Appendix 2 - EKOS ALEO Options Appraisal Review September 2025
Perth and Kinross Council · 29 October 2025
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PKC - GENERAL Option Appraisal for Arms Length External Organisations in Perth and Kinross Appendix 2 Report for Perth and Kinross Council | September 2025
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Please consider the environment before printing this document PKC - GENERAL Direct enquiries regarding this report should be submitted to: Brian McLaren, Managing Director Email: brian.mclaren@ekos.co.uk EKOS Limited St. George’s Studios 93-97 St. George’s Road Glasgow, G3 6JA Reg 145099 www.ekos-consultants.co.uk
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PKC - GENERAL Contents 1 Introduction 1 2 Context 4 3 ALEOs 15 4 Options 39 5 Appraisal 44 6 Conclusions & recommendations 77 Appendix A: ALEO Review Working Group 84
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1 PKC - GENERAL 1 Introduction 1.1 Introduction This report presents the findings of an appraisal of options to change the current structure of Arm’s Length Organisations (ALEOs) providing leisure, culture and performing arts services across Perth and Kinross. The ALEOs in question are: • Live Active Leisure (LAL). • Culture Perth and Kinross (CPK). • Perth Theatre and Concert Hall (PTCH). The study takes place at a challenging time for local authorities. The combination of many years of austerity measures to reduce the UK budget deficit and the COVID-19 pandemic have had a huge impact on public sector finances. These external shocks compound long standing challenges facing councils with increasing demand for services such as health and social care, and more recent cost increases due to a period of high inflation and fast rising energy and staff costs. The operating environment for publicly funded leisure and culture services is currently very challenging. Low cost private and online providers; changing customer needs; very high levels of capital investment needed for venues to remain attractive, competitive and safe; and decreasing funding available are all drivers for this review of current ALEO structure and models. In 2024/25, ALEOs faced significant internal recurring revenue pressures as well as provisionally approved savings totalling at least £2.5m. With decreasing funding available and cost of living / inflationary increases continuing, there needs to be some consideration of how the services delivered by ALEOs remain sustainable in future. At a full Perth and Kinross Council (PKC) meeting on 6 December 2023, a full report was presented setting out clear recommendations for reviewing the ALEO corporate service structure. This work forms part of the wider Transformation & Change programme being led by PKC alongside ALEO partners and builds on previous work and analyses conducted by Perth and Kinross Council (PKC).
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2 PKC - GENERAL 1.2 Project Objectives and Method Study purpose The primary purpose of the study is to undertake an appraisal of a series of defined options for the delivery of culture and leisure services in Perth and Kinross. These options were set out in the council’s previous review work and are as follows: • Option 1: Bring all ALEOs in house to PKC. • Option 2: Bring some ALEO services in house (e.g. consolidation of corporate services from ALEOs delivered by PKC) and ALEOs retain own identity / library services brought back into PKC. • Option 3: Create one new ALEO / two new ALEOs – streamlining corporate and back-office services. • Option 4: Create one ALEO for culture and sport and considering possible change of status for Perth Theatre and Concert Hall. Method The study was conducted in seven stages, as shown below. Background information, including financial information, monitoring reports and staffing structures were provided to the consultant team by the ALEOs and PKC, and a 1. Inception 2. Data Collection & Baseline 3. Stakeholder Engagement 4. Financial and Operational Analysis 5. Option Development and Appraisal 6. Draft Report 7. Final Report and Presentation
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3 PKC - GENERAL programme of consultation was agreed with the ALEO Review Working Group (see Appendix A for a list of members). The consultations included council officers and elected members on the ALEO Boards, senior managers across the three ALEOs and a selection of ALEO Board members. Following the consultation work, the team completed a financial analysis of the ALEOs and each of the defined options. The financial appraisal was then supplemented with a more qualitative appraisal drawing on the consultation inputs and the wider experience of the consultant team as reported here.
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4 PKC - GENERAL 2 Context 2.1 National Context 2.1.1 External Delivery Models Over the last 40 years or so, Councils in Scotland (and elsewhere) have increasingly looked to alternative delivery models for services, including culture and leisure services. The most commonly used alternative to in house delivery of culture and leisure is that of the arm’s length external organisation (ALEO). ALEO is not a legal company structure. Rather ALEOs may take different forms including limited companies, limited liability partnerships, community interest companies and trusts. In Scotland, ALEOs are normally established as a limited companies with charitable status, with the charity status conferring benefits in the form of exemption from non-domestic rates for properties managed by the ALEO. This benefit was effectively discontinued following the Barclay Review of Business Rates in 2017. While the exemption continues for properties that were already managed by ALEOs (councils now have a cap of the relief that they can claim), no new properties coming under ALEO management will have the exemption, a change that acted as a disincentive to councils seeking to establish new ALEOs or add more properties into the existing trusts. There are, of course, other benefits attributed to the ALEO model. Freedom from Council bureaucracy, access to other sources of funding and the ability to develop more agile, entrepreneurial cultures are frequently identified benefits of the externalised models. These benefits led more and more councils to seek to externalise service delivery, and for more to join culture and leisure services together to form larger, multi-function ALEOs in which revenue generating services such as health and fitness could help cross-subsidise those that create little income, such as libraries. ALEOs typically receive payments for their council for the delivery of services (commonly known as a management fee) and may also make use of council services in areas like payroll, finance, HR and IT. Most (but not all) are established as single member companies in which the council is the sole member.
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5 PKC - GENERAL The ALEO model has always been politically sensitive, with some considering it to result in reduced accountability for what remain public services, even despite the presence of elected members on ALEO Boards and quite clear governance structure and practices. Indeed, a number of councils, including North Lanarkshire and Falkirk, have recently brought services back in house, foregoing rates savings in favour of what is perceived to be a greater degree of control over public services. However, only ten councils continue to deliver both culture and leisure in house, underlining the appeal of the ALEO model. Of those that do have one or more ALEOs, 12 have a single ALEO covering both culture and sport. 16 councils deliver culture services in house and ten deliver leisure services. 2.1.2 Budget Pressures A recent report for Community Leisure UK1 paints a very challenging picture for local authority culture and leisure services. The report found growing financial pressure on the services, regardless of whether they were delivered in house or externally, reflecting a number of factors: • over a decade of austerity measures affecting public finances following the 2008 financial crisis everting pressure on local government budgets. • growing demand for health and social care services as a result of the ageing population in the UK and in Scotland. This has required increases in resources for these services without growth in public sector budgets to match, hence other services having to find savings. • increasing ringfencing of council budgets for national priorities, reducing more discretionary spend. • lack of statutory protection for culture and leisure services, meaning that when Councils face difficult budget decisions (as they have done for many years now) they prioritise statutory services, again resulting in larger reductions for non- statutory provision like culture and leisure. 1 Review of Culture and Leisure Services in Scotland (2024), report by EKOS for Community Leisure UK, Creative Scotland and sportscotland.
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6 PKC - GENERAL • growing competition from the private sector in health and fitness (e.g. low-cost gyms) which has impacted on revenue generation for leisure services. More recently, the combination of the pandemic, rising inflation and the cost-of-living crisis have added further pressure to services that have already sustained budget cuts for more than 10 years. The report also suggests that funding is expected to continue to fall, with previous reductions in staff and, in some cases, facilities impacting the range and quality of service provision. Many across the sector expect that these trends will continue, with further reductions in staff and facilities, and resulting negative impacts on services. 2.2 Strategic Context This section outlines the key local, national, and sector-wide policies and strategies that have informed the options appraisal for the future structure and governance of Arms Length External Organisations (ALEOs) delivering leisure, culture, and performing arts services in Perth and Kinross. These documents provide critical context on strategic direction, governance expectations, legal frameworks, financial sustainability, and sector- specific best practice. Ensuring alignment with these strategies will help ensure that any future model reflects the Council’s aspirations and statutory responsibilities and is positioned for long-term success. 2.2.1 Perth and Kinross Council Strategies and Initiatives ALEO Transformation Review Report (Perth and Kinross Council, December 2023) This internal report sets out the Council’s rationale for undertaking a full review of its existing ALEO arrangements. It identifies several challenges including financial pressures, governance risks, strategic misalignment, and single-point dependencies in monitoring arrangements. The report outlines the need for stronger integration with Council priorities and greater transparency in performance and oversight. This report provides the official mandate for the current options appraisal (although as discussed below the ALEO Review work has a longer history). It defines the scope, drivers for change, and the critical success factors to be achieved through any revised governance or delivery model.
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7 PKC - GENERAL Perth and Kinross Community Plan (Local Outcomes Improvement Plan) 2022-2032 The Perth and Kinross Community Plan identifies five priorities to enable “a confident, ambitious and fairer Perth and Kinross”. These priorities target poverty, health and wellbeing, employability, digital participation and learning and development and provide a framework for action across the community planning partners. Perth and Kinross Council Corporate Plan 2022/23 – 2027/28 Aligned to the Community Plan, the PKC Corporate Plan sets out the Council’s priorities over a five year period and reflects the growing challenges post-Covid with cost of living pressures and increasing inequality. These priorities include actions to tackle poverty, improve health and wellbeing, grow the local economy, address the climate emergency and ensure a positive future for children and young people. All ALEOs within Perth and Kinross have a clear role to play here, not least in supporting economic growth and improving health and wellbeing. Perth and Kinross Local Economic Action Plan (2025-2030) The Council priorities are reflected in the Perth and Kinross Economic Plan, with a strong focus again on addressing poverty and inequality and realising the opportunities of net zero. The Economic Plan is itself aligned to the Tay Cities Regional Economic Strategy (2019-2039) and the Prospectus for Regional Growth (2025-2035) which both recognise the role of tourism and culture in supporting the long term economic ambitions of the Tay Cities region. Perth and Kinross Tourism Strategy and Action Plan 2025-2030 Reflecting the priority attached to tourism and culture in the Regional Prospectus, the Tourism Strategy and Action Plan sets out Perth and Kinross’ ambition to grow its tourism economy and culture is a strong feature (both PTCH and CPK are members of the Tourism Business Partnership). Physical Activity and Sports Strategy 2023–2028 This strategy sets out the Council’s ambitions to improve physical and mental health outcomes by increasing levels of physical activity, particularly among children, older adults, and communities facing barriers to access. It includes a strong emphasis on community engagement, inclusive facility design, and low-carbon infrastructure.
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8 PKC - GENERAL Any revised ALEO structure must enable the delivery of these objectives through its governance, resourcing, and service delivery approach such that it can better support increased participation, reduced inequalities, and the Council’s net-zero targets through investment and programming. Culture Strategy 2023–2028 The Culture Strategy positions culture and creativity as central to inclusive economic growth, education, mental wellbeing, and the Council’s wider regeneration and place- making ambitions. It promotes access to culture for all residents and visitors, supports community-led activity, and encourages partnership across sectors. As cultural services (including performing arts) are currently delivered through ALEOs, any revised model must be capable of supporting the Strategy’s ambitions. This includes ensuring cultural access, enabling collaborative delivery, and supporting cultural infrastructure that contributes to wider economic and wellbeing outcomes. PH2O Leisure Development Project PH2O is a major proposed capital investment in leisure and wellbeing facilities in Perth city centre. It represents a significant redesign and consolidation of existing services, led in partnership between the Council and Live Active Leisure. The success of PH2O is directly tied to the governance and operational arrangements that will follow this review. The appraisal must assess how different structural options could support capital financing, long-term asset management, service integration, and risk- sharing for a high-profile and high-value project. Active Travel and Placemaking Initiatives Perth and Kinross Council has invested in active travel infrastructure and place-making initiatives that promote healthier lifestyles, community connection, and environmental sustainability. These include cycle hubs, walkable routes, and integration of active design into public spaces. ALEOs delivering culture and leisure services must operate in alignment with these wider objectives, maximising use of local assets and contributing to strategic outcomes related to health, sustainability, and connectivity.
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9 PKC - GENERAL Active Schools and Physical Education, Physical Activity and Sport (PEPAS) Programmes These Council-supported programmes aim to embed physical activity and sport into the lives of young people by working in partnership with schools and community groups. The ALEO structure must continue to facilitate, support, or partner with these programmes. This may include opportunities to formalise relationships, improve alignment, and ensure delivery is consistent with wider health and education goals. 2.2.2 Scottish National Policy Context Community Wealth Building (Scottish Government) Community Wealth Building (CWB) is a people-centred approach to local economic development, which focuses on fair work, local procurement, inclusive ownership, and making better use of public assets by harnessing the economic leverage of local ‘anchor’ organisations. As anchor organisations, ALEOs can play a significant role in advancing CWB locally by enabling greater retention of wealth in local communities through procurement practices, community asset ownership, and workforce engagement. Community Empowerment (Scotland) Act 2015 This legislation enhances the rights of communities to influence decisions about public services and assets, including rights around participation and asset transfer. ALEO governance must be responsive to these legal duties, facilitating community influence, transparency, and accountability. OSCR Guidance for ALEOs and Charities Guidance from the Scottish Charity Regulator sets out how charitable ALEOs must maintain independence, manage conflicts of interest, and demonstrate public benefit. The guidance has significant implications for the legal status, financial arrangements, and governance of ALEOs. The appraisal must examine whether moving to, continuing with or departing from charitable status is compatible with desired outcomes.
