, and we can certainly show you what is happening across Scotland and by health board against the targets. The broader point that we are making in the report is that the system as a whole is under pressure for reasons that we all understand. We have a concern that it is not clear what the effects are of tightening targets, such as the one on delayed discharges and the one on A and E performance, that that adds to the pressure on the acute system and the knock-on effects into the wider community system are important and much less visible. That is one of the reasons why we are reported in the way that we have. That is a very fair point. Thank you very much for that. Can I just go back, convener, to the point that Mike Lord from talking about earlier about private sector use? You commented on why that occurred. Could you give me some thoughts as to whether or not what you saw seemed to be reasonable and appropriate, because clearly most boards will not have very specialist facilities? Did there seem to be a reasonable use of the facilities and the resources? I hope that you do not think that I am ducking the question, Mr Don, but that might be not really for us. I say that because a lot of those will be clinical decisions, and so not really for us to comment on its reasonableness. The other thing that I would observe is that it is a very small amount of money in proportionate terms in terms of the overall budget. Still a significant chunk, and it has increased. I certainly think that, as Michael said, the fact that some private services are being used to manage the capacity issues and the pressures in terms of waiting times is one thing, but, as Michael explained earlier, some of that is about a clinical decision about where treatment is best, and it is not really for us to make a judgment on that. The fact that you are not saying that it is inappropriate is probably all I need to hear. I am just wondering whether I could go to the very long-term affordability, because I have heard you commenting on the problem of landing a jumbo deck on a very small space and the end of year financial planning, which is plainly ludicrous and has been for every large organisation at any annual plan. You have spoken about the need to get over the year end, and of course we do plans on a two or three-year basis, maybe five if we are lucky. Am I right in thinking that, maybe with the benefit of your long experience of this, even that is not sensible? The changes that we need to make to the NHS need to be planned over 10, 20 years, and boards sometimes need to be able to do that. If we give them carte blanche, undoubtedly everything will be pushed back forever and they are all retired and they need to be cynical to see where that might go, but sometimes surely it will be appropriate to have a 10-year financial plan, a very big hospital, that would surely be the case anyway. I think that we would agree with that. It would be beneficial to have more flexibility at the year end, nor do we think that that is a reason for boards not trying to plan into the longer term. We have a recommendation in the report that says that they need to look beyond the three to five-year horizon, which many boards now do, into the five to ten, and possibly even beyond that demographic. We understand quite a lot now about demographic pressures and why that is going to change. Of course, that involves making all sorts of assumptions, but, as we say in the report, boards should be able to plan for a best, worst and most likely case scenario, and we would absolutely encourage them to do that. That is one, if I might convene it. I will come back to the workforce planning issue. You mentioned in paragraph 56 and probably other places about the demographics of the workforce and the length of time that it takes to train a doctor. Should we not simply be planning around those who are available? Sorry, I am not sure that I understand the question. Rather than trying to run the NHS, I assume that somebody is trying to plan the NHS around the services that they think they want to deliver. I am just wondering whether it should be planned around the services that might actually be deliverable, given the staff that you will have available. If I am understanding the question correctly, I think that you need to do both. I think that this is the challenge that I described, that it is going to ride in the two horses earlier. I think that because of the changing demographic and because of what division for 2020 it is in, as I say, we will see what the national conversation brings out, the kind of healthcare that is required in 20, 30 years is probably not the same that is required today. As well as managing the system just now and dealing with the pressures that we are currently facing, we also need to be redesigning services that will be more fit for the world in 15, 20 years time. That has to include the kind of people that the NHS employs, the balance of those people, the skills that they have. I think that we also need to be looking to the future as well as managing the day-to-day. Stuart McMillan will be followed by Tavish Scott. Just on the question of the backlog maintenance, I did not see any information here regarding the ESA 10 situation in terms of new buildings. How much of that actually had an effect upon the capital situation and the backlog maintenance, please? As far as we are aware, for the projects that we mentioned in Exhibit 10B, the Dumfries and Galloway hospital and the Royal Hospital for Sick Children, those are parts of the on-going discussions that the Scottish Government is having with Treasury at the moment that you know that they are planned as NPD projects, the non-profit distribution method. As far as we understand, the talks are still on-going, so there has been no discussion around their status. Nigel, I touched upon the delayed discharge. I was going to ask the questioners to the Government about the comparison. On the workforce planning, I do not disagree with the comments and the report regarding working to decrease the costs for the agency and the costs to the NHS. On the major events that take place in the country, such as last year when we had the Commonwealth Games, that was not just about building new infrastructure to host the games. There was a huge amount of workforce planning throughout the public sector. We will have taken place for that and also cost for that. How much of that additional cost will have been factored into the report? Michael Russell will keep me right on that, but I do not think that, specifically, we have picked out those kinds of events. When we reported on the Commonwealth Games, we looked at the additional costs and, as it happens, as luck would have it, Michael did that report. He will be able to tell you more. From memory, that report said that we did not identify many significant additional costs to other public sector partners as a result of the games. That was what we said there, albeit that we might have expected to, but that was not what we found. In any year, there might be not something as significant in the Commonwealth Games, but stuff will happen. Therefore, we are looking at the longer term to identify what is a trend in the use of agency staff that could be managed. On the agency staff, I imagine that people might want to join an agency for a whole variety of reasons, as compared to becoming a direct NHS Scotland employee. I imagine that one of those reasons would be potential about the flexibility because of their own individual life circumstances. With that being the case, and being one of the potential examples, I would suggest that it would be very difficult for anybody who is running the NHS in Scotland to really attempt to manage that particular issue effectively or well at all. If someone wants to join an agency as compared to becoming a direct employee, how can NHS Scotland actually manage that very effectively? There is no doubt that people will have all sorts of reasons for choosing how and where they work. Our starting point is the Exhibit 8, which shows that it is going up, and the very significant cost difference is an average of £42.97, specifically for agency staff in 1562. We are not suggesting that you necessarily get to position where there are no agency staff at all, but shifting that balance has to be something that is going to save some money and has to be a good thing. I guess that is our challenge. We are not suggesting that it is easy, and we are not suggesting that any of the NHS as a system is not an easy thing to manage. However, it seems to me that those cost differences are significant, so more needs to be done to try and shift the balance. I will reiterate the point that I do not disagree with the point that is in the report regarding working to reduce, but I do recognise that with individuals and with their own set of circumstances further, for all the circumstances, it is an extremely challenging thing to work towards to try to address. Thank you, convener. First, all those mentions of John Wood, which I am really grateful for you, are the national auditor, Mr McKinley. Not the pilot that will take me home this weekend, but I can ask a couple of questions. The first one follows on from Mary Scanlon's point about mental health services. I was told at a meeting of parents dealing with this in terms of their family in Lerwick on Monday night that NHS Shetland is discharging people to avoid their heat target. Have you come across any evidence of that when this work was being undertaken? Not specifically, Mr Scott. No, we have not. The nature of this work tends to be because it is the national overview. We tend to use nationally available data on the accounts and those kinds of things, so we tend not to get into the detail of that. Where would that appear, if anywhere? Well, if people have concerns about how waiting times are being managed, then they would blow the whistle, I think. There is a confidential— It is just an audit issue about being accurate about what is actually going on, and I genuinely do not know how we tackle that or find out the reality of it. I hear an anecdotal story and I found eight cases that I can point to, but I would be worried if that was a message right across Scotland. Sure, as we would be, it is important that the people who have the concerns are raising it through the appropriate channels. Can I take it to 72, power 72, which Richard Simpson rightly raised earlier on, and, indeed, Stuart McMillan has just mentioned it as well? The two things that strike me, firstly, there is a specific rural issue that you have mentioned, island boards and rural issues about both locum costs and agency costs and bank costs, all of which are going the wrong way. The numbers are even worse in rural parts of Scotland, and then you just answered Nigel Don's question about a five- to ten-year horizon. It does not seem to me to be any real focus on the specific problems that are clearly very costly to the NHS in terms of rural and island boards. Have you pushed that at the Government or at the NHS at the most senior level? In workforce planning terms, there is a specific problem here. What has been done about it? I think that the Government and boards, particularly the boards that are dealing with the pressures in the islands and remote and rural communities, are absolutely aware of that and they are absolutely trying to do things to manage it. I think that we mentioned in the report some innovative things that some boards are doing to try to recruit, attract and recruit people, but, as we mentioned in the