I completely understand that this is a complex area, Mr Pentland. We have tried in the past to separate it out, in our own reporting and for the commission. In a sense, the pension accounting adjustments are like the weather—we have to respond to what the actuary requires of us. They have no impact on the resources available to us, although they feed through to the outturn figures, in the way that Russell Frith has described, and the costs that we manage more generally.
Of the £1 million underspend that you referred to, about £800,000 comes from the things that we control. The pension adjustments happen outside that, due to things such as changes in the discount rate that is applied and changes in the valuation of the assets for the local government pension fund. There is very little that we can do to manage any of that. As you know, we are also not in a position to carry forward reserves to manage it, as most local authority bodies do. With the commission’s agreement, we try to ring fence that and separate it from the other things that we manage here.
With regard to the remaining £800,000, which we have reported here—the £1 million less the £200,000 pension adjustment—we completely agree that we can continue to apply more discipline to bring that figure much closer to a match between our expenditure and our income. We have outlined two areas in that. One is the higher fee income; this summer, we are looking at how we put the income budget into our overall budget to minimise the chance of there being more money recovered than we need across the year. The other is the legal and professional fees; we are budgeting more tightly every year to bring that underspend down.
I remind the commission that, under our financial regime, we simply are not allowed to overspend, so you will always see a small underspend. The challenge for us is to make that as small as possible, while ensuring that we are not coming back to the commission for extra resources every time a small change in our cost envelope occurs. However, you are absolutely right to ask the question, Mr Pentland, and we will continue to apply pressure to it and to make that transparent to the commission in our budgeting round.