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10 PKC - GENERAL Standards Commission Guidance on ALEOs (2024) This guidance clarifies the responsibilities of elected members who serve on ALEO boards, including expectations around ethical conduct, conflicts of interest, and transparency. Governance models must ensure that elected member involvement is appropriately structured, well-supported, and compliant with national standards. Audit Scotland – Councils’ Use of ALEOs (2018) This national review evaluates how well councils manage ALEOs, highlighting risks around oversight, transparency, performance monitoring, and financial management. It offers a framework for identifying risks and improvement areas. 2.2.3 UK-Wide Sector Benchmarking and Best Practice Accounts Commission – "Are You Getting it Right?" (2016) The Accounts Commission published this practical guide for setting up and managing ALEOs, focused on good governance, public accountability, and value for money. It provides a set of best practice criteria against which the Council can test the robustness of different options during the appraisal process. Community Leisure UK Sector Insights (2024) A recent sector-wide review of the challenges and opportunities facing leisure and culture trusts, including issues related to income recovery, digital delivery, and workforce development. The report highlights trends, pressures, and innovations across the sector, helping to contextualise ALEO performance and future-proof delivery models against national patterns. 2.2.4 Conclusion This policy and strategy review has ensured that the ALEO options appraisal is firmly grounded in both the local strategic ambitions of Perth and Kinross Council and the broader policy landscape in Scotland. It has taken into account key national priorities such as community empowerment, community wealth building, public service reform, and the
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11 PKC - GENERAL transition to net zero – all these priorities are shaping how public services are governed and delivered across Scotland. By engaging with these frameworks in detail, the appraisal has ensured that the proposed structural changes are legally sound, financially sustainable, and aligned with the Council’s objectives around inclusive economic growth, health and wellbeing, climate resilience, and local democratic accountability. This provides a strong foundation for implementing future delivery models for leisure, culture, and performing arts services that are responsive to community needs, resilient to future challenges, and consistent with evolving Scottish policy expectations. 2.3 Council Transformation Programme The ALEO Review work takes place within the wider context of PKC’s Transformation programme, itself governed by the Perth and Kinross Transformation and Change Strategy 2022/23-2027/28 in line with the Council’s Corporate Plan. The Transformation and Change Strategy is designed to address the evolving needs of PKC and its communities over a five-year period. It aims to create a fairer, more prosperous, and sustainable future by aligning with the Scottish Government’s commitments and addressing the many social, economic, and environmental challenges faced by the Council now and in future. Phase One, completed in June 2024, set the stage for more changes, and now Phase Two will build on that success until 2027/28. This phase focuses on redesigning services, managing risks, and engaging with stakeholders to ensure services runs efficiently. A key part of this strategy is the ALEO Review, which looks at the governance, financial health, and service quality of ALEOs linked to the council. The review will help inform decisions in Phase Two, ensuring these services are efficient and sustainable in future. Overall, the strategy and review aim to create a more efficient, responsive, and sustainable council that meets the community's needs. The strategy is not a standalone document but is supported by a wider strategic framework that includes the Community Plan, Corporate Plan, and individual team plans. The Corporate Plan 2022-27 sets out PKC's vision and corporate outcomes, which are
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12 PKC - GENERAL aligned with the council's values and designed to mitigate the impact of various challenges over the next five years. The strategic outcomes are underpinned by seven key priorities that outline the areas of greatest need that PKC can most directly influence. 2.4 ALEO Review The ALEO Review work in Perth and Kinross dates back to the pre-Covid period and may have been driven, at least in part, by concerns over the financial and operating performance at that time of PTCH. As far back as 2018, a review considered options for the establishment for a single Cultural Trust to improve financial sustainability and operational effectiveness. Key options considered included maintaining the existing setup or creating a single, consolidated Culture Trust, with this option generally scoring higher in evaluations due to potential operational efficiencies. The recommendations also addressed governance issues, financial oversight, and maximising the cultural sector’s economic and social impacts. These recommendations were informed by challenges identified in the report, such as the need for integrated service delivery, the importance of digital engagement to attract new audiences, and the need for sustainable income generation beyond public funding. Concerns over financial risk due to dependency on Council funding and inadequate long-term income diversification were also highlighted as crucial areas for improvement. Although these recommendations were accepted as part of a longer-term strategy for transforming cultural services and supporting future growth in tourism and community engagement within Perth and Kinross, there was no move toward a different model of delivery. A paper to the Strategic Policy and Resources Committee in April 2019 focused on advancing the Cultural Trusts Transformation Project. This initiative aimed to review and reshape the operation of cultural services, including PTCH, to ensure sustainability and alignment with council priorities. Specific recommendations included exploring potential new operational models and securing long-term funding mechanisms to enhance cultural offerings and operational efficiency across the Council's cultural assets.
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13 PKC - GENERAL The committee accepted a series of recommendations for further work including pursuing the development of a business case for a single Cultural Trust. This set the stage for further steps in restructuring and collaborative opportunities for cultural development within Perth and Kinross. However, details on the specific operational models or financial strategies considered were limited at this stage in public records. A year later in April 2020, a further paper to the Strategic Policy and Resources Committee proposed: • a new governance and delivery structure for services currently delivered by ALEOs including the insourcing of libraries, archives, museums and gallery collections management to PKC and the establishment of a new streamlined ALEO for cultural services. LAL would take on facilities management. • investigation of wider efficiency / joint working potential. • community stakeholder engagement on wider funding arrangements and community participation. • implementation of new third-party funding arrangements. While these proposals were adopted by the Committee, it appears that the pandemic disrupted progress. We also understand that differences in terms and conditions between CPK and PTCH were also considered a barrier to structural change on the basis of cost. In April 2023, the ALEO Review was revisited, this time extending beyond the two cultural ALEOs to also include consideration of LAL. A paper to Perth and Kinross Council in December 2023 as a result of an external review by the organisation Audit Glasgow, made twelve recommendations, as follows: • from 2024/25, corporate functions across the three ALEOs should be consolidated starting with finance, HR, facilities management and business conferencing. • senior management structures should be reviewed in light of the above consolidation. • a review of employment issues should be undertaken to assess any potential risks. • the ALEO property portfolio should be rationalised to ensure it is affordable and sustainable. • consolidation of the Perth sports offer onto a single site should be considered based on evidence from the Leisure Assets Review.
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14 PKC - GENERAL • consolidation of key library provision to Community Campuses and the AK Bell Library (this was subsequently reversed by PKC in February 2025 to be reviewed again in 2027 as part of the Council’s budget setting process. • consolidation of CPK and potentially PTCH storage facilities. • expansion of support for the LAL Community Asset Transfer programme for community halls. • consider disposal of the Fergusson Gallery and William Soutar House. • establish a shared finance function for the three ALEOs based on a single finance system. • move the ALEO contract monitoring/ compliance post to the corporate Strategic Commissioning and Procurement Team. • reinstate quarterly monitoring of ALEOs by the Scrutiny and Performance Committee. These proposals were again approved by the Council and work has progressed to action these, but progress on any structural change (e.g. consolidating corporate functions) has been limited without the detail required to evidence the necessary changes. Further input has been provided by the report in 2023 by Audit Glasgow to support the financial analysis and options for change element of the ALEO Transformation Review. The report noted growing financial pressure on the ALEOs, not least as a result of increasing staff costs without corresponding increase in the PKC service fee. A number of recommendations were made mainly targeting issues with back office services (finance, payroll and IT), governance and scrutiny and collaborative working across the three organisations.
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15 PKC - GENERAL 3 ALEOs 3.1 Introduction This section provides an overview of each of the three ALEOs, covering: • Organisational structure, constitution and governance. • Assets under management. • Funding and financial performance. 3.2 Live Active Leisure (LAL) 3.2.1 Background History Live Active Leisure (LAL) was founded on 1 October 1965 as Bell's Sports Centre (Perth) Ltd. The organisation emerged from a collaborative initiative between the Lord Provost of Perth and the chairman of the Gannochy Trust to enhance public access to sport and recreational opportunities. Bell's Sports Centre opened in 1968 and quickly became a regional landmark due to its distinctive laminated timber dome roof. Over the decades, Bells Sports Centre (Perth) Ltd. evolved into a charitable trust with a strategic focus on increasing community engagement in physical activity. Key milestones include: • 1983 - Perth & Kinross Recreational Facilities (PKRF) created when Perth Leisure Pool (PLP) was built. • 2000 – establishment of Perth & Kinross Leisure (PKL). • 2010 - development of the Live Active brand and Company rename to Live Active Leisure (LAL). By 2015, LAL had become the UK's longest-running leisure trust, commemorating 50 years of service to the Perth and Kinross area.
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16 PKC - GENERAL As outlined in the company’s charitable purposes, LAL is focussed on: • the advancement of public participation in sport. • the provision of recreational facilities, or the organisation of recreational activities, with the object of improving the conditions of life for the persons for whom the facilities or activities are primarily intended. These objectives are designed to benefit children and young people, older adults, people with disabilities, individuals with health issues, and the general public throughout Perth and Kinross. 3.2.2 Governance and Management LAL operates under the oversight of a voluntary Board of Directors comprising representatives from the local community and Perth & Kinross Council. The Council retains ownership of the company as its sole member and designates up to three elected officials to serve on the Board. The company has an independent Chair and two Vice- Chairs. The Senior management is led by the Chief Executive Officer, supported by a senior team responsible for operational and strategic delivery: This management team oversees approximately 380 staff and ensures the organisation’s strategic goals are implemented efficiently across its extensive facility network. The dual- tiered governance structure ensures robust accountability and effective service delivery.
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17 PKC - GENERAL Figure 3.1: LAL Staff Structure Chief Executive Officer Head of Business Development Service Manager Physical Activty and Sport Wellbeing Manager Wellbeing Officers Outdoor Activites Officer Sports Development Officers Sport Specific Development Officers (Cricket, Football) Active Schools Manageer Active Schools Coordinators Activity Programming and Fitness Manager Programme Development Officer Fitness Development Officer Communications and Marketing Manager Marketing Coordinators Head of Corporate Support Services HR and Admin Officer Training Officer Board and Committee Adminstrator Head of Finance Finance Manager Finance Team Information and Business Systems Coordinator Business Systems Assistant Head of Operational Services Compliance Manager Maintenance Supervisor Maintenance Operatives Operational and Business Support Manager Project Officer Operations Managers *4 Venue Teams
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18 PKC - GENERAL 3.2.3 Assets LAL administers a diverse portfolio of facilities across the Perth and Kinross region, comprising: • Perth Leisure Pool: A flagship aquatic facility offering competitive and leisure pools, a fitness gym, and wellness amenities. • Dewars Centre: A multifunctional complex featuring an ice rink, health and fitness facilities, including gym and studios • George Duncan Athletics Arena: An outdoor track and field stadium supporting both community and competitive athletics. • Community Campuses: Integrated sports facilities within educational campuses: o Glenearn Community Campus o North Inch Community Campus o Breadalbane Community Campus o Blairgowrie Community Campus o Strathearn Community Campus o Loch Leven Community Campus • Local Leisure Centres: o Live Active Loch Leven o Live Active Atholl o Live Active Blairgowrie • Community Halls: o Moncrieffe Community Centre o Scone Public Hall o Tulloch Community Centre o Moray Institute o Aytoun Hall o Dunning Village Hall These assets support LAL’s mission to promote health and wellbeing through accessible, high-quality physical activity environments, serving both urban and rural communities.
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19 PKC - GENERAL 3.2.4 Funding Model Typically, 40% to 50% of LAL's income is derived from Council support, with the remainder generated through commercial activities and external funding that includes: • Commercial Revenue: Income streams include user memberships, pay-per-use fees, facility rentals, instructor-led classes, and on-site retail operations. • Grant Funding and Strategic Partnerships: Financial support is secured from organisations such as sportscotland, NHS Tayside, and the Gannochy Trust, which fund targeted initiatives and capital developments. • Inclusive Pricing Models: Programmes like the "Compass" membership offer reduced-cost access to underrepresented and financially vulnerable populations. Table 3.1, over, provides a summary of the income and expenditure for LAL from 2021/22 to 2025/26 Key points to note include are that LAL is forecast to post a deficit of £270k in 2024/25 which is budgeted to reduce by almost 80% in 2025/26, and the PKC Service Fee is also expected to be almost £90k lower than in 2023/24. Income has been impacted with loss of services from the Bells Centre – it is now starting to recover with the relocation of gym facilities within the Dewars Centre which accounts for the projected operating income growth in the 2025/26 budget figure. Energy costs continue to put pressure on the business with gas and electricity costs increasing by 152% and 104% respectively. Staff costs have increased substantially from 2021/22 (25%), mainly due to the implementation of Real Living Wage Employer status and National Insurance increases – staff costs are budgeted to continue to grow in 2025/26.