report as well, quite often boards are in competition for the same kinds of people. The point that we make in the report, which is why the recommendation is directed at the Scottish Government about national workforce planning, is that this is not a thing that boards can fix in isolation of each other. There are things that they can and should do for sure, but it needs a national and co-ordinated approach, which is why we think that more can be done around national workforce planning to make it more targeted, to make it more focused, both to deal with some of those immediate pressures but to do so in a way that has an eye to what healthcare is going to look like in 10 years' time. Sure. Paragraph 77 says that boards do not give an overview of national workforce issues or trends. They do not provide solutions across boards or nationally to problems such as difficulties in recruiting and retaining staff. That is fundamental, is it not? If those things are not happening—and I do not know if you mean that they have not happened during the time-scan span of this particular Audit Scotland report or whether that is a long-term issue—I tend to agree with Mark Marier that we have been at this 15 years as well—that is a pretty fundamental finding in Paragraph 77 about what is not working. We go on in 1978 and 1979 to give a bit more detail on what the Government has done and why we think that that is limited and why we think that more needs to be done on a national level. The six priority actions for 15 and 16 that we mentioned at the top of page 33 are fine, they are good, and we think that it needs to go further because of that sense of it still being a bit too focused on individual boards and what they can do rather than taking a nationally co-ordinated approach. Thank you, but none of those six points have the particular point about rural and island boards who face the highest costs. Would it be legitimate fear to say, given those costs and those problems that you rightly say that boards are totally aware of and I know they are, that that should be another, dare I say it, bullet point that they need to specifically recognise that? The issue needs to be specifically recognised somewhere whether it is in those bullet points or not, as for someone else to decide, Mr Scott. For sure, there are very particular issues in rural areas and there are particular pressures on other parts of the system, too. I have one question and a couple of comments. One is that at the health committee when we were looking at finance and getting the finance directors in front of us, we were trying to drill down into the costs of having 100 per cent guarantee as opposed to 90 to 95 per cent guarantee and certainly they and Paul Gray admitted that having a 100 per cent legal guarantee, which we are failing on for 10,000 Scots a year, so we are not even successfully doing it, but the struggle to make that has massive marginal costs. Again, I am somewhat surprised that the report of the overview is very good on the bank and agency staff and that that area ensures the costs, but you have not commented on the marginal costs as far as I can see. I have maybe missed it because we do have a lot of paper to read, but the finance directors were not either able or prepared to give us that information, yet the constant struggle to do that, we know anecdotally about locum costs of £3,000 for one session, was in the press recently. Those are massive costs, and Mr Olifant referred to the private sector and leaving aside Hunterston and the brain injury units, which are actually appropriate use, I think, of third sector or private organisations. They overspill use for private to do bunions and other operations, where there is no real clinical urgency but to meet a target. The cost of this, I really would like to know, but to have some idea of it, is there any way that you can give us that or could, in future, give us that or require the boards to do that? It must be, they must know. I will ask Michael Lennon to comment on the specifics of whether we can figure out that additional cost that is involved in meeting those targets. I think that what we have said in this report and certainly in previous reports is that we absolutely recognise that there is a disproportionate effect on focusing on delivering the last few percentage points of a target, and that is one of the things that is making it more difficult for the system to redesign how it delivers healthcare. We said that in 1314, we make the point and hear about more challenging targets more generally. Your point is very fair, Mr Simpson, about the extent to which we have gone into the specifics of that in this report. Michael Lennon In terms of finding out the cost of the marginal cost, as you describe it, it would be very difficult in a way that it is actually quite difficult to look at the cost of one target in isolation and the cost of the NHS of them meeting, say, a delayed discharges target, because all the targets can be very much interlinked and it would be very difficult to separate that out to get a very accurate figure. There might be some analysis that can be done to provide an indication, and certainly we would need to explore that with boards to get a sense of the data and the cost that they might be using. Just to mention that, as Fraser alluded to in paragraph 51, we draw out the point that the Scottish Government and boards place an extensive effort in meeting those targets, but we flag up that there needs to be the balance between focusing on short-term targets and the longer-term transformational change that is required for the NHS, and it is important that the right balance is struck. If you are spending the money trying to reach that last 1 or 2 per cent of a target, you are not going to be able to have the money for transformation change. Can I just ask if we can get an update at some point on daycare—a very good report that you did on daycare—a huge variation between boards? I do not know if you are intended to do an update on that, and maybe I could write with other questions. If I could just follow up the point about the marginal cost, which is crucial to any economic model of anything, I appreciate the disorders that you go looking for the data that is already out there when you try to analyse it. Could I just ask if the marginal costings within the NHS are not available and whether somebody should be asking for some research so that it is? It is absolutely crucial to the economic model. I will step in and echo the frustrations that Ms Scanlon and Dr Simpson have expressed already today. It feels as though, for as long as I have been involved in public audience Scotland, we have been talking about poor cost information about the NHS. Michael is absolutely right that, over and above the amount that is spent with private sector providers to meet waiting times targets, it is very hard to come up with the total cost of the NHS that is contributing towards waiting times and other priorities. Having that better data is fundamental to making the sorts of shifts that we know are needed and that are not keeping up with the pace of both the financial pressures and the demographic and other demands on the system. I am quite worried at the figure for consultants nursing in midwight vacancies. There has been an 87 per cent increase of vacancies for six months or more—page 26, exhibit 6—and an 87 per cent increase over the past year. However, when you drill down to that paragraph 58, what worries me about this report is that we are looking at the referral for cancer treatment the 31 or 62 days. In actual fact, I am not—if it was me and hopefully it won't be, but I think that most patients are not so much worried about the first doctor that they see is whether my treatment leads to a good outcome and a good survival. I apologise for going back but, for as long as I can remember, there have been shortages in clinical radiology. That has been over 10 years and it is still 12 per cent of the posts are vacant in radiology, so what I am worried about is that the actual targets are pretty meaningless the first time that you see a doctor. That is fine, but what I would be worried about is will I get my treatment on time and will it treat my cancer? Will I have a good outcome? Can we in future look at the impact of the vacancies on survival? We are not looking at that because my information is a bit out of date, but I think that I am right in saying that the survival rates in Scotland are quite poor compared with the rest of Europe, and I wonder how much the vacancy rates—general acute medicine—17 per cent vacancies, radiology—12 per cent. In future, can we look at something rather than the fairly meaningless targets and look at what is the outcome? That is not what we are seeing. I know that I am only here for another four months, but I wonder whether, if that is something you could look at for future, we need more stark figures about our survival. I think that that might—we have had over 10 years to work with universities to get more radiologists, it is still as bad as it ever was, and so people going for cancer treatment, if they knew that there are 40 vacancies, that is very worrying. It is a very timely question. We are just in the process now, as a team, of planning what we want to include in this report for next year. It is like the fourth road bridge. We are constantly starting on the next version. I absolutely take the point about there being scope for more outcomes in here. Equally, I think that it is important and particularly for this committee to keep that clear focus on inputs on the money and the other things that deliver services, but we will look at how we can deliver that in ways that are meaningful, because they are quite complex relationships, as you can imagine. Before we move to agenda item number three, I would like to spend the meeting just for five minutes just to allow for the change over the witnesses and comfort break. Agenda item number three, we have three section 22 reports. We have the 2014-15 audit of NHS 24. We have the 2014-15 audit of NHS Tayside and the 2014-15 audit of NHS Heland. We propose to take those in turn and receive an opening statement firstly and then an opportunity for members to question on each statement individually, so I understand that the order general is a brief opening statement to make in respect of NHS 24. Again, Fraser will lead on my behalf in terms of briefing the committee. Nick at the end of the row here is the appointed auditor for NHS 24 on whose annual audit report my report is based, and he will help us to answer any questions that the committee may have. First of all, just about very briefly about all three, it is worth highlighting that the external auditors of the three boards have given an unqualified opinion on the 2014-15 accounts, which means that they are satisfied that the accounts provide a true and fair view and there are no significant errors in the accounts. We have prepared those reports because we believe that there are issues of significant public interest that have been highlighted in the auditor's reports to the Auditor General, and the Auditor General felt important to bring those to the attention of Parliament and the public through this committee. Turning to NHS 24, I am sure that the committee will be well aware of the issues arising from the implementation of a new IT system in NHS 24. The Auditor General did report under section 22 last year to the committee last October on some of the issues in NHS 24, but due to legal action that was under way at that time with