Chamber and committees

The Scottish Executive will undertake a range of activities to help to build compliance in the run up to the introduction of the smoke-free legislation in March 2006. This will include an advertising campaign, a mail drop to every household in Scotland, and guidance to businesses and organisations on how to comply with the new law.

It is currently estimated that these activities will cost in the region of £1.5 million.

The Executive did not consult on the specific issue of the date of implementation.

Scottish Executive officials and staff from Consolidated Communications, the company handling smoke-free PR for the Executive, attended the regular meetings of the Scotland CAN Communications Group. No financial support was provided.

The level of funding is still under negotiation. The Minister of Health and Community Care is meeting the President of COSLA at the end of the month to discuss a range of implementation issues, including funding for enforcement.

The Scottish Executive appointed Consolidated Communications from its roster of PR agencies to undertake a range of PR activities in support of the smoke-free legislation. The cost for the period April 2005 to March 2006 is £169,000 (net).

The core work on the current Northern Isles ferry tendering process is being carried out by a team based in the Transport Group of the Scottish Executive Enterprise, Transport and Lifelong Learning Department. However, inputs to the work are being made by senior officials in Transport Group and by staff in a range of policy and professional divisions across the Scottish Executive. It is not possible to quantify the staff costs incurred on this work by such officials as work on the tendering exercise represents only one element of their duties. On similar grounds, it is not possible to cost the ministerial involvement in the process. However, on the basis of the staff costs of the core team (without any allowance for general Scottish Executive overheads relating, for example, to accommodation costs), it is estimated that a total of £242,100 (in outturn prices) has been spent on the exercise up to 31 July 2005 broken down as follows:

Staff Costs - £84,000

Travel and Subsistence - £2,700

Consultation - £400

External Advice - £145,000

Advertising - £10,000.

The total administration costs that will be associated with the re-tendering of the contract cannot be estimated with any degree of precision at this stage of a complex procurement process.

The payments made to NorthLink in each year since they took over the contract, broken down by category of payment, are set out in the following table.

Category of Payment	Oct 2002 - Sept 2003	Oct 2003-Sept 2004	Oct 2005-July 2005	Total Oct 2002 – July 2005
Basic grant	£11,605,168	£10,702,000	£9,275,218	£31,582,386
Capital expenditure	£400,000	£400,000	£333,333	£1,133,333
Material change – staff costs	£828,615	£593,016	£491,778	£1,913,409
Material change – harbour dues	£1,758,368	£2,922,587	£2,298,050	£6,979,005
Scrabster Pier delays	£831,158			£831,158
Lease and loan payments		£4,149,377		£4,149,377
Additional funding	£3,000,000	£9,966,445	3,606,287	£16,572,732
Total	£18,423,309	£28,733,425	£16,004,666	£63,161,400

 

The basic grant line provides the basic grant figures uprated for inflation (but for only a 10 month period for 2004-05).

The capital expenditure line reflects the provision in the grant agreement to pay NorthLink up to £400,000 per annum in additional grant depending on the extent to which the aggregate capital expenditure related to the new vessels exceeded the grant agreement benchmark of £88 million. The actual capital expenditure incurred triggered this allowance in full.

The material change – staff costs line records the payments made to NorthLink as a result of actual staff costs being higher than projected in the company’s bid. This provision stemmed from the fact that the previous operator would not release details of their staff costs to other bidders in the subsidy competition. From April 2004 the figures are notional as the support to NorthLink was provided through a single monthly payment without a specific sum hypothecated for material change.

The material change – harbour dues line records the payments made to NorthLink as a result of actual harbour dues being higher than projected in the company’s bid. This provision was necessary as the scale of harbour dues payable was unknown at the time of the subsidy competition, not least because some new facilities were still to be constructed. From April 2004 the figures are notional as the support to NorthLink was provided through a single monthly payment without a specific sum hypothecated for material change.

The payments related to Scrabster Harbour delays were intended to meet some of the costs faced by NorthLink as a result of the delay in the completion of the new pier at Scrabster, including the costs of laying up the new vessel for that route and chartering a replacement for a period of approximately six months.

The lease/loan payments were made in September 2004 and were aimed at paying off, in one instalment, a loan which NorthLink had entered into and leases related to some of the assets used by NorthLink. As a result, the Scottish Executive secured control of these assets for use in the follow-on contract. These payments also served to reduce the total level of support which NorthLink required as they involved interest payment savings.

The additional funding line aims to present the additional funding that has been provided to NorthLink, over and above the other categories, to maintain its delivery of the lifeline services. However, this category has also been the source of funding to cover other items that could have been the subject of a material change claim under the terms of the grant agreement. For example, the grant agreement provided for NorthLink to bear the first 10% of any increase in fuel prices over the benchmark April 2000 figure. No material change claim for additional grant under this heading was made by the company before the funding system was changed in 2004. However, the company estimates that, up to 31 July 2005, it would have been entitled to approximately £2.2 million to cover the increase in fuel prices over the 10% margin stipulated in the grant agreement. Allowing for this figure would reduce the additional funding awarded to NorthLink over the period October 2002 to July 2005 to £14,372,732. There are also, for example, legal costs associated with the consideration of the applicability of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) to the transfer of staff to NorthLink and costs arising from the outcome of the TUPE Employment Tribunal decision that fall into the same category.

The grant agreement of December 2000 between the Scottish Executive and NorthLink Orkney and Shetland Ferries Ltd provided for basic grant payments, expressed in April 2000 prices, as follows:

October 2002 to September 2003 - £10.773 million

October 2003 to September 2004 - £9.662 million

October 2004 to September 2005 - £9.250 million

October 2005 to September 2006 - £8.139 million

October 2006 to September 2007 - £7.828 million.

However, the agreement provided for these figures to be uprated in line with inflation and also made provision for extra payments to be made to the company principally to cover cost factors which were unknown at the time of the contract award and to cover cost increases (egg in fuel prices) that were beyond the control of the operator.

The core work on the previous Northern Isles ferry tendering process (which culminated in an award of contract to NorthLink Orkney and Shetland Ferries Limited in December 2000) was carried out by a team based in the Transport Group of what is now the Scottish Executive Enterprise, Transport and Lifelong Learning Department. However, inputs to the work were made by senior officials in Transport Group and by staff in a range of policy and professional divisions across the Scottish Office/Scottish Executive. It is not possible to quantify the staff costs incurred on this work by such officials as work on the tendering exercise represented only one element of their duties. On similar grounds, it is not possible to cost the ministerial involvement in the process. However, on the basis of the staff costs of the core team (without any allowance for general Scottish Office/Scottish Executive overheads relating, for example, to accommodation costs), it is estimated that a total of £100,000 (in outturn prices) was spent on the exercise broken down as follows:

Staffing - £86,000

Travel and Subsistence Expenses for Officials - £ 1,000

External Advice - £13,000.