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20 PKC - GENERAL Table 3.1: Consolidated Income and Expenditure for LAL 2021/22 to 2025/06 (budget) Source: LAL Accounts, LAL Budget papers, PKC Scrutiny Committee Papers 3.2.5 Impact LAL’s operations generate measurable social and economic impacts, aligned with broader local authority priorities as summarised below with more details in LAL’s Achievement and Impact Report (2022-2024): • Health and Wellbeing Promotion: Evidence-based interventions support physical rehabilitation, mental wellness, and prevention of lifestyle-related conditions through structured activity programmes. • Social Inclusion: Tailored outreach and financial assistance schemes ensure equitable access to physical activity for marginalised groups, including individuals in rural areas and those with additional needs. • Youth Engagement and Development: The Active Schools initiative provides structured opportunities for children and adolescents to engage in sports, fostering leadership, confidence, and long-term engagement in physical activity. • Community Integration: Facilities serve as focal points for community interaction, supporting volunteerism, club development, and event hosting that reinforce local identity and cohesion. Category 2021-22 2022-23 2023-24 2024-25 forecasted outrun 2025-26 Budget Income Operating Income 4,813,639 4,280,447 4,614,463 4,084,433 4,974,630 Services to PKC 4,645,173 4,653,406 4,771,842 4,706,400 4,683,272 Grant Funding 959,475 732,142 730,934 780,933 777,877 Other Income 87,265 204,661 380,155 344,200 231,376 Income Total 10,505,552 9,870,656 10,497,393 9,915,967 10,667,155 Expenditure Cost of Sales 33,053 87,095 71,969 66,071 73,440 Staff Costs 5,517,887 6,356,638 6,869,628 6,703,754 7,345,063 Supplies & Services 709,203 896,349 1,005,503 986,219 1,028,228 Property Costs 3,477,119 2,571,285 2,340,326 2,253,278 2,001,239 Grants Awarded 125,276 190,962 176,751 177,209 277,877 Exoenditure Total 9,862,538 10,102,330 10,464,176 10,186,530 10,725,847 Surplus/Defecit 643,014 -231,673 33,217 -270,563 -58,692
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21 PKC - GENERAL • Local Economic Contribution: Employing over 380 staff and attracting significant footfall, LAL contributes to job creation, local spending, and regional tourism. By delivering inclusive, evidence-informed services, Live Active Leisure supports Perth & Kinross Council’s objectives to reduce health inequalities and foster a culture of active living. The organisation remains a pivotal stakeholder in regional health, wellbeing, and community development. 3.2.6 Issues for Consideration Based on the review of information provided and consultation with LAL Board members and Leadership Team, there is a number of issues pertinent to the option appraisal work: • Rising staff and energy costs, including the move to the Real Living Wage, and now the increase in Employers’ National Insurance, have added significantly to the organisation’s costs. • LAL has been working with PKC on a Strategic Facilities Review which is looking at the replacement of Perth Leisure Pool and The Dewars Centre as well as potential redevelopment and upgrades of other facilities. This process has been ongoing for some time and led to lack of investment in current facilities. • Whilst income generation has remained flat, it should be noted that this is with the backdrop of facility closures at Bells (flooding) and the redevelopment of Blairgowrie (old venue still open but the infrastructure is old and the offer declining) representing a significant reduction in available facilities, but LAL is clear that there is a need to continue to develop commercial income to continue to meet increasing costs and savings expectations. The improved facility offerings as a result of the Strategic Asset Review with fewer buildings and improved energy efficiency will be critical to future sustainability. At present, the proposal will see the merging of two City Centre sites with a budgeted operating deficit of £1.6m into one new building (PH20) with a projected operating deficit of £1.2m creating the opportunity for significant saving. • LAL staff are not on the same terms and conditions as those in either PTCH or CPK. LAL is an admitted body for the Local Government Pension Scheme and therefore, aligning these would result in significant additional costs. • LAL works unsocial hours (evenings and weekends) during which some back-office support is required e.g. IT.
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22 PKC - GENERAL • Shifting LAL into the council would result in loss of non-domestic rates relief on buildings. • There are multiple property arrangements in place from LAL ownership ((Perth Leisure Pool, Dewars Centre, Live Active Atholl, Live Active Loch Leven and Live Active Strathearn) to leasing and other management arrangements. This is complicated to manage and could potentially become more complicated with the addition of more assets. These issues have been taken into account in appraising the proposed options. 3.3 Culture Perth and Kinross (CPK) 3.3.1 Background History Culture Perth and Kinross (CPK) was established in 2016 as an independent charitable trust to deliver library, museum, archive, and cultural services on behalf of PKC. The creation of CPK followed a strategic review of cultural service delivery models, with a view to ensuring long-term sustainability, increasing community engagement, and enabling access to a broader range of funding opportunities. The organisation was formed by transferring staff, assets, and responsibilities from PKC into a new charitable entity. The charitable purposes of CPK include: • the advancement of education, arts, culture, and heritage. • the provision of public library services and promotion of reading and literacy. • the care, preservation, and interpretation of cultural and historical collections. • the promotion of social inclusion through access to cultural resources and learning. CPK’s remit includes management of management of 15 key cultural venues such as Perth Museum, Perth Art Gallery, the AK Bell Library and a range of community libraries. 3.3.2 Governance and Management Culture Perth and Kinross is governed by a Board of Trustees comprising individuals from a range of professional and community backgrounds, selected for their experience and
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23 PKC - GENERAL expertise in culture, business, education, and community development. Perth & Kinross Council has representation on the Board. CPK’s executive leadership is headed by a Chief Executive, supported by a Senior Management Team which oversees functions including operations, collections, public programmes, learning, digital development, and income generation. The organisational structure reflects its dual commitment to service delivery and innovation across heritage, culture, and library services.
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24 PKC - GENERAL Figure 3.2: CPK Staff Structure Library Support Services Officer 1FTE Events Co-ordinator 1FTE Local and Family History Officer 1FTE Programme Manager 1FTE Libraries Manager 1FTE General Manager 1FTE Snr Opps Officer 1 FTE - Exhibitions Assistant 1FTE Library Supervisors Design and Publicity Officer 1FTE FGIC Technologist in Residence 1 FTE Head of Audiences and Engagement 1 FTE Head of Support and Contracts 1FTE Head of Museums and Collections 1FTE - Collections Officers 3 FTE Exhibitions Officer 1FTE Marketing Officer 1FTE IT Supervisor 1FTE
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25 PKC - GENERAL 3.3.3 Assets Culture Perth and Kinross is responsible for the operation and curation of a portfolio of cultural facilities and collections, including: • AK Bell Library: The main library and headquarters of CPK, offering extensive reference and lending services, digital access, and community learning. • Perth Museum: The new Perth Museum opened its doors on Saturday, 30 March 2024 after a £27 million redevelopment project. This world-class cultural and heritage attraction highlights the fascinating objects and stories that put Perth and Kinross at the centre of Scotland’s story. At the heart of the museum sits the Stone of Destiny, also known as the Stone of Scone, one of Scotland and the UK’s most significant historical objects. • Perth Art Gallery: One of the UK’s oldest collections featuring works from influential Scottish artists and now the home of the Fergusson Collection. • Local Libraries: Operated in communities across Perth and Kinross: o Blairgowrie Library o Auchterarder Library o Breadalbane Community Library o Kinross Library o Scone Library o Strathearn Community Library o Loch Leven Community Library o Comrie Library o Birnam Library o Pitlochry Library o Alyth Library. • Local and Family History Services Offering public access to documents and records of local significance based in AK Bell Library. CPK also stewards museum and art collections, all of which are nationally recognised for their significance.
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26 PKC - GENERAL 3.3.4 Funding Model CPK operates on a mixed funding model that includes: • Annual Service Fee: Provided by Perth & Kinross Council to support core library and museum operations. • Earned Income: Derived from commercial activities such as venue hire, retail sales, events, exhibitions, and café operations. • Grant Funding: CPK is active in securing funding from national agencies including Creative Scotland, Museums Galleries Scotland, the National Lottery Heritage Fund, and others. • Philanthropy and Sponsorship: Targeted fundraising campaigns and strategic partnerships support exhibitions, educational projects, and capital developments. Over 90% of CPK’s income is provided by PKC, with the remainder coming from external funding sources and some modest earned income. Table 3.2, outlines CPK’s income and expenditure over the last three years with forecast and budget information for 2024/25 and 2025/26 respectively. Table 3.2: Consolidated Income and Expenditure for CPK 2021/22 – 2025/26 Source: CPK Accounts, PKC Scrutiny Committee Papers The financial pressure on the organisation is evident, with consistent increases in staff costs, set nationally by COSLA, and in the costs of supplies and services. These have combined to turn a surplus in 2021/22 into a deficit by 2022/23. The deficit is forecast to be particularly large in 2024/25 due mainly to a sharp increase in staff costs associated Category 2021-22 2022-23 2023-24 2024-25 forecasted outturn 2025-26 Budget Income PKC Service Fee 3,178,116 3,219,116 3,392,116 3,919,116 3,995,116 Donations and Legacies 14,151 22,618 35,632 78,100 80,000 Income from Charitable Activities 35,143 162,691 95,703 194,695 176,840 Other Income 19,419 54,858 138,779 134,203 138,512 Total Income 3,246,829 3,459,283 3,662,230 4,326,114 4,390,468 Expenditure Staff Costs 2,467,991 2,801,568 3,102,644 3,940,158 3,546,700 Property Costs 76,490 83,364 81,624 114,480 80,819 Supplies and Services 380,360 410,263 426,913 597,610 691,500 Transport Costs 99,399 95,641 86,354 70,252 73,466 Bank Charges 1,616 1,184 1,600 10,925 15,000 Governance Costs 37,099 47,725 52,525 62,529 55,471 Total Expenditure 3,062,955 3,439,745 3,751,660 4,795,954 4,462,956 Surplus/ Deficit 183,874 19,538 89,430- 469,840- 72,488-
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27 PKC - GENERAL with the payment of historic back pay and the opening of the New Museum, budgeted to reduce again in 2025/26. Income other than the PKC Service Fee is modest and there is limited scope for further income generation when core services are free at the point of access. 3.3.5 Impact Culture Perth and Kinross delivers wide-ranging cultural, educational, and social benefits across the region: • Lifelong Learning and Literacy: Through libraries, digital access points, and outreach, CPK supports reading, digital inclusion, and learning for all ages. • Cultural Heritage: The preservation, exhibition, and interpretation of artefacts and records fosters a strong sense of identity and place. • Tourism and Economic Development: Cultural venues contribute to the visitor economy, drawing residents and tourists alike. • Wellbeing and Social Inclusion: Cultural programming is designed to address issues of isolation, intergenerational engagement, and community cohesion. • Digital Innovation: CPK has invested in digital storytelling, collections access, and virtual programming, expanding its reach and relevance. Through its blend of cultural stewardship and public service, CPK supports Perth and Kinross Council’s aims in education, regeneration, and community wellbeing. 3.3.6 Issues for Consideration From engagement with CPK’s leadership team, external stakeholders, and review of organisational data, several key issues have been identified that influence future planning: • ongoing pressures from inflation and staffing costs have tightened budget flexibility, even as demand for services increases. • staff salaries remain tied to local authority increases, but no allowance in staff costs inflation in the annual PKC grant has led to a (reported) real terms decrease of 48% in the grant’s value since 2015.
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28 PKC - GENERAL • income generation from commercial activities remains constrained by physical space and infrastructure limitations in key buildings. Also, the free nature of the services (libraries, museums) limits the opportunities for income generation. • collections storage is under significant pressure, with off-site storage needs competing with access and conservation requirements. • the redevelopment of Perth City Hall and associated museum development required significant transitional planning and staffing resource. Reallocation of staffing across the service was required to ensure the expenditure bottom line remained unchanged. • capital investment is needed to maintain or upgrade community libraries and ensure digital infrastructure meets public expectations. • proposed library closures in rural areas led to strong community response and adverse media attention. The rationale and options for the closures, agreed in the Review of 2023 (see p12), remain a subject of debate. In February 2025, PKC reversed this decision for review in 20278. • footfall recovery/lending levels are recovering well post-COVID in all facilities with many facilities now exceeding pre-Covid footfall. • the opening of the Perth Museum(previously Perth City Hall) in 2024 has dramatically increased overall visitor figures and resulted in high levels of positive national media profile. • the quality of development/engagement work remains high although there are capacity issues around quantity of activity versus potential demand. There is scope to develop further the strategic relationship between PKC and CPK with a joint mission, shared objectives, and potential for shared delivery. Any structural changes to CPK’s status would need to consider the management of nationally significant collections and the potential implications for charitable status and funding eligibility. These issues have been taken into account in appraising the proposed options.
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29 PKC - GENERAL 3.4 Perth Theatre and Concert Hall (PTCH) 3.4.1 Background History Horsecross Arts Limited was established in 2006 to run Perth Concert Hall and to refresh and reposition Perth Theatre, Scotland’s oldest repertory theatre company. In 2013, new Articles of Association were adopted whereby Perth and Kinross Council became the sole member of the company. The charitable objects of the company are to: • advance education by the encouragement of the performing arts by means of production, presentation, collection, exhibition, collaboration, education and training in the performing arts. • run arts development and arts education programmes in theatre, music and new media public art in Perth and elsewhere which will promote and encourage creativity, skills development, social and personal development, social inclusion and lifelong learning but only as long as such activities are regarded as charitable in law. Horsecross Arts Limited has a wholly owned subsidiary, Horsecross Trading Limited, established to generate funds to support the parent charity. In 2022, the Trustees took the decision to conduct all activities under the trading name of Perth Theatre and Concert Hall (PTCH). 3.4.2 Governance and Management PTCH has a Board of 12 Trustees, acting in a voluntary capacity, with fiduciary responsibility for safeguarding the assets of the charity. Perth and Kinross Council has the right to appoint up to three Elected Members of the Council to serve on the Board. The Chair and Vice Chair of PTCH are independent (i.e. not council appointees). Independent trustees bring a diverse set of skills and experience including performing arts and theatre management, communications, HR, legal and commercial business.