one of the external IT suppliers, which is Cap Gemini, it was fairly brief. Now that the legal process has been withdrawn, we are now in a position to give you a fuller update. NHS 24 started work on the futures programme back in 2009. It was originally due to go live in June 2013, but then subsequently it was delayed to October and then postponed due to the new system's failure to meet critical patient safety performance measures. Since then, through the legal process and then subsequently NHS 24 has worked with both suppliers, involved Cap Gemini and BT, to develop the system and try to resolve the patient handling performance issues. The board agreed at its February 2015 meeting to a two-phase approach to implementation, the first phase of which was implemented on schedule in October of this year. I am sure that, as the committee will be well aware, and certainly since we laid the section 22 report in Parliament, the board has subsequently decided that because of concerns over the performance of the system and patient safety, it has now decided to delay the implementation until 2016, particularly to ensure patient safety over the winter period. Clearly, costs have increased significantly. The total cost of the programme has risen by 55 per cent to £117.4 million compared to an outline business case cost of £75.8 million. The cost covers the 10-year contract period and increases are due to changes in the contract specification and costs associated with the delays. There continue to be significant costs incurred by the board in running the existing systems. Each month, the future programme is not operational, and NHS 24 is incurring around £450,000 in additional costs. Clearly, if implementation is not successful, double running costs will increase still further during 2015-16. Finally, the cost of implementing the future programme in their financial plans has included NHS 24. However, given the scale of the challenge, the auditor's view is that delivering the financial targets will be very difficult and will largely depend on achieving some significant efficiency savings in the year. We would be delighted to answer any questions that you have on the report, convener. Thank you. Can I just open questions in respect of the paragraph where you referred to contract management in paragraph 15? I think that one of the challenges that we always face in looking at these reports is that there is anything that could have been forecasted. So, could you have foreseen some of those challenges? A very similar contribution from what Mary Scanlon referred to here, we have been referring to IT reports in this Parliament since it was formed in 1999. The issue in respect of the lack of specialist knowledge comes up in every single report, so surely those who are planning the requirement of the IT system should have been able to recognise that they just do not have the specialist knowledge and they would have to get through their appropriate recruitment procedures so that they would not have to rely on the private contractor. If this was a company running this, they would be bankrupt. They would not have public money to keep pumping into it, so is there an issue here concerning those who are managing this project? We absolutely recognise and share that frustration, convener. We had the ICT report here just quite recently, and you took evidence from those in the Scottish Government. I think that you have the head of digital, the chief information officer, coming next week as part of your panel. It is enormously frustrating that we continue to see the same mistakes being repeated for our part. I was having a conversation with my team yesterday about whether there is anything more or different that we could do as auditors, because, as you say, we have been saying the same things a number of times. I would also say that the responsibility for this lies with the people planning and managing the projects. It is surprising that, at the outset of such a significant IT programme, some of those lessons were not learned at the outset. As you say, we see lots of the same issues here, to do with experience, to do with optimism bias, to do with a whole bunch of stuff that we see repeated over and over again. It is really disappointing and problematic that they are having to spend such a lot of public money on trying to get things fixed. When we reported at the time at that point, it looked like it was going to be delivered. Of course, now we know that it has not, so I think that the other thing to say to the committee is that Nick and his team, with my team and Audit Scotland, will continue to keep a very close watch on what happens with the new system. Our expectation is that they are doing some specific review work at the moment. We would expect to see that reported soon. We will look to see what the detailed plans are for implementing the system and, clearly, the Auditor General has the option to report back to the committee in the future. In terms of who would be responsible—I think that the issue for me is having a clear pathway to who is responsible for the way in which these contracts are prepared, who would be responsible for recruitment. Effectively, would that be the chief executive? Who are the individuals or who is the individual who would be responsible? Ultimately, in NHS 24's context, the accountable officer is the accountable officer for everything that happens on that board. That is where I would start. Clearly, then, there is a question about the way in which the significant public sector IT projects are supported by the wider environment. That is where the Scottish Government and the digital team come in. In the NHS, we have national services Scotland to have a big procurement function and our experience in IT. There is a wider system question about how we are bringing to bear that experience that is in the system on big contracts, convener. I accept the point that I made in respect of this as a private company that will be bankrupt. We cannot keep pumping public money into something that is clearly not working. That is what is happening here. There is public money, so let us just prop it up. That is what is going on here, isn't it? I might ask Nick to come in and offer a review. It is a specific answer to the question. I suppose that it depends on the private company. If some private companies might have gone bankrupt, some bigger private companies might have had to throw money at the problem. I do not think that it is necessarily the case that the private sector always gets the stuff right too, but I do not know if Nick has any perspective on that. I would say, convener, that NHS 24 is a relatively small special health board compared with some of the other health boards. A project that takes forecast £117.4 million is considerably above its annual expenditures. There are two points. Paragraph 7. It subsequently became apparent that there were flaws with the contract documentation, including the performance measures specified in the tender negotiation documents not appearing in the final contract. Who draws up the contract documentation? Is it NHS fault? Did they not clearly specify what they wanted or are Capgemini at fault by not meeting the specifications that were in the contract? I did not quite understand that there were flaws with the contract documentation. I wonder if you could clarify that. I will ask Nick to come in on the second question. Basically, what happened here is that there was a gap. There was a difference in understanding between NHS 24 and the contractor about what they were supposed to deliver. I apologise for interrupting. Should that not been sorted out before? If you were going to build a house, you should come to an agreement about where the bricks went before you started building. Should that not have been sorted out before any money was paid over? Yes, it should, absolutely. What happened was some of the stuff that was in the original tender documentation about performance standards had then not been transferred into the contract documentation, which is what they discovered. However, that only came to light when they were trying to implement it in 2013. NHS 24 was saying that it was not working like we said it was supposed to, and Capgemini are saying that it is working like it says it is supposed to in the contract. If there were flaws in the documentation, it should not have gone ahead until those flaws were ironed out. As the accountable officer, he should have said, let's get this straight so that we know exactly how we are going to spend the money before you have made a start. I agree with that. The problem was that they had not identified that there were flaws until much later in 2013 when they tried to implement it. At that point, who discovered that there were flaws? Nick, do you have any further specifics on that? The discovery really came because there was a difference of opinion between the contractor and NHS 24. The contractor believed that they had supplied the system that they tended for and NHS 24 felt that there were patient safety requirements that hadn't been met. At that stage, the differences between the contract that was intended and the contract that finally went out were identified. I hope that I am not straying on dangerous ground, but I appreciate that this has been in court. I think that it has been at the High Court on my right. Has any decision been made? Have judges made any ruling? It seems that NHS 24 is left with a brokerage of more than 20 million costing them about half a million a year in additional costs. Were there any costs found against Capgemini or did the High Court fall in favour of Capgemini and all the costs were on the NHS, the public purse? As part of the overall agreement, the legal case was withdrawn by NHS 24. So, they wouldn't have withdrawn it if they thought they were going to win it? Why did they withdraw it? I'm sorry, I just haven't followed it in detail. No, and it is very complicated, Mrs Cannon. At paragraph 9, we tried to set out a little bit of what happened there. They went through a whole series of contractual processes, because, in a contract like this, there are escalation procedures that they would go through. As we say, in paragraph 9, in June 2014, NHS 24 served what's called a default notice, which could have led to NHS 24 to end of the contract, but they decided, instead of doing that, they decided to go into mediation and to undertake some diagnostic work and work with the contractors to try and salvage the project. That was the judgment that the board made at the time, to try to build on, rather than lose the £37.9 million that had been invested at that point. So, they've already spent £38 million. Capgem and I, were they still working on the project, am I right? But BT have been brought in as well. Both supplies are part of it. I'm just trying to understand going forward. Apart from the £21 million loan from the Scottish Government, the NHS 24 has been lumbered with, are we looking at something satisfactory coming out of this project? I suppose that's a million-dollar question, Mrs Cannes, that we'll need to keep a very close eye on. It's a million, convener. It says quite a few million here. Indeed, it's a several million question, convener. When we wrote the section 22 report, I guess we would have envisaged having this conversation with you with a system that was up and running. That would have been bad enough, given how much it had cost and the significant overruns in all those things, but that's not where we are. That's even more problematic and worrying for us