Scotland's secret finances: How difficult it is to get to the bottom of how public money is spent

First of all, let’s look at the new Queensferry crossing, which was opened to great fanfare. In its Infrastructure Development Plan progress report in January 2014, the Scottish Government claimed that “the Chambers of Commerce estimate that the [crossing] will deliver economic benefits worth around £6 billion to Scotland’s economy.” We were, naturally, interested in the basis of this £6 billion estimate, and approached the Chambers of Commerce. They had no record of talking about a £6 billion benefit to the economy – but they had produced an estimate in 2010 of a cost of £1 billion to the economy if the existing bridge had been closed for a year – but could not recall who drew up this costing. They speculated that the £6 billion figure could be in respect of multiple years’ closure. What seems clear to us is that the £6 billion figure is tenuous, and cannot be supported by hard evidence.

Again on the Forth crossing, we were interested to know how much of the contract and subcontract work on the bridge had gone to Scottish companies. It took long enough to determine which was the right body to approach with a Freedom of Information request - it turned out to be Transport Scotland. The information they gave us was as follows. Of the total cost of the scheme of just over £1.3 billion, the principal contract was worth £790 million. Of the principal contract, £123m went to Scottish subcontractors and £127m went to Scottish supply orders. Of the over £500m of other contracts, Transport Scotland did not hold information on work going to Scottish firms. So, all we know, at present, is that 19% of the £1.3 billion went to firms registered in Scotland. There will have been more Scottish firms working on projects outside the main contract, but we are not privy to the information. There will also have been Scottish employees working on the projects obtained by non-Scottish companies but again we have no information. Overall, this is a situation which is totally unsatisfactory.

Our second example relates to the Edinburgh Schools PFI project. When it became clear that there were major structural problems with this project, we requested a copy of the contract from Edinburgh Council under Freedom of Information. Despite the public interest in making the details of this contract available, Edinburgh Council took a different view, saying that commercial and confidentiality considerations weighed in favour of non-disclosure. This decision appears very difficult to justify given that when we applied for disclosure, we were within months of the 15-year time lapse after which the documents are regarded as historical records, which should be publicly available. We have found the attitude of compulsive secrecy, as adopted by Edinburgh Council, increasingly common over the past ten years during which we have been investigating public contracts - if anything, the position has got worse over the recent past.

Our third example of secrecy relates to the hub programme, operated by the Scottish Futures Trust. Under the hub initiative, Scotland has been divided into five hub areas, and a private hub company has been established in each area. Each hub is a partnership between public sector bodies, (like health boards and local authorities), the Scottish Futures Trust, and private sector partners. These private sector partners are typically large construction companies or specialists in the provision of services and finance. The hubs are set up under very long contracts, (20 years, extendable to 25): and the hubs are responsible for delivering much public sector infrastructure in their areas, like schools and health centres. Hubs are big business – with over £2 billion of public investment either undertaken or in the pipeline.

The Scottish Futures Trust has claimed significant benefits from the hub approach – both in terms of cost savings, and the percentage of subcontracts awarded to Scottish companies. We were interested in assessing these claims, so approached the hubs with requests under FoI to be told - by the Scottish Government, by the Scottish Futures Trust, and by the hubs themselves - that the hubs, being private companies, were exempt from FoI. In fact, the responses from the hubs make interesting reading. As well as stating that they were exempt from FoI, three of the replies contained almost identical forms of wording along the lines that “as a small business we are unable to allocate resources to processing such requests for information.” This is a bit rich given that the hubs are bodies responsible for projects worth hundreds of millions of pounds. It also rather suggests that there may be a concerted line underlying the hubs’ refusal to answer requests. And finally, one of the hubs even suggested that their Twitter account was a useful source of information on their activities.

Overall, this is a very unsatisfactory, position, for two reasons. First, because it means that there is no way for the public to assess or verify the claimed benefits of the hub approach. But secondly because, to any reasonable lay person, the wording of the contracts under which the hubs were set up does clearly seem to imply that they should co-operate with FoI requests.

The Scottish Futures Trust is also responsible for the National Housing Trust. The SFT state that:"So far, deals support around 2,000 jobs in the construction industry and wider economy." So SFT were asked: “Are you speaking here of jobs in Scotland or in the UK as a whole, or elsewhere?” The reply was: “It would appear that the source of the statement quoted in your request is the More Homes Policy published by Scottish Government...The information you have requested is not held by Scottish Futures Trust.” But going to the Scottish Government website, which indeed gives this statement, one is directed to the Scottish Futures Trust for more information. So we were in effect being sent round in circles.

Our final example is not of overt secrecy – but of confusion, if not worse. An important document which is now produced for the UK as a whole is the Whole of Government Accounts – which gives, among other things, estimates of the long term liabilities of the public sector under commitments like PFI and other public private partnerships. When MSP Andy Wightman asked the Minister for Finance if there were plans to produce Whole of Government Accounts for Scotland he was given the brush off – the Minister referred him to a letter that concerned Consolidated Accounts, not Whole of Government Accounts. But Consolidated Accounts are quite different from Whole of Government Accounts: Consolidated Accounts show how money has been spent, but do not cover the wider long term liabilities which are covered in Whole of Government Accounts.

All in all, in a wide variety of areas covering economic and social matters, and particularly financial matters, it is almost impossible to get appropriate information on how our money is being spent and by how much it is benefitting the economy and society. Nor do we have anything like an adequate picture of our future liabilities. What is going on? There appear to be three main causes.

First of all, there is a growing tendency for public services to be provided by quangos, or by private bodies. There are a number of factors driving this process – like the desire to get capital projects off the government’s books, or the desire to escape the constraints of the EU directives on public procurement. But the effect is that more and more public money is being spent by bodies who feel themselves beyond the scope of FoI, and, in many cases, by bodies who have no culture or track record in the running of proper information and evaluation systems.

Secondly, Government itself is in many cases content to quote headline figures, without being too concerned whether these are soundly based. The £6 billion benefit figure for the new Forth crossing is an example of this.

And finally, for reasons which we do not understand, when it comes to the crunch, FoI is not being interpreted robustly enough. In an ideal world, the public interest would weigh much more heavily with public bodies, and with the Information Commission, when making decisions on disclosure.

What can be done? Well, actually, the answer is simple, in principle. We are, after all, talking about information on how public money is spent. With the right political will, it could be made a condition of awarding any public contract that adequate disclosure of information must be made. The fact that the public sector in Scotland has failed to grasp this particular nettle is likely to cost us all dear in the long run. A point made as long ago as 1997, in the UK Government’s original report, “Your Right to Know”, is still very relevant namely, “Unnecessary secrecy in government leads to arrogance in governance and defective decision making.”

Margaret Cuthbert lectured in economic statistics, before taking up economic and business consultancy. Her research has included studies of Scottish public expenditure, Scottish industry and support for business. Jim Cuthbert lectured in statistics before joining the Government Statistical Service. He worked in the Treasury and the Scottish Office where he was latterly Chief Statistician. His research interests include Scotland’s public finances, utility pricing and investment theory.