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30 PKC - GENERAL Perth and Kinross Council and Creative Scotland can attend the Board meeting as observers and receive Board papers and minutes. The Board meets at least four times a year and has a number of Committees which meet to coincide with the cycle of Board meetings: • Finance and General Purposes Committee. • Nominations Committee. • Business Development Committee. • People Committee. PTCH works with Perth and Kinross Council to develop programmes of activity in line with the organisation’s charitable objectives and the priorities of the Council. Otherwise, Perth and Kinross Council maintains an arms-length relationship with PTCH (although it does retain the power to remove Trustees in exceptional circumstances). The Executive Team comprises the Director supported by both: • a Leadership Team which includes the Director, Director of Commercial Operations, Director of Finance and HR, and Director of External Relations. • a Senior Management Team which includes the Media Relations Manager, Theatre General Manager, Head of Learning and Engagement, Head of Technical Services, Head of Events and Commercial Development and Head of Contemporary, Classical and Theatre Programming. Following a difficult period of poor trading performance, PTCH was placed by Perth and Kinross Council into ‘Special Measures’ leading to significant changes at Board and Senior Management levels. This was followed by the Covid-19 pandemic during which the organisation undertook a wider restructure which led to further changes in staffing numbers (a significant reduction in overall headcount) and subsequently at Senior Management and Board levels. The period since the pandemic has brought greater stability and a refreshed vision and approach to programming and wider operations, including growth in commercial income and fundraising performance as well as increased audiences. The senior team was also restructured in 2023 with the deletion of the previous Artistic Director post, the creation of the new Director of Commercial Operations position, and a
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31 PKC - GENERAL change for the CEO to Director with an enhanced role in artistic programming. This was done with a view to enabling a new approach to artistic programming. The PTCH staff structure is shown below. Figure 3.3: PTCH Staff Structure Source: PTCH 3.4.3 Assets PTCH manages two properties owned by PKC: • Perth Theatre: founded in 1900, Perth Theatre reopened in 2017 following an extensive period of restoration and redevelopment costing approximately £16.6m. The venue houses a traditional Victorian auditorium (with proscenium arch), new studio theatre, dedicated community rooms, café, and spacious public areas. • Perth Concert Hall: opened in September 2005 following a £12.3m capital build project, the venue boasts world leading acoustics in its 1,200-capacity auditorium.
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32 PKC - GENERAL 3.4.4 Funding Model The two principal funders of PTCH are PKC and Creative Scotland. PKC provides PTCH with annual funding in the form of a service fee (of just under £1m per annum plus an additional separate payment from the COSLA pay award) governed by a Service Level Agreement (SLA). The SLA sets out the responsibilities of each party as follows: • PKC retains responsibility for property maintenance. • PTCH is required to deliver diverse programme across the performing arts with a primary focus on music and drama. The SLA also specifies a range of Key Performance Indicators (KPIs) that PTCH is required to deliver, which include measures relating to numbers of performances, audiences, community and learning activities and participants and commercial activities (mainly conferences and events). It does not include specific financial targets although the service fee is reducing by 12% over a three-year period. Following a successful application to Creative Scotland’s new multi-year funding programme, PTCH secured an increase in their annual grant for 2025/26 to c. £736K, an increase of c. 38%. In addition, PTCH also has a strong track record of securing funding from a range of sources including trusts and foundations with core and project funding from the Gannochy Trust to support staff costs for community and learning activities. The organisation has also benefitted from additional funding from PKC for capital works and to support activities to celebrate the forthcoming 125th year anniversary of the theatre and 20th anniversary of the Concert Hall. Table 3.3 provides a summary of the income and expenditure for PTCH over the last three years with forecast data for 2024/25 and the budget for 2025/26.
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33 PKC - GENERAL Table 3.3: Consolidated Income and Expenditure for PTCH 2021/22 to 2025/06 (budget) Source: Integratis/ EKOS analysis of PTCH data Note 1: Other grant income includes new funding from Trusts, including from Garlfield Weston, Hugh Fraser Foundation and Wolfson Foundation and a significant uplift in 2025/26 from the Gannochy Trust Note 2: Breakdown of governance costs not available for 2024/25 and 2025/26 A number of points are worth noting: • 2021/22 cannot be considered a typical year as this was still impacted by the pandemic with reduced levels of performance and trading activity offset by grant income relating to Covid emergency funding (PTCH was successful in securing funding support through the pandemic). • there has been a reduction in grant income and income from donations and legacies but 2021/22 is skewed by the Covid emergency funding. Funding from Creative Scotland increases in 2025/26. • trading income from charitable and commercial activities has increased indicating good recovery post-Covid and renewed emphasis on income generation. Income from productions and performances has shown consistent growth in line with the organisation’s plans. • staff costs (2024/25 forecast) have increased by almost 60% since 2021/22 but this again reflects the downturn in activity with the pandemic. The increase between 2023/24 and 2024/25 was 15%. However, PTCH reports that its total staff is around two thirds pre-pandemic levels. Category 2021-22 2022-23 2023-24 2024-25 forecasted outturn 2025-26 Budget Grant Income PKC Service Fee 1,062,480 1,062,480 1,062,480 1,018,730 1,015,880 Creative Scotland Revenue 553,481 533,333 533,333 533,445 736,046 Other Grant/ Donations Income1 1,121,822 613,214 290,997 298,220 366,000 Total Grant Income 2,737,783 2,209,027 1,886,810 1,850,395 2,117,926 Production and Performance Income 856,113 2,193,913 2,069,520 2,352,475 2,361,606 Creative Learning and Community Projects 21,888 39,900 37,524 61,458 55,000 Other retail, merchandising and Commission income 190,166 486,819 490,660 453,321 381,722 Sponsorship income - - - 66,546 150,000 Company Catering Sales 215,985 678,592 730,711 840,597 952,857 Total Earned Income 1,284,152 3,399,224 3,328,415 3,774,397 3,901,185 Total Income 4,021,935 5,608,251 5,215,225 5,624,792 6,019,111 Expenditure Staff Costs 1,666,089 2,162,949 2,312,003 2,650,993 2,809,708 Governance Costs2 70,002 102,572 143,848 n/a n/a Other Operating Costs 1,975,183 3,182,882 2,986,490 3,223,148 3,387,998 Total Expenditure 3,711,274 5,448,403 5,442,341 5,874,141 6,197,706 Suplus/ Deficit 310,661 159,848 227,116- 249,349- 178,595-
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34 PKC - GENERAL • The organisation posted a deficit in 2023/24 following two years in surplus. This is down to increased costs, particularly staffing costs. This is partly attributable to the organisation moving to the Real Living Wage as part of the conditions for the Creative Scotland multi-year funding. PTCH set a target to increase income generation to address the 2023/24 deficit position. However, despite exceeding this income target, the organisation is still forecasting a deficit in 2024/25 due to increases in staff costs (as a result of the Real Living Wage) and energy costs along with ongoing challenges in securing trusts and foundations income (which is not specific to PTCH but is rather a national trend). Despite growing audiences, PTCH still faces the challenge of increasing ticket income through the sale of full price tickets rather than concessions. However, this needs to be balanced against the organisation’s community responsibilities and its contribution to Council priorities. 3.4.5 Impact 2023/24 was a record year for PTCH: • over 135,000 tickets were sold for 510 performances spanning classical and contemporary music, theatre, comedy, dance and film. • 43% of bookers were first time attendees and 14% were from areas of high deprivation in Scotland (defined using the Scottish Index of Multiple Deprivation’s 20% most deprived datazones). • there were 19,631 visitors to conferences and events and over 10,000 participants in learning and engagement work. • there were also almost 35,000 other building users (café, meetings rooms, exhibition spaces etc). PTCH report that these activities contributed to the organisation generating a direct economic impact of £16.9m in 2023/24. For Perth and Kinross Council this means that each £1 of investment in PTCH returns more than £16 in economic impact for the region.
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35 PKC - GENERAL 3.4.6 Issues for Consideration Based on the review of information provided and consultation with PTCH Board members and Leadership Team, there is a number of issues pertinent to the option appraisal work: • PTCH is differentiated from comparable local authority performing arts venues in two principal ways: it is a producing theatre and not solely a receiving house; and the combination of a producing theatre and concert hall is almost unique in the UK. • the organisation has worked hard to recover from both the pandemic and its pre- Covid difficulties and is now working to a clear plan to revitalise the artistic and community programme, grow commercial and other income and develop a sustainable model for the two venues. • extensive restructuring during and immediately after the Covid period significantly reduced staff headcount and resulted in a leaner and more focussed organisation. • more recently, rising staff and energy costs, including the move to the Real Living Wage, and now the increase in Employers’ National Insurance, have added significantly to the organisation’s costs. These additional costs effectively negated the impact of the recent income growth on the organisation’s deficit position. • there are capital investment needs at both venues, particularly for the Concert Hall, and PKC has committed an initial £2.8m to these works. More will be required in due course and PTCH can raise capital funding from sources not available to the council. • income growth has been good, but PTCH is clear that there is a need to continue to develop commercial income through conferences and events, full price ticket sales and trusts and foundations. This is the primary focus for PTCH in working with PKC to reduce the overall level of subsidy required. • PTCH staff are not on the same terms and conditions as those in either LAL or CPK. PTCH is not an admitted body for the Local Government Pension Scheme (CPK and LAL are). Aligning these would result in significant additional costs to PTCH, although this must be balanced against the risks of equal pay claims. • PTCH has some specific needs in relation to support services such as HR and finance as the organisation works with a large freelance labour pool which requires different contractual conditions and prompt payment terms. Similarly, many concert promoters require payment within 48 hours.
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36 PKC - GENERAL • PTCH has external HR support and a different finance system (Xero) to those used by LAL and CPK. Both are considered to be very lean operations (there are three people in the Finance team). • the finance team at PTCH has developed specialist expertise in securing Theatre Tax Relief, an important source of additional income. • PTCH works unsocial hours (evenings and weekends) during which some back- office support could be required e.g. IT. • shifting PTCH into the council could risk the loss of Creative Scotland funding (or require a re-application). This is an existential risk to the business. This is also a risk under options which result in the creation of a new ALEO. • similarly, shifting PTCH into the council would result in loss of non-domestic rates relief on the two buildings. • there are some concerns that merging with leisure services, museums and libraries could risk loss of expertise specific to the PTCH business (for example, through the creation of a single board or reduction in senior management). • there are also concerns about options which could result in dilution of the PTCH brand amongst the community – something that the organisation has worked hard to establish (including with the move to the PTCH trading name). • issues were raised about the current level of reporting burden and the amount of management time that this requires. These issues have been taken into account in appraising the proposed options.
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37 PKC - GENERAL 3.5 Consolidated Overview We have collated the finances for the three ALEOs together to provide a consolidated picture of financial performance. This is shown in Table 3.4, over. In 2023/24, the combined deficit of the three ALEOs was just under £380K with this forecast to rise to almost £1m in 2024/25 before reducing again in 2025/26 to c. £300K. At the same time, the total management fee paid by PKC is forecast to increase slightly for CPK while reducing for the other two ALEOs. While all are forecast to increase their deficit in 2024/25, this is particularly marked for CPK and to a slightly lesser extent LAL. Income at CPK and PTCH is forecast to rise in 2024/25 while it reduces at LAL. However, income growth for CPK and for PTCH is offset by a larger rise in expenditure, while costs are forecast to reduce at LAL. While the 2025/26 figures estimate some improvement, these are budget figures only at this stage and are still predicated on significant increases in income for LAL and PTCH. For CPK, a modest increase in the PKC management fee is budgeted. This suggests that while the overall financial picture is not getting significantly worse, substantial improvement (i.e. reduction in the level of subsidy required) appears some way off. It is also worth noting here that PKC has expressed some concerns regarding the differences in staff terms and conditions across the three ALEOs, particularly in relation to the potential for equal pay claims. However, this is not a new risk and to date there have been no claims raised in respect of either LAL or PTCH (CPK is now aligned to PKC).