that they have spent what they've spent to date. They're running up that £450,000 a month in keeping the current systems going. They have worked hard with the suppliers, and our sense is that contractually and in terms of the relationship with the supplier, that's in a better place than it was. Clearly, it was a very big decision not taken lightly to effectively pull the plug on the system once it had gone live in October. For all the right reasons, I have to say, if there were concerns about patient safety, you would expect the NHS 24 to make that decision. The final question. After all, there are only 55 per cent over budget, compared with 300 per cent over budget for the cap payments. Realistically, in comparison, it's not too bad, but it's still a very serious issue within the NHS. Do you have a crumb of comfort going forward that flaws in documentation and arrangements between CAPGEM, IBT and NHS 24 will be solved in the months going forward? I don't think that we're in a position to do that today, Mrs Callan. What I can say is that the NHS 24 is taking it very seriously. As absolutely you would expect, the chief executive has asked for a detailed review to be undertaken, which should be reporting on Nick as the auditor will get sight of that report very soon, we hope. We should have a better understanding of what happened at GoLive, and then, as I say, we'll be looking very carefully for the detailed implementation plan when that comes through for when they want to try and reimplement it in 2016. Given the history of the project, it would be a brave man or woman who wants to give any assurance on how this is all going to end up. As you've answered one of my questions, it's £0.45 million per month. When it was abandoned at October, those costs started again, and they will run until the system comes in, and may even run a bit beyond that, possibly. So we're not going to get this until the spring, and that's going to be another four, five, six months. So it's going to be another £3 million, £4 million of brokerage that they'll require, Mr Bennett. My understanding is that the system won't go live before the end of June, 2016. I mean, what I find astonishing is having been involved in dealing with IT projects, but not at this scale, I'm very glad to say. You know, we used, there were two things that we did, one was we all went and tried to develop a software system, we used an iterative process, in other words, as you went along, you started with a basic goal, which you agreed with the contractor, and you then actually began to develop it and used your clinicians to test the system as you went along. That was before you got to beta testing, which is when your final system is being tested before launch. I just don't understand how we've got to this point in this particular situation. I understand the original problem, but the tender contract, tender documents and contract documents didn't match, but I don't understand. My first question is, in terms of your overall view of ICT, which we've seen, what systems are used that allow to prevent this final thing from happening that's now happened? Nor do we fully understand it, I think, is the first point to make. The challenge for us is that, as the time of writing the report, it had gone through that process of testing, it had been an iterative process, as you describe it. It's clearly been around for a long time, so there's been a lot of work and things done to it. I think that one of the things that the board will now be looking at is why didn't the testing process that they carried out late summer of this year, why didn't it pick up some of the stuff that then became quite clear over a particular weekend of operation once it went live? As you'll know, it's very, very difficult to fully replicate a live environment. You can always really test it once it actually pressed the button, but then what's been striking about this is that some of the performance issues were so significant that it is surprising that they weren't picked up. To get, you would expect teething troubles in the odd glitch to get to a point within a few days of pulling the plug in it altogether. Something's clearly gone wrong in that testing process, but as to what that is, we don't really know yet. I'm really astonished at the fact that in your paragraph 25 you refer to the reviews. A gateway review, an independent review by Ernst and Young, an independent lessons learned by PricewaterhouseCoopers—I don't know who paid for all those, by the way—but you've got all those reviews, and we're still in the situation whereby we are constantly being faced with these ICT problems. Mr Bennett, you made the point that this is a small board with a very focused purpose, and I suspect almost no experience in ICT whatsoever. To me, that lies right at the top. If contracts of this sort are being signed off, why was the contract not reviewed by the most senior part of the digital section of the Government in terms of the gap between the contract and the tender for it? It's such a fundamental error that it should have been picked up by the digital—we'll ask him next week—but you must be very concerned if it happens with one project, and we're handing these out to all those nine special boards that we've got. We're a tiny country—nine special boards that we've got running. If each of them tries to run an ICT project with this sort of situation, we're going to be faced with this again and again and again. I just advise colleagues that we need to be careful that we're focusing on the auditor's report and the questions around it. There will be some policy issues that we can take up with the Government representatives and possibly whoever else we wish to do that, so we just need to be careful. Thank you, convener. I have a couple of briefings, Dr Simpson. First of all, it's worth saying that some of the arrangements that we described to you in our last ICT project were in existence when they all kicked off back in 2009. I would agree that relatively small organisations without the experience of doing things at this kind of scale is costing more than they spend every year. You would absolutely expect a degree of external support and help to be not just offered but required. That has to be one of the things I'm sure that the Government will be looking at. I wonder if I could just expand that point, please, Mr McKinley, because we've already looked at ICT contracts in general. We've asked the Government about the arrangements for those, in particular the Governance arrangements for that. I think that several of us went on record as saying that this looked to be very complicated. It's tempting to say when we look at these that it may not be working terribly well. Richard Simpson has already picked up on paragraph 25 where we seem to be running up large bills with consultants of one sort or another to tell us things that are probably pretty obvious, because we can see them anyway. On reflection of all of it, of which this is but a small part, is the Scottish Government's ICT structure beginning to look appropriate or inappropriate? Is that because of its complexity? Is it perhaps because we just don't have the skills and we believe that contractors should have the skills and the Government shouldn't? What's the audit perspective on all of that now, please? I think that the audit perspective is what we said in the report that was very recent, Mr Don. I think that that remains our view, which is that the arrangements are still pretty new. If the arrangements for how IT projects are delivered are to be effective, then we would expect them to be managing things like this. I'm not sure in a position yet to say whether it's right or wrong or whether it's working because they are relatively new, but clearly you would expect the governance of how we do digital things in this country to be managing and avoiding stuff like this happening in the future, for sure. The thing that's very frustrating is that this is yet another example of where that hasn't worked. What fraction of ICT contracts don't work? There is a risk that we focus on the ones that we can see as a failure in some sense, and I presume that there are quite a lot out there that have worked. It's a good question, so I'm not sure that I have the answer to it. As auditors, we tend to be professionally sceptical, which is how we describe it. It's clear that when things like this go so badly wrong that, obviously, that's in the public interest, but it's a fair question and I'll take that away and see what we can dig out. Thank you. I think that in fairness to those concerned, it might be nice to know how many of them have gone well, because I suspect that it's really quite a large number. I'm looking at paragraph 9 and the decision not to jeopardise the £37.9 million investment already made. Having considerable past experience in quite large IT projects, a classic error is to continue to throw bad money after good. Does it seem the decision by the board at that point was a reasonable one? It's a great question, Mr Butian. We obviously have the benefit of hindsight now. As you say, one of the sometimes the best decision boards can make is to not proceed with something and just take the hit. I'll ask Nick to say a little bit more about the circumstances at that time, but genuinely, I think that that is a question for the board. They took a judgment based on all the information that they had in front of them, and the judgment was that the system could still be made to work. In that context, it's worth saying that what NHS 24 is trying to achieve here is a good thing. I don't think that anyone is arguing that the future programme is ill-conceived as a concept, and so the prize that they were seeing was significant. It's an important part of not just how NHS 24 operates, but how the system operates, and it's part of the discussion that we were having earlier today about managing the pressures on the system. It's just not to underestimate the scale of that decision at that time to pull the plug in it, but I don't know if Nick might have a bit more detail on that. NHS 24 had taken on a future programme director who was quite experienced at the time, and she undertook a full risk assessment as to whether the board should proceed with the system. I think that the risk assessment was quite comprehensive, so I wouldn't be critical of that particular decision at the time. Was the board aware of the potential increases in costs at that point? Was that a decision that they took on board? They had already incurred £37.9 million, so there were additional costs that are included in the £117.4 million, which represent the full 10-year cost of running that service. They knew that there would be additional costs to be incurred at that point. It was going to be £117 million against £75.8 million, not at that particular time now. They took the decision going forward without knowing how much it was going to cost to go forward? No, they didn't anticipate at that stage that it would be £117.4 million. How much did they anticipate it would be? I haven't got those figures to hand. It would be interesting to know. The only good thing in this report is that services to patients weren't affected. On paragraph 10, it says in the last sentence that a review of the contractual obligations is currently on-going. Then, again, paragraph 14, the auditor's opinion is that financial implications remain significant and on-going. What is the risk going forward? Has there been any clue as to whether that is a financial risk? Is it a performance risk? Yes, I think