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38 PKC - GENERAL Table 3.4: Financial Summary all ALEOs 2021/22 to 2025/26 Cost Centre Organisation 2021-22 2022-23 2023-24 2024-25 forecasted outturn 2025-26 Budget Income Live Active Leisure £10,505,552 £9,870,656 £10,497,393 £9,915,967 £10,667,155 Income Culture Perth & Kinross £3,246,829 £3,459,283 £3,662,230 £4,326,114 £4,390,468 Income Perth Theatre & Concert Hall £4,021,935 £5,608,251 £5,215,225 £5,624,792 £6,019,111 Income Total £17,774,316 £18,938,190 £19,374,848 £19,866,873 £21,076,734 Expenditure Live Active Leisure £9,862,538 £10,102,330 £10,464,176 £10,186,530 £10,725,847 Expenditure Culture Perth & Kinross £3,062,955 £3,439,745 £3,751,660 £4,795,954 £4,462,956 Expenditure Perth Theatre & Concert Hall £3,711,274 £5,448,403 £5,442,341 £5,874,141 £6,197,706 Expenditure £16,636,767 £18,990,478 £19,658,177 £20,856,625 £21,386,509 Net Expenditure Live Active Leisure -£643,014 £231,673 -£33,217 £270,563 £58,692 Net Expenditure Culture Perth & Kinross -£183,874 -£19,538 £89,430 £469,840 £72,488 Net Expenditure Perth Theatre & Concert Hall -£310,661 -£159,848 £227,116 £249,349 £178,595 Net Expenditure Total -£1,137,549 £52,287 £283,329 £989,752 £309,775 Management Fee Live Active Leisure £4,645,173 £4,653,406 £4,771,842 £4,706,400 £4,683,272 Management Fee Culture Perth & Kinross £3,178,116 £3,219,116 £3,392,116 £3,919,116 £3,995,116 Management Fee Perth Theatre & Concert Hall £1,062,480 £1,062,480 £1,062,480 £1,018,730 £1,015,880 Management Fee Total £8,885,769 £8,935,002 £9,226,438 £9,644,246 £9,694,268
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39 PKC - GENERAL 4 Options 4.1 Introduction Through the previous work on the ALEO Review, a number of possible structural options have emerged through which the services provided by the three ALEOs could be delivered. These were set out in the brief for the current appraisal. Here, each option is outlined in more detail, with a high-level summary of the pros, cons and any specific issues for consideration raised with each option. Further appraisal of each of the options is provided in Section 5. The options are as follows: • Option 1: Bring all ALEOs in house to PKC. • Option 2: Bring some ALEO services in house (e.g. consolidation of corporate services from ALEOs delivered by PKC) and ALEOs retain own identity / library services brought back into PKC. • Option 3: Create one new ALEO / two new ALEOs – streamlining corporate and back office services. • Option 4: Create one ALEO for culture and sport and considering possible change of status for Perth Theatre and Concert Hall. 4.2 Option 1: In House Under Option 1, all services currently delivered by the three ALEOs would be delivered instead by PKC directly. The three ALEOs would then be wound up and closed. This would require the transfer of staff from each of the three ALEOs into the Council (under TUPE regulations) and would also likely require equalisation of staff Terms and Conditions in line with the Council. This would add to the total staff costs but would mitigate the risks of equal pay claims. Also, a move to a single delivery structure would create opportunities for some rationalisation of staff positions achieving savings. There would also be opportunities to move support services such as IT onto a single system within PKC. These issues are considered in more detail in the appraisal section that follows.
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40 PKC - GENERAL Other issues raised by this option are: • A move to Council delivery would result in the loss of the non-domestic rates that the ALEOs currently receive on the facilities under management. This could add as much as £2.7m to combined annual costs (not all ALEOs have full rates relief). • Councils cannot access the same range of external funding available to ALEOs, including support from trusts and foundations. There is also some uncertainty about what this option might mean for the multi-year funding support that PTCH receives from Creative Scotland. Our current understanding is that Creative Scotland would not automatically remove the funding as it is based on delivery of agreed outputs and outcomes rather than the legal entity that delivers. However, this does remain a risk for the future. • The migration of existing systems across the three ALEOs into a single structure has the virtue of aligning activity to existing Council systems, but could also be complex (and potentially disruptive and costly) given that each ALEO operates different systems for finance and IT. • In relation to IT in particular, the costs of licences are considerably higher for PKC than for the ALEOs as a result of their charitable status. This is likely to add significant cost as well as time to support a migration to new systems. • It could be argued that full control by the Council might make property rationalisation more straightforward, but it is not clear that this is the case as the council already has decision making authority on any closures. • While key staff could be retained (via TUPE transfer to PKC) bringing all services into the Council would lose the expertise on each of the ALEO Boards. 4.3 Option 2: Some Services In House Option 2 would involve the Council taking some services back in house – including corporate support services such as finance, IT and HR (it already retains property management except for the venues that are owned by LAL) and libraries. The rationale for this is twofold: • Libraries are community services that may be better aligned with other community focussed provision within the Council.
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41 PKC - GENERAL • The consolidation of corporate services offers opportunities for rationalisation via economies of scale. While this option would be less disruptive and less complex than a full transfer of all services into PKC, it does raise some of the same issues as Option 1 regarding the consolidation of corporate services and systems. It would also require that terms and conditions be equalised for affected staff. 4.4 Option 3: One/ Two ALEOs This option breaks down into two ‘sub-options’ as explained below. 4.4.1 Option 3a: One ALEO Under Option 3a, the three existing ALEOs would be merged into a single new organisation also with ALEO status. There is a risk here that, following the Barclay Review of Non-Domestic Rates in 2017, a new ALEO would not be eligible for rates relief. However, as the assets in question are already under ALEO management this may be something of a grey area and would require specialist advice. For now, we have assumed that the new body would benefit from rates relief. Other issues to be considered include: • The merger of the three organisations would require equalisation of staff terms and conditions, increasing the total staff costs (but reducing the risk of equal pay claims). • Economies of scale should be possible via streamlining of corporate services and workforce planning. While in theory senior management positions could be rationalised, each service area will still require the appropriate expertise at senior level, plus the new organisation would need an overall CEO. Some rationalisation may be possible in corporate functions such as finance, HR and business development. • ALEO status should enable a new organisation to access funding sources not available to local authorities. • Strong income generating services (e.g. health and fitness) could help cross- subsidise those that generate less income (e.g. libraries, museum).
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42 PKC - GENERAL • The three ALEOs are each operating quite different businesses and business models, and the strategic coherence of a single merged organisation is not always clear, although there are precedents from elsewhere. 4.4.2 Option 3b: Two ALEOs With Option 3b, two different models are possible, as follows: • Merger of CPK and PTCH to create a new Cultural ALEO, with LAL remaining as it is. • Merger of LAL and CPK with PTCH remaining as it is. The first has a degree of strategic rationale as both are cultural ALEOs and the museum, art gallery, theatre and concert hall are all key assets serving both the communities of Perth and Kinross and the wider visitor market. The rationale to bring together the museum, art gallery and libraries with leisure services is arguably less clear although as noted above, libraries and leisure services both have a very strong community focus (the other services do too but also have a role in driving the visitor economy of the region). In the appraisal, we have focussed more on the second of the two models above on the basis that LAL and CPK are more closely aligned in relation to staff terms and conditions. The assumption is that corporate services (finance, HR, IT etc) would be provided by the new ALEO on behalf both of itself and PTCH. However, this model still raises some issues: • There is again an issue with different staff terms and conditions, albeit pensions are aligned. • There may also be an issue with the extent to which trusts and foundations which already support more than one of the ALEOs (e.g. Gannochy Trust) would continue to support at the same level if organisations were merged. • Under this model, there could be scope for some economies of scale in corporate support services and staffing but these would be smaller than in a larger merged organisation. • CPK and LAL have different support needs in areas like finance and HR (LAL operates out of hours, for example) and they use different systems – the same is also true for PTCH.
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43 PKC - GENERAL • There is less strategic coherence in this option than in a merger of CPK and PTCH. 4.5 Option 4: Culture and Sport ALEO and change in status for PTCH Option 4 brings together CPK and LAL and proposes a change in status for PTCH such that it becomes an independent charity rather than a Council-owned ALEO. This is similar, for example, to the status of the Royal Lyceum Theatre in Edinburgh which is an independent charity operating a council-owned building (and in receipt of funding support from the local authority). This option aligns PTCH more with other producing theatres in Scotland (none are ALEOs) and opens up the possibility of funding from some trusts that do not typically support ALEOs (the Robertson Trust would be one important example). The creation of a culture and sport ALEO, as discussed above, has some precedent across Scotland (Glasgow, Highland and Dundee all have culture and sport ALEOs) and should offer some potential for economies of scale in staffing and corporate services functions. However, issues with differing staff terms and conditions are still present, and LAL and CPK operate different systems for financial management and bookings. It is possible too that bringing leisure assets, community halls and libraries all under a single delivery structure could open up further opportunities for the development of consolidated community facilities (some of which have already been considered), which is consistent with the direction of travel for PKC and indeed for councils across Scotland.
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44 PKC - GENERAL 5 Appraisal 5.1 Introduction While the appraisal is designed, to some extent, to test the potential to achieve financial efficiencies through the different structural options, it is important that a broader approach is taken that considers other less easily quantified factors. With this in mind, the appraisal has been conducted in two stages: • Each of the options was set out in an organogram format and a financial model created for each. This took account of costs and income (as provided by each of the ALEOs) and identified potential savings that might be realised through staff and other operational efficiencies. A supplementary note providing more detail is included at Appendix A. • Each option was then assessed against a set of wider criteria by awarding each a score between 1 and 10 (with 10 being most positive). 5.2 Financial Appraisal This section considers the financial impact of the options being considered and is based on information available at the time of writing. Therefore, all figures detailed should be taken as indicative rather than definitive. For the purposes of the analysis, we have split Option 2 into Option 2a: Bring corporate services in-house and Option 2b: Bring corporate services and Library services in-house. Similarly, for Option 3 we have set out Option 3a: Create a single new ALEO and Option 3b: Create two new ALEOs. As such, six options have been appraised: • Option 1: Bring all ALEOs in house to PKC. • Option 2a: ALEO Corporate Services delivered by PKC and ALEOs retain own identity • Option 2b: ALEO Corporate Services delivered by PKC and Library services brought back into PKC. • Option 3a: Create one new ALEO, bringing together all three ALEOs into a single organisation.
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45 PKC - GENERAL • Option 3b: Two ALEOs – one bringing together LAL and CPK with PTCH remaining as it is. • Option 4: Create one ALEO for culture and sport and considering possible change of status for Perth Theatre and Concert Hall. In terms of potential savings/additional costs, we have based this against the current level of investment made by PKC in terms of management fee currently being paid. The assumptions and calculations used to estimate savings are set out below and cover: • Senior Management realignment • Alignment of Terms and Conditions • Non-domestic rates • Governance costs Senior Management Realignment The savings under each option achieved by senior management realignment are detailed below. Terms and Conditions For all of the options we have assumed that affected staff would be brought in line with PKC terms and conditions as follows: • Option 1: all ALEO staff TUPE into PKC with Ts and Cs aligned to PKC • Option 2a: ALEO Corporate Services staff TUPE into PKC with Ts and Cs aligned to PKC • Option 2b: ALEO Corporate Services staff and CPK Library staff TUPE into PKC with Ts and Cs aligned to PKC • Option 3a: All ALEO staff aligned to PKC Ts and Cs • Option 3b: Ts and Cs for LAL and CPK staff aligned to PKC (in line with CPK) and PTCH remains unchanged • Option 4: Ts and Cs for LAL and CPK staff aligned to PKC (in line with CPK) and PTCH remains unchanged. For these purposes we have made an assumption of uplifting relevant salaries (and pensions) from LAL and PTCH by 8% which is the current difference between LAL and
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46 PKC - GENERAL CPK salaries. Where positions have been identified as not being required, we have calculated potential savings based on current salary being paid by the relevant organisation. Non-domestic rates The figures here are the assumed loss of NDR savings that are currently being achieved by the ALEO’s. In Option 1 as the proposal is that all ALEO’s be brought in-house, we have assumed that all NDR savings would be lost. The level of savings has been based on information obtained via the assessor's office and where that information was not readily available (libraries and town halls) we have assumed costs based on similar sized venues. In Option 2b the NDR for library properties would be lost. None of the other options have implications for NDR as assets remain under charitable management. Governance Costs Governance costs savings have been based on current costs incurred by each organisation in relation to accountancy and audit fees, legal and professional fees and irrecoverable VAT. Assumptions are as follows: • Option 1: all governance costs saved – governance within PKC • Option 2a: no governance savings • Option 2b: no governance savings • Option 3a: savings on the basis of consolidated requirement (based on loss of current CPK and PTCH Costs) • Option 3b: some savings based on loss of CPK costs • Option 4: some savings based on loss of CPK costs
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47 PKC - GENERAL 5.2.1 Current Model (Baseline Position) Currently the combined Senior Management structures are as set out in Table 5.1 (below) and Figure 5.1 (over) and cost £840,491 per annum. Table 5.1: Senior Management Structure (current) Live Active Leisure Culture Perth & Kinross Perth Theatre and Concert Hall Position FTE Position FTE Position FTE Chief Executive Officer 1 Chief Executive 1 Director 1 Head of Business Development 1 Head of Audiences and Learning 1 Director of External Relations (0.8) 0.8 Head of Support Services 1 Head of Museums and Collections 1 Director of Commercial Operations 1 Head of Finance 1 Head of Operations and Support Services 1 Director of Finance and HR (0.8) 0.8 Head of Operational Services 1 Senior Finance Officer 1 Finance Manager 1 Total 5 5 4.6
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48 PKC - GENERAL Figure 1: Current Senior Management Structures – all three ALEOs CEO LAL Head of Business Development Head of Corporate Support Services Head of Finance Head of Operational Services CE CPK Senior Finance Officer Head of Audiences & Engagement Head of Community Support Services Head of Museums and Collections Director PTCH Director of External Relations Director of Commercial Operations Director of Finance & HR Finance Manager
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49 PKC - GENERAL 5.2.2 Option 1: Bring all current ALEOs in house to PKC This would see the disbandment of the current three ALEOs and the staff and services being merged into a relevant Council department. Table 5.1 below summarises the financial impact of this option. In assessing this option, we have made the following assumption: • There would be a reduction in Senior Management positions through some form of redundancy process. • Staff terms and conditions would be brought in line with those of PKC. We have assumed an 8% increase for this purpose, as noted above. • Current levels of income generation would be maintained including donations and grant funding, although it should be noted that an in-house model would put some funding at risk. As a result, the cost to PKC for this option could be higher than shown below. The level of staff savings is based on the assumption that the current number of Senior Positions within the ALEOs would not be required therefore generating potential savings. The assumption is that a combined Senior structure would be created that would oversee the running of the services that are currently provided by the 3 ALEOs – Table 5.2. Table 5.2: Option 1 Senior Management Structure (within PKC) Proposed Combined Structure Position FTE Senior Service Manager 1 Lead Manager of Ops & Service Delivery 1 Lead Manager of Business Dev & Partnerships 1 Lead Manager of Finance & Corporate Services 1 Lead Manager of Programmes & Service Development 1 Total 5 The revised Senior Management Structure for the services if brought within PKC is illustrated in Figure 5.2, over. We have assumed that the tier below would include service specific expertise.
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50 PKC - GENERAL Figure 5.2: Option 1 - Revised Senior Management Structures (within PKC) Senior Service Manager Lead Manager of Ops & Service Delivery Lead Manager of Business Dev & Partnerships Lead Manager of Finance & Corporate Services Lead Manager of Programs & Service Development
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51 PKC - GENERAL One-off costs for implementation (including redundancy costs, increased software licence costs and any system integration costs) would be over and above the figures shown. Table 5.3: Option 1 – In House Delivery Category of Expenditure Savings/ Costs Senior Management re-alignment -£481,774 Terms & Conditions consolidation £750,442 Governance Costs -£400,257 Non Domestic Rates £2,735,300 Annual Additional Cost/Saving to PKC £2,608,711 As shown, this option would bring significant additional costs to PKC mainly as a result of the loss of the current non domestic rates relief. Alignment of staff terms and conditions also adds considerable cost. 5.2.3 Option 2a: Bring Corporate Services in house to PKC This option looks at the feasibility of taking away the current corporate services function of each ALEO and having them delivered by PKC under a services agreement. This appraisal assumes that all corporate services would be provided by PKC and that any relevant staff would be TUPE transferred from the ALEOs to PKC. The potential savings under Senior Management re-alignment works on the basis that some of the current Senior positions would not be required as equivalents would already be in place at PKC. Table 5.4 summarises the positions identified as being surplus and therefore generating the potential saving. The revised Senior Management Structures within the ALEOs are summarised in Figure 5.3, over. Table 5.4: Option 2a – Surplus Management Positions Live Active Leisure Culture Perth & Kinross Perth Theatre and Concert Hall Position FTE Position FTE Position FTE Head of Finance 1 Senior Finance Officer 1 Director of Finance & HR (0.8) 0.8 Finance Manager 1 Total 1 1 1.8
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52 PKC - GENERAL Figure 5.3: Option 2a - Senior Management Structures in all three ALEOs CEO LAL Head of Business Development Head of Corporate Support Services Head of Operational Services CE CPK Head of Audiences & Engagement Head of Community Support Services Head of Museums and Collections Director PTCH Director of External Relations Director of Commercial Operations
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53 PKC - GENERAL The financial assessment is summarised in Table 5.5 below. The modelling assumes that terms and conditions for the staff that are transferred to PKC are then aligned to PKC. Other costs and income remain as current estimates. It does not include potential hidden cost including redundancy costs, software licences and system integration. Table 5.5: Option 2a – Corporate Services In House Category of Expenditure Savings/ Costs Senior Management re-alignment -£206,349 Terms & Conditions consolidation £14,542 Governance Costs £0 Annual Additional Cost/Saving to PKC -£191,807 As shown above, this option has the potential to achieve a modest saving. However, it should be noted that currently there is no standard approach to systems and processes across the ALEOs in terms of software and each operating model has its own specific requirements which may be hard to replicate in a single support service from PKC. It was also reported that CPK was previously asked to move away from PKC finance support as they were unable to meet day to day operating needs, 5.2.4 Option 2b: Bring Corporate Services and Library Services in house to PKC This option considers the transfer of Library Services into PKC alongside a central corporate services function. This appraisal assumes that all corporate and library services are brought in-house to PKC and that any relevant staff would be TUPE transferred back to PKC (with terms and conditions aligned to PKC – see below). The potential savings under Senior Management re-alignment works on the basis that some of the current Senior positions would not be required as equivalents would already be in place at PKC. Table 5.6, over, summarises the positions identified as being surplus and therefore generating the potential saving. NB: The assumption gives the same level of management savings as 2a as the specialist Senior Library positions would still be required to deliver the service.
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54 PKC - GENERAL Table 5.6: Option 2b – Surplus Management Positions Live Active Leisure Culture Perth & Kinross Perth Theatre and Concert Hall Position FTE Position FTE Position FTE Head of Finance 1 Senior Finance Officer 1 Director of Finance & HR (0.8) 0.8 Finance Manager 1 Total 1 1 1.8 The revised management structures within the ALEOs are summarised in Figure 5.4, over.
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55 PKC - GENERAL Figure 5.4: Option 2b - Senior Management Structures in all three ALEOs CEO LAL Head of Business Development Head of Corporate Support Services Head of Operational Services CE CPK Head of Audiences & Engagement Head of Community Support Services Head of Museums and Collections Director PTCH Director of External Relations Director of Commercial Operations
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56 PKC - GENERAL The financial impact is summarised in Table 5.7 below. Table 5.7: Option 2b – Corporate Services and Libraries In House Category of Expenditure Savings/ Costs Senior Management re-alignment -£260,349 Terms & Conditions consolidation £14,542 Governance Costs £0 Non Domestic Rates £606,800 Annual Additional Cost/Saving to PKC £414,993 This option could mean a significant additional cost to PKC driven by the loss of non- domestic rates savings across the library estate. As with Option 2a, there would also be the challenge (and hidden costs) of bringing together the various approaches to systems and processes across the ALEOs. 5.2.5 Option 3a: Create a single new ALEO This option looks at creating a new body to run all cultural, library and sports and leisure services on behalf of PKC. Similar to Option 1, this assumes that a merger of the 3 ALEOs into one would only require a single Senior Management Team to operate. Table 5.8 summarises the proposed Senior Management Team for a new organisation. This is illustrated in Figure 5.5, over. Table 5.8: Option 3a – Proposed Management Structure Proposed Combined Structure Position FTE Chief Executive Officer 1 Executive Director of Ops & Service Delivery 1 Director of Business Dev & Partnerships 1 Director of Finance & Corporate Services 1 Director of Programmes & Service Development 1 Director of Ops & Service Delivery 1 Total 6
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57 PKC - GENERAL Figure 5.5: Option 3a - Senior Management Structure for single ALEO Chief Executive Officer Director of Business Development & Partnerships Director of Finance & Corporate Services Director of Programs & Service Development Director of Operations & Service Delivery Executive Director Operations & Service Delivery
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58 PKC - GENERAL The financial impacts of this option are summarised in Table 5.9 below. Table 5.9: Option 3a – Single new ALEO Category of Expenditure Savings/ Costs Senior Management re-alignment -£284,768 Terms & Conditions consolidation £747,186 Governance Costs -£193,999 Non Domestic Rates £0 Annual Additional Cost/Saving to PKC £268,419 Again, this option represents an additional financial burden to PKC mainly due to the assumption that Terms & Conditions of employment would require to be standardised. As with the other options considered, there is no allowance for one-off costs of implementation to achieve this. Consideration would also have to be given to the complexity of bringing together three diverse organisations into one and the cultural challenges that this would represent. 5.2.6 Option 3b: Two ALEOs This option proposes a shift from the current three ALEOs to two bodies. This assessment has assumed that one body would be the merger of LAL and CPK due to them being more closely aligned in terms of T&C’s. The second body would leave PTCH as it currently operates. This option looks at the merging of LAL and CPK into a new entity and the retaining of PTAH but in a more streamlined manner with corporate services being provided by the larger entity. Table 5.10, over, summarises the proposed Senior Management Structures for the 2 entities.
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59 PKC - GENERAL Table 5.10: Option 3b Senior Management Structures New ALEO Perth Theatre and Concert Hall Position FTE Position FTE Chief Executive Officer 1 Director 1 Head of Business Development 1 Director of External Relations (0.8) 0.8 Head of Support Services 1 Director of Commercial Operations 1 Head of Finance 1 Head of Operational Services 1 Head of Audiences & Learning 1 Head of Heritage & Culture 1 Total 7 2.8 The new structure is illustrated in Figure 5.6, over.
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60 PKC - GENERAL Figure 5.6: Option 3b - Senior Management Structure for two ALEOs CEO Head of Business Development Head of Support Services Head of Finance Head of Operational Services Head of Audiences & Learning Head of Heritage & Culture Director PTCH Director of External Relations Director of Commercial Operations
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61 PKC - GENERAL The financial impact is summarised in Table 5.11 below. Table 5.11: Option 3b – Two ALEOs Category of Expenditure Savings/ Costs Senior Management re-alignment -£284,768 Terms & Conditions consolidation £747,181 Governance Costs -£52,525 Non Domestic Rates £0 Annual Additional Cost/Saving to PKC £371,100 Again, consideration needs to be given to the additional one-off costs that would be required for this option to be delivered. In addition, the forecast shows a significant additional financial burden to PKC, again driven by the alignment of terms and conditions. 5.2.7 Option 4: New Sport and Culture ALEO and change of status for PTCH This option would mean that the Council would have a single ALEO representing Sport, Culture, Libraries and Museums and re-imagine the current operating model of PTCH to no longer be an ALEO but an alternative type of supported body (we have assumed that this would be an independent charity). In this option, PTHC terms and conditions would remain as they are. Table 5.12 below summarises the proposed Senior structures. Figure 5.7, over, displays the structure as an organogram. Table 8: Option 4 Senior Management Structures New ALEO Perth Theatre and Concert Hall Position FTE Position FTE Chief Executive Officer 1 Director 1 Head of Business Development 1 Director of External Relations (0.8) 0.8 Head of Support Services 1 Director of Commercial Operations 1 Head of Finance 1 Director of Finance & HR 0.8 Head of Operational Services 1 Finance Manager 1 Head of Audiences & Learning 1 Head of Heritage &Culture 1 Total 7 4.6
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62 PKC - GENERAL Figure 5.7: Option 4 Senior Management Structures CEO Head of Business Development Head of Support Services Head of Finance Head of Operational Services Head of Audiences & Learning Head of Heritage & Culture Director PTCH Director of External Relations Director of Commercial Operations Director of Finance & HR Finance Manager
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63 PKC - GENERAL The financial analysis is summarised in Table 5.13 below. Table 5.13: Option 4 – Culture and Sport ALEO and PTCH change Category of Expenditure Savings/ Costs Senior Management re-alignment -£220,169 Terms & Conditions consolidation £560,450 Governance Costs -£52,525 Non Domestic Rates £0 Annual Additional Cost/Saving to PKC £287,756 As can be seen the option again places an additional recurring burden on PKC. This is mainly due to increased staffing costs as it assumes that the new ALEO would be brought in line with PKC terms and conditions. 5.2.8 Conclusions & further cost implications The above assessment shows there is only one option that potentially brings a financial saving on a recurring basis, Option 2a consolidation of corporate services. However, it should be noted that there could be significant challenges and costs in delivering this due to current set ups and requirements. Table 5.14 below summarises the financial impact of all of the options. • Option 1: Bring all ALEOs in house to PKC. • Option 2a: Bring some ALEO services in house (e.g. consolidation of corporate services from ALEOs delivered by PKC) • Option 2b: as 2a but with library services brought back into PKC. • Option 3a: Create one new ALEO • Option 3b: two new ALEOs – streamlining corporate and back-office services. • Option 4: Create one ALEO for culture and sport and consider possible change of status for Perth Theatre and Concert Hall.