that both of those things. Nick has reported and will continue to keep a very close eye on the financial risk, specifically in relation to the project. The knock-on impact that has for the board and its ability to continue to break even at the end of the year. Clearly, the brokerage repayment schedule is an additional pressure that it will have to live with and deal with. We have already said that, since we reported, we know that it will incur additional costs in terms of running the existing system and, presumably, in whatever needs to be done to get the new system up and running. That is absolutely a financial risk. The performance risk, I guess, is not so much the performance risk in terms of how the service is currently being delivered. It is managing to keep going as it has done. The performance risk is probably more than one of opportunity cost. The future programme that is designed to deliver is not being delivered yet. As Nick has said, we do not expect it to be delivered and operational within the next six months. The longer that goes on, the longer we do not have a system that can help to provide a better service. The floor is in the contract documentation. Who actually had responsibility for the contract negotiation? At that time, it was NHS 24. Did they do it themselves? Did they have any outside lawyers, for example, to review the contract details? It is not just a question that bits were missed off in terms of the specifications of what was to be delivered, but there are flaws in how the document was put together in terms of delivery and all the rest of it. There were external lawyers who were involved by NHS 24, but I think that their internal processes were not comprehensive enough in terms of the procurement. They did not undertake a complete read-through of all the key documents. The signing off and checking was inadequate on the NHS 24 documents. They did not read the documents. Not a full read-through, so they did not identify the elements that were missing from the revised contract. It is not a little bit odd that you do not read the contract. I used to read the contract. It is. There should have been a page turned on the various documents to make sure that they were complete and comprehensive, and that did not happen. The cost of the contract was just for the record. I have not read through a document, but what would the cost be for that document that they signed for that they did not read through? The total cost of the Futures programme is forecast at £117.4 million. At the time, it was not that. At the time of signing the contract, the outline business case was anticipating £75 million. It is still a lot of money. The accountable officer would have signed the contract. Is that who would have signed it? The accountable officer signed the document where he and nobody in the organisation read through the entire document. I am not saying that the contract was not read through at different stages, but at the time that the contract was signed, there was not a page comparison done to make sure that some of the elements that were included in the original outline business case had been properly copied into the final contract document. That is fascinating, Mr Bennett. Does that mean that those three reviews that you and Mr Finlay described earlier on, did they find exactly that point that you have just made? Did they look into why that contract did not include those details? I do not believe that that was picked up by those reviews. What did those reviews achieve, if anything? I think that they did highlight that there were weaknesses in the overall governance of the project. There were changes made as a result of that, and more expertise was brought in. I mentioned that the new future programme director was brought in as a result of that, so that was a positive development. The system is still not up and running, and it is still costing £450,000 a month. We may have brought on one new person, but it has not made any difference to delivering the project, has it? Currently, that is the case. Can I just be clear about the numbers? You said that the current estimated cost is £117.4. Is that the real number at the moment, as of today? Is that still the real number that we are working from? That was the forecast cost at the time that section 22 was drafted. Just remind me of what date that was. It was in October, and it was before we knew that they would pull the plug in it. As we said earlier, we would anticipate that number to go up, because we are not going to have the system for another six months or so at best. That was the forecast on the basis of it going live in October. It is then plus £450,000 per month for October, November, and Mr Bennett said earlier all the way through to June at the current estimate. That is £4 million more, at least. I think that that is subject to negotiation as well. I understand that the impact in 2015-16 will be £1.1 million in terms of the financial cost. Mr Bennett, in terms of auditing it, who is paying that extra £450,000 a month? Is that being paid for by the Scottish Government to NHS 24? Again, I understand our current between NHS 24 and Scottish Government about how that will be financed. It could be that there would be an extension of brokerage. No, I am clarifying that it is public money and it is not being paid for by Cap, Gemini or BT, who are the suppliers. Why not? I think that we have to wait to find out what the lessons learned and the reasons that it was delayed before we can come to conclusion. Is this going to end up in court? Something that is so far over budget? I do not understand why it came out of court. What did NHS 24 get for coming out of court? It does not have a system. It has cost £117 million plus. They are no better off. They are all great questions. I do not think that we are in a position to answer them today, Mr Scott. I think that that is exactly—I think that the decisions around those kinds of judgments are more appropriately directed to the board. What we can see is that there is significant risk remaining, both in terms of the finances and the performance of the system. As Nick Scott said, there will be lots of discussions going on with the suppliers, with the Government. We have an exhibit to the brokerage repayment schedule. I would expect that it will be part of the discussion about what that looks like in the future. It may need to reface some of that. That is why we need to continue to keep a very close eye, because it is a very fast-moving picture. I do not accept that. Can I just make one final point? I think that it would help us, and it may be your frustration as well, if this report included as clear a line of responsibilities as possible to achieve. I find it very hard to work out who is responsible for what. You very helpfully said earlier on to the convener that the accountable officer is the accountable officer. There are all these other people coming in, including what responsibility did the three reviews have that Mr Donne rightly referred to earlier on? Do they just do a review and then go away? Do they have no responsibility for the terms of that review and what it did? I do not know the answers to any of those questions, but in terms of learning from that, what is the point of three reviews if they do not get us any further forward? I wonder if the Scottish Government would reflect on that for a future reference. I think that that is a very helpful feedback. Again, with the benefit of hindsight, the review processes clearly have not delivered a successful project, nor does that necessarily mean that there was nothing useful that came out of them, as Nick mentioned earlier. Thank you, convener. I would like to highlight one positive point from this, and it is paragraph 13. Colin Beattie touched upon it earlier. That is it whilst this has been under way. There has been no risk to patient safety. That is a very important point to highlight for anyone who is reading the official report or watching this online at some point later. However, I would like to touch on paragraph 7 and 10. Paragraph 7 highlights the flaws in the contract documentation. Paragraph 10, with the failings in the both organisations, Capgemini and BT, when they are looking at the particular project. I think that that highlights once again that the public sector can get things wrong, but so too can the private sector. Clearly, we are looking at NHS 24, and that is the responsibility for this committee. The two private sector organisations have a role to play in that as well, in particular when looking at the contract at the very outset. That point has to be raised. It is clear that we are failing on many sides. It is not just NHS 24. On paragraph 17, when you touched upon the external appointment, did this individual come from within the NHS or from elsewhere within the public sector, or were they someone from outside of the public sector? Yes, someone within the NHS. In terms of their experience of IT projects or of any kind of relevance, are you aware of a direct relevance in order for them to really take this particular project and take the situation forward? I am not aware of the specific experience, but she did hold a very senior position within the NHS. In terms of IT projects, every organisation undertakes an IT project of scale. There are clearly going to be challenges there for that to go forward and move forward, but my understanding of organisations is that every organisation is different. It will have its own internal working culture. In terms of trying to introduce a new IT system, I understand and appreciate that it can be very difficult to get IT experts who actually have cultural expertise within that organisation, whether it is this one or the other, so that when the initial contract or initial proposals are being set out, that can actually be married up at the very beginning. I know that the private sector will get IT contracts wrong, and the benefit they have is that they can then charge their customers more money to cover overruns. That is a different scenario when it comes to the public sector, as we all know. In terms of the cultural understanding and expertise, I, after looking at the report, and certainly in previous reports and discussions that we have had in this committee, I just wondered if NHS 24 is too small an organisation to undertake a piece of work of this magnitude on its own. I am not sure, but I do not know if you would have a viewpoint on that, or if that might be a policy question that you are not able to answer. Well, it is, so thank you for giving me that out, but what I would say, and Nick said it himself, I mean, just looking at the scale of this thing compared to the size of NHS 24, bearing in mind as well that NHS 24 does a very specific thing, and therefore its requirements in this project were very specific. This is not just a boilerplate solution that you can roll out and plug in. Again, not at all straightforward, but I come back to the same point that in terms of when any organisation is starting out on this kind of exercise, the capacity, both in terms of numbers of people and skills of people and expertise, has to be part of the decision-making process about how you are then going to do it. I think that there is absolutely an argument that it is not necessarily about size necessarily, but it is about undertaking a more robust risk assessment at the outset to say, does this organisation have all the things that are required to deliver a very big and very complex IT project like this? Do you think that they did? No, clearly not. I think that