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64 PKC - GENERAL Table 5.14: Summary of Financial Appraisal Category of Expenditure Option 1 Option 2a Option 2b Option 3a Option 3b Option 4 Senior Management re-alignment -£481,774 -£206,349 -£206,349 -£284,768 -£323,561 -£220,169 T&C’s alignment £750,442 £14,542 £14,542 £747,186 £747,786 £560,450 Non-Domestic Rates £2,735,300 £606,800 Governance Costs -£400,257 -£193,999 -£52,525 -£52,525 Costs/Savings £2,603,711 -£191,807 £414,993 £268,419 £371,100 £287,756 In addition to the costs that have been highlighted above, there are a number of one off (and some recurring) implementation costs for each option that would need to be considered. In some cases, additional costs would require significant investment and may have an impact on the costings above, especially in relation to the savings currently attached to Option 2a. While precise costings have not been prepared for all of these additional costs due to the variation across options and the complexity of costs in areas like IT and systems, a breakdown of the types of areas under consideration has been provided below: • IT Systems: rationalisation and integration to unified systems across all organisations. At present, there are approx. 50 systems in use across ALEO’s for HR, payroll, budgeting, ticketing, licencing, technical support and customer service areas. Some of these systems are specific to the organisation and would need to be kept as there is no PKC equivalent. Costs for recurring contracts and one off costs are around £420k per annum across all three ALEO’s. Further work could be carried out as a separate project if required to analyse full costs of integration, systems remaining as well as the time and resources required to deliver on this. • Loss of charity status discount: through consolidation of services to PKC, there could be resulting reductions to discounts for contracts and services which are both recurring and one off. Costs have not been identified in detail due to the variable nature. • Additional costs for integrated systems: PKC may incur additional costs (one off and recurring) to consolidate and increase users / capacity of Finance / HR / Payroll systems. There may also be some implications in terms of flexibility, for example payroll as PTACH pay sessional / weekly / hourly employees and PKC pay on a
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65 PKC - GENERAL regular monthly basis. This may also incur additional add on functions to PKC payroll systems. • Voluntary Retirement / Redundancy: in the event of staff being displaced as a result of structural change, there would be additional one off costs for those entitled to redundancy payments. • Implementation resources: to ensure any of the options above was implemented in the most timely, efficient and cost effective way possible, project management support would be required as a one off cost. 5.3 SWOT Analyses In addition to the financial appraisal, a summary of the Strengths, Weaknesses, Opportunities and Threats (SWOT) of each option is provided below. These were discussed at a workshop with the ALEO Review Working Group in August 2025. 5.3.1 Option 1: Bring all current ALEOs in house to PKC In addition to potential savings in senior management costs, Option 1 offers the potential to consolidate service and structures and provides clear lines of accountability through existing Council governance arrangements. However, there are considerable costs in this model due to the loss of NDR relief and a shift to in house delivery could have implications for existing sources of funding to the ALEOs both from public funders (e.g. Creative Scotland) and trust and foundations. While there may be opportunities for further efficiencies through workforce planning and asset rationalisation the added costs are likely to lead to further cuts with service reductions likely.
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66 PKC - GENERAL 5.3.2 Option 2a: Bring Corporate Services in house to PKC Option 2a delivers some staff savings and consolidates support services within the Council. However, these saving are modest and, as noted likely outweighed by the costs of change. All of the ALEOs also raised issues with the extent to which the Council would be able to meet their specific needs in areas like HR/ payroll, finance and IT. This in turn could negatively impact on relationship between the Council and the ALEOs. Weaknesses: Cost to Council (NDR and Ts & Cs) Reduced funding opportunities Potential risks to current funding Dilution of brand value Questions over Council expertise Loss of service specific expertise Hidden costs for winding up ALEOs Strengths: Consolidation of support services Senior Management savings Accountability Alignment to Council services Threats: Reduced focus on services within larger structures Financial issues require deeper service cuts Ongoing Council budget pressures Opportunities: Further savings through workforce planning Asset rationalisation Closer links to related Council services Greater political engagement/ understanding Weaknesses: Savings are only modest Hidden costs (eg IT alignment, HR) Possible issues with inconsistent support to ALEOs Strengths: Delivers some staff savings Consistency of systems and support services within PKC Retains ALEO identities/ brands Threats: ALEOs demanding higher level of service that Council able to provide Possible negative impact on Council/ ALEO relationships Negative impact on ALEO operations? Opportunities: Allows ALEOs to pursue income generation plans
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67 PKC - GENERAL 5.3.3 Option 2b: Bring Corporate Services and Library Services in house to PKC Option 2b also delivers some staff savings and aligns support systems within PKC while enabling the ALOEs to continue to operate under their own brands. However, as with 2a, the savings are modest and could easily be outweighed by the costs. The loss of the NDR relief on libraries also makes this option less affordable. 5.3.4 Option 3a: Create a single new ALEO Option 3a again delivers some staff savings and the potential for more in future with efficient workforce planning. However, the more consolidated model reduced the extent of service specific expertise on both the senior management team and the Board. As noted in the financial appraisal, the main area of cost here is in aligning staff terms and conditions (to those of CPK/ PKC). This option should also afford opportunities for both collaboration and across selling across service areas as well as cross-subsidy. Weaknesses: Staff savings are only modest Hidden costs (eg IT alignment, HR) Loss of libraries NDR savings Strengths: Delivers some (modest) staff savings Consistency of systems and support services Retains ALEO identities/ brands Aligns libraries to Council services Threats: ALEOs demanding higher level of service that Council able to provide Possible negative impact on Council/ ALEO relationships Opportunities: Allows ALEOs to pursue income generation plans
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68 PKC - GENERAL 5.3.5 Option 3b: Two ALEOs Similar to Option 3a, Option 3b delivers staff savings (albeit at a lower level) and the opportunity for more in future. However it is also subject to the hidden costs of change and the costs associated with the alignment of terms and conditions. There is also the question of the strategic coherence of bring together sport and leisure with museums and libraries and again the loss of service specific expertise that could result. Weaknesses: Cost of alignment of Ts and Cs Hidden costs (eg IT alignment, HR) Loss of service specific expertise/ focus at senior management and Board level Dilutes individual ALEO brands Strengths: Delivers some staff savings Consistency of systems and support services Allows cross-subsidy of services Allows greater service collaboration across service areas Threats: Long term sustainability not clear Potential loss of funding Opportunities: Possibility to realise other economies of scale Allows new ALEO to pursue income generation plans Collaboration/ cross-selling across service areas Weaknesses: Cost of alignment of Ts and Cs Hidden costs (eg IT alignment, HR) Loss of service specific expertise/ focus at senior management and Board level (LAL/ CPK) Dilutes individual ALEO brands (not PTCH) Lack of strategic coherence between LAL and CPK services Strengths: Delivers some staff savings Consistency of systems and support services Allows cross-subsidy of services (LAL and CPK) Allows greater service collaboration between LAL and CPK Threats: Long term sustainability not clear Potential loss of funding Opportunities: Possibility to realise other economies of scale Allows new ALEO and PTCH to pursue income generation plans Collaboration/ cross-selling across service areas
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69 PKC - GENERAL 5.3.6 Option 4: New Sport and Culture ALEO and change of status for PTCH Option 4 is broadly similar to Option 3b but offers the added benefit to PKC of removing the risk of equal pay claims relating to PTCH (it being independent in this model). However, the Council should note that this independence could result in less direct accountability. While independent status can open up some additional funding opportunities (some trusts are reluctant to support ALEOs), encourage public trust and donations and would bring PTCH more in line with the wider theatre sector, it is not without risk to the organisation. ALEO status is generally held to offer greater certainty for the ALEO regarding council support (although this is not guaranteed) and for councils it offers clearer accountability and alignment to council priorities. 5.4 Wider Appraisal As outlined above, the financial appraisal suggests that Option 2a is the most likely to deliver financial savings, albeit at a relatively modest level. However, as discussed, financial savings, important as they are, should not be the only criteria on which decisions are made. Here, we appraise each of the options against a wider set of criteria: Weaknesses: Cost of alignment of Ts and Cs Hidden costs (eg IT alignment, HR) Loss of service specific expertise/ focus at senior management and Board level (LAL/ CPK) Dilutes individual ALEO brands (not PTCH) Reduced Council control/ accountability (PTCH) Strengths: Delivers some staff savings Consistency of systems and support services Allows cross-subsidy of services (LAL and CPK) Allows greater service collaboration between LAL and CPK Removes equal pay risk for PKC Threats: Long term sustainability not clear Equal Pay issue within PTCH Longer term funding risk to PTCH? PKC need to tender for PTCH services? Opportunities: Possibility to realise other economies of scale Allows new ALEO and PTCH to pursue income generation plans New funding opportunities for PTCH Collaboration/ cross-selling across service areas
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70 PKC - GENERAL • Income generation – the financial appraisal above focussed mainly on cost savings, but the different options have implications for income generation in particular through access to funding sources (weighted x1.5). • Management focus – considering the extent to which the different models enable or inhibit sufficient management (and Board) focus on the different service areas. • Service development – the extent to which the options support the development of exiting and/ or new services. • Impact on staff – considering the degree to which each option will have an impact on staff across the three ALEOs. • Impact on service continuity – whether or not each option is likely to impact the continuity of service delivery. • Set up costs – considering the potential costs of moving to each option (not quantified but scored against each other). • Credibility and influence – the extent to which the options result in a structure with credibility and influence within and beyond Perth and Kinross. • Sustainability – assessing the extent to which each option offers a sustainable model for service delivery (this is weighted x2 to reflect its importance). • Risk – assessing the level of potential risk associated with each option (weighted x1.5). Each member of the study team scored the options from 1 to 10 (where 1 is negative and 10 positive) independently and the results were compared and combined to arrive at an overall assessment, summarised in Table 5.15, over.
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71 PKC - GENERAL Table 5.15: Summary of Qualitative Scoring Criteria Option 1 Option 2a Option 2b Option 3a Option 3b Option 4 In House Shared Services Shared Services & Libraries in house One ALEO – Culture and Leisure Two ALEOs PTCH status/ One ALEO Income generation 7.5 10.5 10.5 12 10.5 10.5 Management focus on service 6 8 8 6 7 7 Service development 5 6 6 7 7 8 Impact on staff 4 7 6 5 5 6 Impact on service continuity 5 7 7 6 6 7 Set up costs 7 8 8 6 6 6 Time to deliver 5 7 6 5 6 6 Credibility and influence 6 7 7 8 7 7 Sustainability 14 16 16 14 12 12 Risk 9 9 9 10.5 10.5 10.5 Total Score 68.5 85.5 83.5 79.5 77 80 The rationale for the scoring is as follows: • Income generation – options which create new consolidated ALEOs offer strong income generation opportunities but also the risk that some trusts and other funders’ income may reduce if they choose to fund only once to the new body/ bodies, compared to the shared services model where the individual ALEOs continue to operate. Council-run services would not have access to the range of funding sources available to ALEOs and charities.
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72 PKC - GENERAL • Management focus – options which consolidate services under a single management structure lead inevitably to rationalisation of management teams and Boards (with cost savings as considered above) and therefore to a dilution of service specific focus and expertise compared to options which maintain the three organisation structures. • Service development – the more consolidated models were judged to offer slightly greater potential for service development through opportunities for income generation, collaborative effort and cross-subsidy. Council delivery scored lower here due to the financial impact of the loss of non-domestic rates relief, which would constrain service development. • Impact on staff – options that result in significant structural changes are likely to be disruptive for staff and those that are based on consolidation could also result in headcount reductions. These options therefore scored lower. • Impact on service continuity – similarly, options which propose high levels of restructure carry a higher risk of services being disrupted through the change process. • Set up costs – greater levels of structural change are likely to incur more in the way of set up costs, including legal and related costs as well as costs relating to potential staff restructure. • Credibility and influence – experience from further afield suggests that larger organisations often carry more weight and influence. However, in this case PTCH may be better served by having its own identity, particularly in relation to the theatre production sector and audience. Delivery from within the council was felt to result in a lower level of influence based on concerns that the services could have a lower profile alongside much larger statutory provision. • Sustainability – the financial appraisal demonstrates the potential of most options to deliver significant savings is limited. Therefore, none can be assessed as offering strong potential for a sustainable model other than the shared services model which is itself modest. • Risk – the appraisal found little to separate the options in terms of risk as all raise issues in some form from funding risks in consolidated models to financial risks. The single ALEO model was judged least risky on the basis that it protects rates relief and other ALEO benefits while offering the potential for longer term economies of scale and service development.