is the conclusion that you get to in this. OK, thank you. OK, thanks. Colin Beattie wants to come back to just a brief question. Thank you, convener. Mr Beattie, I just want to come back on this question of contract, which is obviously at the core of whatever has gone wrong here. You said that it hadn't been read. You talked about a page-turning exercise at the time of signing. These are really two different things. Are you aware whether the board actually read and understood that contract before they signed it off? I think that if I could just outline the issue that actually happened, the procurement strategy that NHS24 followed was one of an output-based specification, which the key performance measures that relate to that contract are quite critical to that. Well, it is a specification based on what output is going to be delivered. As I say, the performance measures are very important. There were two errors in the procurement process when the output-based specification was loaded on to the NHS24 procurement software. There was the emission of some of the performance measures. It was a copying error in terms of uploading on to an IT platform. There was a new maker checker system. There was no check done. That procurement software forms the basis of what tenders bid for. They bid on the basis of that. The issue was further compounded by the fact that there were also emissions in the final contract. Again, some of the performance measures hadn't been copied across to the final contract that was signed by NHS24 and Capt. Gemini. I find it quite incredible. Was there nobody responsible for checking this contract, for verifying that it actually was going to save what they wanted it to say? The council officer is ultimately responsible, but as I mentioned before, the problem was that there was no complete read-through of the various documents to make sure that the copying and uploading had taken place accurately. Would that have been the external lawyer responsible for that? Would it have been delegated to them? It could have been a number of individuals, including NHS24 staff. So we don't know who was responsible? So we're not absolutely clear, Mr Beattie, but I suppose that's the point that we're making, and neither were they, because if someone had been clearly responsible for it, it would have happened. So I think that one of the lessons that we learned from this, and I think that if I'm understanding Nick's point correctly, the read-through bit should be a final check and balance, so that's not the only thing that went wrong here. That's the thing that compounded a whole bunch of other stuff that happened up to that point. Bearing in mind that this is a big and complex process, and as Nick said, the fact that it's output-based means that this is not a big long list of tasks that you'll do and I'll do. This is about what we're delivering, and in some ways that's a good thing, because it focuses on everyone and what they're trying to deliver. What it does mean is that performance measures and the expectation on all the parties have to be absolutely crystal clear, and that's what hadn't happened, and that's what became very clear when they tried to implement it in 2013. Can we just make it clear that obviously the auditors are not responsible for the actions that should have been followed through, and we'll have an opportunity to decide how we take that forward in terms of further evidence on that? That's just a very brief question from Richard Simpson. One of the things in the annual report of the NHS 24 was that they were committed to the 25% reduction in senior managers, and I just wonder if your audit demonstrated that the senior managers they got rid of had anything to do with the catastrophe. That's maybe too strong. The problems that we're now facing. It's all very well to see your cut sway through senior managers, but if you get rid of the people who are actually responsible for significant programmes or bits of finance or whatever, so did the people they get rid of have any adverse effects upon the NHS? That's probably a question for NHS 24. But as far as the audit is concerned, if this and the NHS 24 generally, you didn't find anything that would point to problems arising from this restructuring. We haven't seen any kind of causal link there, and lots of other organisations are experiencing the same kind of reduction. In terms of the work that we've done, we haven't identified any causal link. Okay, thank you. A very small point. When we've talked about the read-through and we've talked about an output specification, how many pages would an output specification run to? I mean, surely it's not that many words. I can't remember the number of pages. It's a large document though, but surely the output specification can't be.  I recognise in contracting terms that that happens, but surely the output specification can't run to it. Surely it's one side of a piece of paper, isn't it? It's an appendix, I believe, in the contract, yes. Okay, maybe we need to ask to see. Thank you, colleagues. Can we now move to the next section 22 report that we have on the agenda is the audit of NHS Tayside? Just a little change over what this is. I understand that we've got a brief opening statement from the Auditor General. Thank you, yes. The second report that we have in front of you today is NHS Tayside. This is the first time that the committee has seen a section 22 report on Tayside, and the Auditor General has made this report for a few reasons. In 2014, NHS Tayside received a total of £14.2 million in brokerage and two installments. It received an initial payment of £8 million to cover retrospective holiday pay enhancements and some overspends in workforce costs and primary care prescribing. The board later required an additional £6.2 million following an accounting adjustment that was identified by our colleagues as auditors of the board in recognition of the sale of land, which was the formerly Ashludae hospital in the 14-15 accounts. This is the third year in succession that the board has required brokerage. The report says that the board's reliance on brokerage stems from overspends and an on-going difficulty to sell a number of surplus properties, which means that it has been unable to generate income from planned sales. The board has agreed with the Scottish Government that it will repay the brokerage from the proceeds of the sale of assets of those properties. The board is currently engaging with the Scottish Futures Trust to develop plans for the main sites for disposal in an attempt to try and sell those properties more quickly and reduce the risks associated with planning permission applications. Having said all of that, the timing of the disposals remains uncertain, and the Scottish Government has indicated that it will discuss repayment options with the NHS Tayside should disposal not actually happen as planned. In addition to the brokerage repayments, in 2015-16 the board has required to find £27 million of efficiency savings in order to break even. As at 31 July of this year, the board had yet to identify £11.2 million of those savings. In the first six months, the board was overspent by just over £5 million. As the board continues to rely on the sale of properties to address the issues, there continues to be a risk that it will not break even in this financial year 2015-16. I thank the convener very happy to take questions on the report. Can I raise the first question in connection with the land disposal being included in the accounts? Can I just ask how unusual that would be for any of the boards to include the proposed land sale in their accounts, given that the final sign-off had not taken place? I will ask Kenny to talk to the detail of it, but it is unusual, and it was the auditors that required it to be changed. Kenny can give you more detail on what has actually happened there. NHS Tayside had signed an agreement with Miller back in December 2014, where they agreed in principle to sell the property, depending on a number of conditions. The main condition on that was achieving successful planning permission. I think that the board felt that the likelihood of getting planning permission was extremely high, and they felt that the risk of not getting it was very small. However, from an accounting standpoint, it is quite right that you should not recognise a disposal until all conditions are met in such an important condition of planning permission, although it could be deemed to be small. We know that those things often take longer to be resolved. They have now concluded the transaction on 23 October, with planning permission and the whole transaction. At the annual AGM of the board, accounts have been proposed to the board, and they would have accepted it on the basis that the transaction had already taken place. Was there any caveats attached to the papers on which they—I take it that it is something that you have uncovered and not something that is presented to the board? Yes, that is correct. There are not issues that we have had with other boards. We have had inquiries at the committee in respect of information that has been provided by managers to board members to ensure that they can take decisions. For example, at Brokeridge, we had it in our inquiry at NHS Highland. Is it acceptable for board members to not be made aware of the fact that the disposal had not taken place? I think that it is possibly a question for the board why that was the case, but it is certainly unhelpful that the board members were not totally aware of the real position in the recognition of that. There is an argument to be made here that it is poor governance that board members have been presented to them by set of accounts that include the disposal that had not taken place. I think that it was possibly more a poor—the wrong judgment reached by the finance team in recognising that at that point of time rather than any misleading attempt to mislead the board. I appreciate that issue, but it does have ramifications in other decisions that the board could potentially take. I take it that there is no record that there is any trail of the board being kept up-to-date with whether the transaction had taken place or not. What progress has been made because it is quite a significant omission to say that sorry, those accounts include the disposal and make them available for public record, and then for the auditors to come in following that and say that the disposal has not taken place. I think that you probably best asked the board that question why that has happened. If I can briefly come in there. You drew a couple of comparisons there, and I think that we would see some important differences from the likes of the NHS Helen case that you mentioned earlier. I should also say that adjustments to the accounts after the signs are not in itself an unusual thing. That happens all the time. That is significant because of the scale of it, I think. There is always a degree of judgment and debate between a finance director and an organisation and the auditors, because they are coming from a position of managing the finances. We are coming from a perspective of accounting standards and other things, so there is always a bit of that that happens. That is why there is a period between the board in this case signing their accounts and the auditor signing that opinion three or four months later, because that is what happens in that process. I do not think that that was necessarily about the board being kept in the dark. You mentioned brokerage and, in fact, the evidence that we have on page 5 of the section 22 report for me demonstrates a good process in terms of a finance officer keeping a board up-to-date about the financial position and the potential requirement for brokerage, which happened way back in November 2014, so much, much earlier than, for example. I am not raising the issue of brokerage in this occasion. The main issue is that the board, where they are kept aware of the fact that, yes, here is a set of accounts that includes the sale of the disposal, which is clearly in the balance in terms of the various balances that are made available to the board members. Where they are made aware of the fact that this disposal had not taken place before the auditor did, that is the question, I think. I appreciate the question that is raised with the board directly, but there must be issues about governance if the board members have been not kept aware of the fact that, yes, here is a set of accounts that we have presented, but the caveat is that it is subject to, because, again, it is standard practice that these disposals are all subject to the money not being in the bank until the developer against plan permission. That is probably quite a common arrangement. I am not aware that the board was aware of the fact until we raised it at the audit committee. That means that decisions that the board has taken as when the council presented to them may have been impacted by that, because if I am a board member and I am not made aware of the fact that possibly that land disposal may not take place or has not taken place, then it has an impact on decisions that the board has taken or not. That is an issue concerning the governance, then, is it not? Yes. That is a comparison, I am raising. I appreciate that there are issues about brokenings with NHS Island, but NHS Island knows primarily about the way in which the board was provided with information to allow them to take the necessary decisions that they had to take. If I am a board member and nobody makes a set of accounts that are set before me, they make it very clear that, yes, this disposal has already taken place. There is no caveat. I appreciate what can happen after that, but it is a significant decision. I would be pretty relieved at the board meeting to say that it looks very good now, because this land that we are expected to be disposed of has actually taken place. Nobody has made me aware of the caveats, but I appreciate that it is a decision for the discussion that has to take place directly with the board. My first question is, how do you expect any health board to make £27 million of cuts in one year? Paragraph 13. I will come to the nitty-gritty, but on top of brokerage, £27 million of cuts in NHS Tayside is that possible? Who decided that that would all be done in one year? The current layer is required to meet the 3 per cent efficiency savings on a year-in-year basis. Last year, NHS Tayside made £22 million of efficiency savings. I think that the key point to draw out was that 60 per cent of those efficiency savings came from non-recurring items. Therefore, it becomes increasingly hard for the board to keep on making further efficiency savings, and £28 million will be difficult for the board. There is no doubt about that. My second question and phraser. I have definitely been here too long, because I have to correct you. It is not the first time that NHS Tayside, I do not know if it was a section 22, but I remember back in 2012 that it had a £16.5 million deficit. In fact, it came to the audit committee and, believe it or not, the chief executive resigned something that does not happen now, I think a chap called Tim Brett. That is all history. I wanted to get into the property disposal. I was brought up in Hillside and went to the primary school in Hillside, so I am very familiar with Sunnyside. The Sunnyside hospital has leaned derelict for decades. My concern is that there are various property disposals on the accounts in Tayside, for example, Sunnyside. Is it possible that they appear in their accounts at an inflated value, which makes the accounts look quite good? When they come to be sold, the sum realises that it is much lower than that shown in the accounts. Does that not create an immediate deficit? Relying on non-recurring savings, we all know that that is bad, but this is a huge amount of land and property. Surely, if it was put on the accounts at a certain time in recent decades, the state that it is in now and the property market cannot possibly be worth that. Is there not an inherent problem going back two decades to 2012? Is there not a problem there about overpriced properties on their accounts? Every year, a full valuation is done by valuers on the properties right across the NHS Tayside, and we review that valuation. It is regularly changed to upgrade the state of dereliction, etc. That is right. The valuations held in the accounts will reflect the state of the properties that it is in and the original cost and exactly what they think they might realise from it. I do believe that the property values that are carried out in the accounts are appropriate. If I can ask for the Ashloody example, I appreciate that it went through in April and was not included in those accounts. Was the amount that it was disposed for pretty well equal to what it was on your account? The Ashloody profit was £4 million on a final disposal process of £5 million, so the net book value was just over £1 million, so there was a profit made on the Ashloody sale. You would expect the same from Sunnyside. I believe that it is finally on the market for sale after many decades. Yes, it went on the market in August of this year, and I believe that you would anticipate that you would hope that you would realise at least the carrying value, but it will clearly depend on by a property by property basis. That is one of the challenges that the boards are facing, is trying to realise the surplus estate that they have in a difficult market. I just have one other question on Tayside, because I come from that area, I get a little anecdotes. I understand that there is quite an inflated team of directors in NHS Tayside. I just wonder if you looked at the management team of executive directors, senior managers, is that, higher than in other board areas, are they paid a greater amount than in other board areas, and have they been given superior performance-related pay that is any different to other health board areas? Is that something that you looked at in your audit? It isn't something that we specifically looked at. I haven't done a benchmark to see how that compares to other boards, so I haven't done that. You might look at that in future in the NHS Tayside. I am just looking at some of the issues here. I see that there is mention made of changes to how the public pension schemes are valued. If I am not incorrect, the additional costs of £5.5 million on the pension, is that the deficit? That is effectively the increase of the costs that they will be paying going forward. That is similar to all other boards, just as a result of the recent revaluation of the national pension scheme. Obviously, that combined with national insurance charges is quite challenging. On paragraph 24, it is mentioned here that NHS Tayside recognises that traditional approaches to producing savings are declining. What are the implications of that? Does that mean that the soft options are finished and now it is going to get a bit tougher? Yes, I think that that is right. As we heard earlier, the challenge is facing the NHS as a whole across Scotland. You need to look at the longer term strategic plan to make savings that will be sustained for the long term, so I think that you are right that the low-lying fruit is being picked. On paragraph 27, at the overspend of £4.549 million in the first four months, does that include the staff payments? It does, yes. The additional staff payments from respect to the EDL were accrued at the end of last year, so that has all been taken care of from the 1415 accounts. Therefore, there should have no impact on the 1516. The £4.5 million is separate from that, not part of the additional staff costs that were accrued for EDL. Obviously, there is quite a difficult position here. Do you think that, given the sheer size of the deficit that they have to cover, that it is going to be practical on-going? I realise that, whether they sell ashlydy or not, that is a one-off non-recurring asset sale. They certainly have challenges in facing them going forward. They need to move away from their alliance on non-recurring items and the dependence on disposals of surplus properties. I know that the board is looking at this and coming up with a detailed plan on how they might address it, but it is certainly going to be challenging for them. If I may convey it very briefly in a sense, what is as well as the specifics of Tayside, this is an interesting report because it is a microcosm of the discussion that we had earlier about the overview report. I think that we see all the pressures in one board. As Mr Butie said, it looks very difficult for them to break even this year, for sure. I have two questions, really. One is the sale that was put on the accounts and then taken off or discovered one. Was that declared as part of their efficiency savings for that year? I think that it would have been declared as one of the non-recurring savings. That is what I mean. It has already been included not just in the accounts but included in the report that we received on efficiency savings. That is a fairly significant amount. Presumably, it will not appear again as an efficiency saving this year, although the sale has gone through this year. I hope that someone is taking a note of that and we do not get it. The other thing is the EDLs that we have referred to, the enhanced payments for work during leave, which is a very interesting one. It is four point something million, the total amount involved. It goes back over some four or five years and it was raised by staff as being inadequate. Mr McKinley, are you comfortable that this is a one board event? Are we fairly certain that it is not occurring in other boards? As you would expect, Dr Simpson, that is exactly the question that I asked when I received the Auditor's Annual report. We have done checks with all of the Auditor's Eye points to NHS boards and we are confident that it is simply this board where an error had taken place in the treatment historically. That is the one piece of good news that we probably had today. Can I also ask about one of the things that occurred? I mean, I have only just joined the Public Audit Committee, but one of the elements that was coming up in looking at future finances in the health committee on health service was ensuring that equality of pay was undertaken. I think that you qualified previous accounts in previous years on that issue. I do not see any in this report referring to equal pay issues. The amounts previously could not be quantified going forward as to what that would cost. Is that gone now? A quality equal pay has been dealt with and is not an issue for Tayside that has not been addressed? I think that it is the case that there is in just about every health board's accounts a provision for liabilities relating to equal pay. The situation in the NHS is now very different from that in local government. We are in the position where at the end of 2014-15 it was possible to quantify the liabilities for the first time and the accounting treatment has moved from being an unquantified contingent liability to being a quantified provision and