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73 PKC - GENERAL On the basis of this scoring, the shared services model emerges as the strongest option, albeit largely as a result of the fact that it avoids the risks and issues associated with significant structural change while delivering some modest financial benefit. 5.5 Preferred Option The importance of the financial context, and the need to identify a sustainable model for the delivery of culture and leisure services in Perth and Kinross point towards the shared services model (Option 2a) as the most promising. However, as noted earlier, this is not without complication given the different requirements of each of the three ALEOs, the differences in terms and conditions for affected staff and the concerns raised by all three in relation to whether or not a single service would be sufficiently flexible and responsive to meet their needs. The status quo position is not sustainable, at least not on its current trajectory, but there are some mitigating factors that should be considered. • PTCH is working to a plan to further increase its income through growth in commercial activity, increased ticket sales with more production activity and a focus on fundraising particularly with trusts and foundations. Progress has been made and it is likely that this could result in a more financially robust position within a few years. • The planned PH2O facility will replace the Bell’s Centre and the existing leisure pool and will enable LAL to move to a more sustainable platform through increased income and cost reduction at these other sites (there may also be an opportunity for an alternative delivery model for the Dewars’ Ice facility). It is also important to consider the return on PKC’s investment in terms of the value and impact that culture and leisure can create for Perth and the wider region. Linking back to the Council’s priorities set out in the Corporate Plan, the three ALEOs can make a clear contribution to priorities around physical and mental health and wellbeing, education and in helping to mitigate the negative impacts of poverty and inequality. They can also, through their combined asset base and service portfolio, make a significant contribution to local economic development through area regeneration and the promotion of the visitor economy. PTCH’s impact work demonstrates this potential and points towards the
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74 PKC - GENERAL potential gains of the three ALEOs working more closely together around this shared agenda. 5.6 PKC Objectives and Critical Success Factors As set out in the study brief, PKC identified two objectives for the ALEO Review work, along with seven critical success factors. 5.6.1 PKC Objectives PKC identified two main objectives for the ALEO Review work, as follows: • Ensure a sustainable model of delivery for leisure and culture services in future. • A more streamlined and consistent approach across all ALEO organisations in terms of systems and corporate support. Table 5.16, below, summarises the extent to which the identified options meet these objectives. Table 5.16: PKC Objectives As shown, while the options generally do result in a more streamlined approach in terms of systems and corporate support, the financial appraisal suggest that only Option 2a (and possibly Option 4) offers the potential to develop a more sustainable model. However, even for these options, this assessment remains uncertain. 5.6.2 Critical Success Factors Table 5.17, over, maps the options against the seven critical success factors (CFSs) identified by PKC for the review work. Option 4Option 3bOption 3aOption 2bOption 2aOption 1PKC Objectives MaybeNoNoNoMaybeNoSustainable Model SomeSome (LAL and CPK) YesYesYesYesStreamlined and consistent approach to Corp Services
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75 PKC - GENERAL Table 5.17: Critical Success Factors Option 4Option 3bOption 3aOption 2bOption 2aOption 1CSFs NoNoNoNoMaybe No1. Reduce costs / make savings NoNoNoNoNoNo2. Reduce ALEO properties across Perth & Kinross MaybeNoNoNoNoNo3. Increased income opportunities – specifically in PTCH Yes (PTCH no longer an ALEO) YesYesNoNoYes4. Ensuring consistency and equity in terms and conditions of employment in ALEO’s PKC to advise PKC to advise PKC to advise PKC to advise PKC to advise PKC to advise 5. Compliance with all related employment law across all ALEO's Some (LAL and CPK) Some (LAL and CPK) YesYesYesYes6. Consolidation of corporate services NoNoNoNoMaybeNo7. Optimise PKC investment in culture and leisure through the arms-length model
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76 PKC - GENERAL As shown, none of the options meets all of the CSFs. Most obviously, only Option 2a delivers savings, but as noted above, these are likely cancelled out by the costs of aligning systems. None of the options makes it more or less likely that ALEO properties would be reduced as this remains a decision for the Council and not one that is materially impacted by the structural options. The only option that can clearly contribute to income generation is Option 4 by virtue of the independent status of PTCH, and the resulting ability to access funding not available to ALEOs or Councils. This is not to say that income generation is not possible under the other options – it is and all ALEOs have plans to do so – but rather that this is not dependent on the structures proposed by the options. Consistency in terns and conditions is a feature of Options 1, 3a, 3b and to some extent in Option 4. However, as noted, this comes at a considerable cost. All of the options do result in greater consolidation of corporate services either within PKC or as part of a more consolidated ALEO structure. In terms of the final CSF – optimising investment - the assessment remains unclear. As noted, none of the options deliver significant savings so if the starting point is that the current level of investment is not sustainable, then the proposed structural changes do not offer a clear path to a more sustainable model.
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77 PKC - GENERAL 6 Conclusions & Recommendations In this section, we present our overarching conclusion and discuss the implications of this for PKC and the three ALEOs. 6.1 Appraisal Conclusions The purpose of the study was to appraise the identified options for structural change in the delivery of culture and leisure services in Perth and Kinross. The status quo, at least in its current trajectory, is not considered sustainable as it is likely to demand a growing level of subsidy from PKC. Examining each of the options in more detail reveals that the potential to achieve significant savings is limited in virtually all options. The most promising is that of a shared services model for corporate and back-office support functions but even this offers only modest savings for a potentially significant level of operating risk. Indeed, the hidden costs of aligning systems in areas like finance and IT is likely to offset the identified savings. Thus, our overarching conclusion is that structural change (at least those identified in the options) is unlikely to deliver the level of savings and efficiencies that will result in long term sustainability. With that in mind, we have given some initial thought to what else might now be considered and have proposed a twin track approach that combines a strategic approach to more structured collaboration with more operational measures to grow income and manage costs. 6.2 Recommendations 6.2.1 Strategic Alliance We believe an option worth considering that avoids structural/governance change/disruption is that of ‘Status Quo+’. This would seek to build on the considerable collective strengths of the three ALEOs and PKC’s Events team by creating a more
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78 PKC - GENERAL formalised ‘Strategic Alliance’ built on shared objectives and cooperative working practice. An illustrative approach is outlined below: A Strategic Alliance between Perth and Kinross Council (PKC), Culture Perth and Kinross (CPK), Perth Theatre and Concert Hall (PTCH), and Live Active Leisure (LAL) would provide a framework for collaborative leadership in delivering cultural, leisure, and wellbeing outcomes across the region. Such an alliance would not constitute a merger or legal restructuring but would formalise a commitment to shared goals, coordinated delivery, and strategic investment. Establishment The alliance would be established through a Memorandum of Understanding (MoU) signed by the Chief Executives and Chairs of each organisation and by senior PKC officers. This document would outline shared principles, such as collaboration, inclusivity, transparency, and set out agreed priorities. A cross-organisational Strategic Alliance Board would be convened, comprising senior representatives from each partner, meeting quarterly. PKC would act as a convener and enabler, ensuring alignment with council priorities and resource planning. The Alliance would be underpinned by a Joint Strategic Plan, co-developed with input from communities and staff, aligning organisational strategies with key themes such as community wellbeing, creative economy development, equal access to services, and sustainability. This plan would inform joint funding bids, capital development proposals, and advocacy work at national level. Operation The Strategic Alliance would operate as a coordinating forum, not a delivery body. It would enable alignment without undermining the autonomy or governance of member organisations. Key operational mechanisms would include: • Shared Working Groups focused on joint themes (e.g. capital investment, outreach and inclusion, programming). • Coordinated Planning Cycles to allow visibility of programming, infrastructure plans, and funding requirements across partners.
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79 PKC - GENERAL • Data and Evaluation Collaboration to develop shared metrics and evidence impact across services. • Joint Staff Development opportunities to foster cross-sectoral skills and understanding. Resource-sharing arrangements (for example, for communications, ticketing platforms, or digital infrastructure) could be explored where appropriate, particularly where cost- efficiencies and audience benefits align. Shared Objectives The Alliance’s shared objectives might include: • Enhancing community health and wellbeing through joined-up cultural and active lifestyle initiatives. • Strengthening inclusion and access for underserved groups across rural and urban areas. • Growing the local economy and Perth and Kinross visitor economy developing career pathways across cultural and leisure sectors. • Coordinating capital planning to maximise public benefit and avoid duplication of investment. • Advocating for national recognition and funding for Perth and Kinross as a regional cultural leader. • Seeking efficiencies in service delivery. This strategic alliance would aim to strengthen the region’s collective voice, improve outcomes for residents, and provide a more resilient and agile delivery model for public cultural and leisure services. 6.2.2 Operational Measures In addition to the strategic approach suggested above, it will also be necessary to look to other more practical measures and here the options are limited, and few can be considered straightforward. While detailed analysis of each of these is beyond the scope of the current appraisal, we have provided here some initial thoughts on the following: • Income growth.
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80 PKC - GENERAL • Property rationalisation. • Workforce planning. • Other efficiency measures. Income Growth There is undoubtedly some potential for income growth in all three ALEOs, but most obviously in LAL and PTCH. Unless a decision is taken to introduce admission charges at Perth Museum and Art Gallery, the potential for CPK to generate significant levels of additional income will be limited. LAL is likely to realise some savings (see below) and achieve some income growth with the development of the new PH2O facility, even if this will take some years to materialise. Beyond this, pricing models may offer some income growth, as well as prioritisation of revenue generating services (e.g. health and fitness, swimming lessons, gymnastics classes etc) but the potential scale of this opportunity requires further analysis to quantify. PTCH, as noted earlier, is working to a plan to increase its income both through ticket sales and from commercial hires as well as via fundraising efforts to target more trusts and foundations. While initial signs are good and progress has been made, this again is likely to take a few years to reach a level that will have a meaningful impact on the level of subsidy required from PKC. Nonetheless, income growth should certainly be part of a forward strategy for the services. It is worth noting that we found little to separate the structural options in respect of their potential to support income growth, and some presented risks as detailed earlier. Property Rationalisation Similarly, the potential of the various structural options to support property rationalisation did not vary as decisions on this matter ultimately rest with PKC regardless of what ALEO structures are in place. While any decisions about property rationalisation should be taken on the basis of due consideration and analysis of evidence relating to, inter alia, building conditions, usage patterns, financial sustainability, availability of alternative provision, and wider asset rationalisation plans, we offer the following thoughts: • PTCH has little scope for rationalisation – closure of either venue would significantly impact both on the financial viability of the organisation and the
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81 PKC - GENERAL perception and reputation of Perth. This would risk the loss of the significant economic and community benefits that the organisation creates. • Similarly, Perth Museum and Art Gallery is a flagship asset for the city and the region which cannot be relocated to another facility. This leaves CPK with the library estate, which may offer potential for rationalisation as part of the move towards more integrated community facilities. While there is always a risk of political and community resistance, the community hub model which brings together different services within a single location makes good sense in both financial and service development terms. • Parts of the leisure estate may also lend themselves to consideration within community hub proposals and should be part of this process. In addition, LAL’s Strategic Asset Review has identified the potential to close some assets with the arrival of PH2O which will certainly result in savings as well as providing an improved offer. Again, while the scope for property rationalisation may be limited, this should still be considered in line with PKC’s wider asset rationalisation plans. Workforce Planning Our experience is that detailed workforce planning can usually deliver savings, sometimes at a quite significant scale. This requires detailed analysis of rotas and shift patterns against usage data to identify periods when facilities and overstaffed and underused. It should also extend to detailed consideration of job roles and where there may be potential for rationalisation. As analysis at this level of detail is beyond the scope of the current appraisal, it is difficult to comment at this time on the potential scale of efficiencies that might be achieved. However, we recommend that such an exercise is undertaken for all three ALEOs (recognising that PTCH’s venues are used in a different way) with a view to identifying efficiencies in staffing structures. It is perhaps worth also noting that while larger (more consolidated) structures generally do offer greater potential for staff savings, in practice the realisation of these does not often cross service boundaries (i.e. leisure centre staff do not easily transfer to museums). Gains tend to be within rather than across service areas apart from management and corporate functions (which have been addressed in the earlier appraisal).
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82 PKC - GENERAL Other Efficiency Measures Greater collaboration across the three ALEOs can offer some potential for efficiencies in areas like procurement and purchasing, These are likely to be modest gains, but one area worth considering is energy. Utilities Payment Agency Agreement The ALEOs have an opportunity to achieve significant financial savings by establishing an agency agreement with PKC for utility payments. Under this arrangement, PKC would manage utility payments on behalf of the ALEOs, with costs offset against the Service Fee provided by PKC, making it cost-neutral for the Council. The key benefit for the ALEOs is reducing irrecoverable VAT paid to HMRC, which is currently a significant cost. By having PKC manage utility payments, the ALEOs would avoid VAT charges that cannot be reclaimed. Due to information at the time, we can only look at the potential benefits from a LAL perspective (as shown in Table 6.1) but there is no reason why these cannot be replicated across the other two bodies. It should also be noted that this is based on all LAL properties and it is likely that those that are directly owned by LAL would not qualify for inclusion in such a scheme. The actual savings for LAL would therefore likely be lower than the indicative figures provided below. Table 6.1: Energy Agency agreement – LAL Example Item Value Energy Costs £1,083,497 Irrecoverable VAT rate 11% Potential Saving £119,185 Similar arrangements across the country have shown success, such as those being implemented by Active Stirling, West Lothian Leisure and Edinburgh Leisure. The agency agreement would reduce operational costs without compromising service quality. By shifting utility responsibilities to PKC, ALEOs could focus resources on the delivery of services. It also fosters a stronger partnership between the ALEOs and PKC, aligning all organisations towards efficient resource utilisation and community enhancement.
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83 PKC - GENERAL Further discussions and evaluations are needed to refine the proposal and align it with the financial frameworks of the ALEOs and PKC. Proper planning and negotiation can ensure the arrangement benefits both parties while maintaining transparency and mitigating risks. Overall, this agreement provides a practical solution, enabling cost savings and supporting the sustainability of services for the community.
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84 PKC - GENERAL Appendix A: ALEO Review Working Group Members of the ALEO Review Working Group are as follows: ALEO Chief Executives • Paul Cromwell – Live Active Leisure • Chris Glasgow – Perth Theatre and Concert Hall (Horsecross Arts Limited) • Helen Smout – Culture Perth and Kinross Perth and Kinross Council Officers • Charlene Guild, Strategic Lead, Projects & Programmes (Lead) • Stephen Crawford, Strategic Lead, Property • Pauline Johnstone, Corporate HR Manager • Serge Merone, Strategic Lead • Lisa Simpson, Strategic Lead, Legal & Governance • Scott Walker, Strategic Lead, Finance & Business Support • Steve MacDonald, Service Manager, Economic Development • Norman Ballantine, Transformation & Change Programme Manager • Alan Taylor, Strategic Lead, Customer & Digital Services