the amounts involved are coming down quite markedly. That is why I have not drawn attention to them either in the NHS 2015 report that you were taking evidence on earlier or on the three section 22 reports that you are looking at just now. That is very helpful. Thank you. I do not have any further questions from colleagues on that particular report. Can I now move on to the 2014-15 audit of NHS Highland? For the record, we are now clarifying with Stephen Boyle, who is the Assistant Director of Audit Scotland. He was joined by the Auditor General and the Assistant Auditor General. He needs no introduction to the particular board, but for consistency, the committee is very well aware that the audit report that Stephen Boyle did last year in 2013-14 highlighted weaknesses in financial management that were a major factor in the board requiring brokerage of £2.5 million from the Scottish Government to Breakeven. As you know, the need for that brokerage was mainly due to an overspend on operating costs at Rhaigmore hospital. The auditor and subsequently committee in its inquiry identified significant concerns about the governance in the board and the decision making around the decision to go for brokerage. The Auditor General decided to bring a section 22 back to you this year as an update. Since we did the work and since you had your inquiry, NHS Highland has developed an end-year financial recovery plan, which detailed how the board expected to address projected shortfalls against its budget and achieve its planned Breakeven position at the year end. The committee will also be aware that the Scottish Government brought forward £3 million of the national resource allocation money in RAC in January 2015 to help the board to reach a Breakeven position in 2014-15. I am very finally convener. Based on a review of the work undertaken by the board in 2014, the auditor, Stephen, concluded that NHS Highland has strengthened its financial management arrangements and scrutiny of financial performance. In 2014-15, NHS Highland achieved its two key financial targets, breaking even against its revenue and capital budgets. 40 per cent of savings that were made in the year were on a recurring basis. Raghmawr did reduce its budget overspend to £6.9 million, but that fell short of the £6 million target, which adds to the continuing pressure that the board experiences this year. I am very happy to take questions on the section 22 report. Clearly, there has been tremendous improvement here from the auditor general's report that a great deal of work has been done. Obviously, it is still a worry that there is such a high level of non-recurring savings. I think that we made that comment at the time that the last report came forward. The big problem still appears to be Raghmawr hospital. I know that the comments have been made that it has reduced its budget overspend. Are we satisfied that adequate steps are being taken to bring Raghmawr hospital, which contributes such a large portion of the deficit? Is there adequate steps being taken to pull that back into financial equilibrium? As you say, Mr Beattie, they have responded well to the audit work and to the committee's inquiry in the last 12 months. An important part of that, we mentioned at paris17 in the report, the three-year recovery plan for Raghmawr, which takes us through to 2016-17. I can maybe ask Stephen to give you a little bit of flavour as to what is in that, but it looks to us like it covers all the right things. Certainly, when we look at some of the issues that the committee talked to the board about at the time in your inquiry about the way in which clinicians and others in Raghmawr were spending money without any real control or reference to their budgets, that has been a particular focus in getting that under control. Certainly, we have seen an improvement in the control environment within Raghmawr hospital and we note a paragraph 22 to the report on some of the practical steps that they are taking around the director overseeing and taking control of the authorisation of local doctors and temporary staff so that that oversight is there and that is factored into the financial projections for the hospital. As one example, having said all that, the financial environment for Raghmawr remains challenging. Even at period 7, the board's most recent set of in-year financial projections suggests that they are still looking at a potential overspend of £6 million for the year. In the context of not quite making the savings for the hospital last year and the financial environment still remain challenging, it remains the case that, given its dominance of the overall spend for the board and the bearing that that has, it will remain challenging to continue to deliver on the financial recovery plan. Do you remind me how much the overall budget for, at least the overall financial spend in Raghmawr is? I am just wondering what proportion that £6.9 million is. The total exhibit 5 to the report sets out the budget for the hospital for the current financial year is 145.8 million. I refer to your general report on NHS 2015, paragraph 64. It says here that NHS Highland reported that its policy is to hold corporate services vacancies open for at least six months to allow it to generate non-recurring savings. It almost becomes recurring savings if you do it all the time. How significant a contributor is that to reducing the deficit? Is it desirable? If a post is empty for six months, do you need that post? I am sorry, but I do not have the proportion of that to hand. In terms of flipping a non-recurring savings into a recurring savings, that has been part of the process that NHS Highland has used over a number of years, exactly as you suggest. If a post is vacant for such a long period of time, it will take a judgment as to whether or not that post is still required. It would be interesting to know what proportion of the savings that it is trying to achieve that this contributes. Just one last thing. On paragraph 22 of the report, again, temporary staffing and overtime is showing an increase. There seems to be additional controls around it. Does that proportion of 9.859 million seem disproportionate, or is it a reasonable spend? We can double-check that. The order to general is very helpful, so we can find a number in the overview report. We do not have it in here, Mr Beattie, but we can certainly check and come back to you on how that stacks up compared to other boards. I think that I have not been quite critical of NHS Highland. It is only right to be fair where it has done some corrective work. It is also fair to say that it will overspend its budget in the past five years. Since section 22 came forward, it has gone down from 9.9 million to around 5 million. As a Highlands MSP, it is also quite annoying that NHS Highland has not received the recommended amount of funding in accordance with the NRAC funding formula from the Government for many, many years. Although it got some last year to help it to break even, it has been underfunded for many years now. NHS Highland and Highland Council, as you will know, were the first organisations in Scotland to have the health and social care integration, so they are the pioneers here and all credit to them for making that work. My concern is that, although we have seen NHS Highland addressing the issues, I think that the future is looking fairly good. I think that they have corrected a lot of things that were wrong in section 22, but they now rely on Highland Council doing their share and NHS Highland can do what it wants. Highland Council this week is facing £40 million of cuts. I appreciate that this is new to you, but given that the NHS budget is protected and given that council budgets—I do not want to go too much into that—the point is that the protection for the NHS and NHS Highland doing everything right in order to meet your recommendations, they have to take some responsibility because of this health and social care integration for Highland Council meeting £40 million of cuts. I am just asking how difficult is this going to be where we have this kind of integration between the health service and councils because I think that this might be the first. Is it something that you are looking at going forward given that so many have followed in the footsteps of Highland Council? We are indeed, Mrs Gann. In fact, we are publishing our first report on health and social care integration tomorrow. I think that it is due to come to the committee in two weeks' time. You will get plenty of opportunity to go there. As well as being the first, the other interesting thing about Highland is that they are now the only board that went for what is known as the lead agency model. All other areas have gone for the integrated joint board model, where they create— Children is with the council and that is worrying with 40 million cuts. They have swapped those things over. It is fair to say that, without giving too much away in the report, we are publishing tomorrow that the way in which the money is working in all of this is one of the biggest issues that is proving really difficult for NHS boards and councils to bottom out. The report that you will see coming out tomorrow really is a bit of a position statement, given that it is quite early days in the new integration landscape. We are really just trying to set out the facts as to what is out there and the shape of them all. We also identify some issues for the future. Highland Council and the board in Highland have had a lot of experience of figuring out how the money works, because the model that they developed when it first started two or three years ago has had to be unadapted as the services can and bottom level out. A long answer to your question, which is that health and social integration is going to feature heavily in our work programme the next three to five years. Can I start? I am concerned about budgets and how they are set. I am looking, as we have done an exhibit four, about the position at Regmore hospital. I am just wondering with the benefit of hindsight what justification there might have been for the budget, given that it has always been overspent. It continues to be overspent by a significant amount. It does rather look as though it costs about £145 million to run Regmore hospital and the budget has never actually said as much. Am I being too cynical? I would not call it cynical. I think that it is a perfectly fair observation, Mr Don. In fact, you will see and Stephen O'Keefe will keep me right here that between 11.12. and 12.13. they did actually go through a process of rebasing the budget, which is why it jumped from 130 to 135. They went through that process then and it still was not enough. I would absolutely agree that, as part of their longer-term financial planning and thinking about budgets, they will need to think about the budget for Regmore. The challenge there, of course, is if they simply were to up the budget for Regmore by five or six million, that is five or six million that they need to find from somewhere else. So there is a balance between continuing to try to push down the cost of Regmore as well as possibly considering a rebasing of the budget. That takes me, I think, to the bigger question of how on earth are these budgets set at all. Again, forgive me, I look at the other exhibit three the other side of the page and I see non-recurring savings of three million for every foreseeable year, because I have no idea where they are going to come from, so a figure of three million will go in and the incredibly accurate figures