Public Bodies Expenditure: Supplementary Report of Data Commission

What this means for public bodies and Scottish Government

Overarching message: The importance of action

In the face of a constrained financial outlook, it is incumbent on all public services - including public bodies and Scottish Government – to pursue all reasonable opportunities to secure savings, helping to ensure the services they provide and oversee remain sustainable and meet people’s needs well in future. The “cascade approach” to delivering savings provides a clear roadmap for how they do this: it places emphasis on releasing resource through efficiencies, service redesign and how functions are organised, before consideration is given to savings that have a bearing on service delivery.

This challenge and the need to act with energy in order to protect the sustainability and effectiveness of public services is well understood across Scottish Government and public bodies. As well as reaffirming the need for continued action, the information in this report should assist all these organisations in identifying where opportunities to pursue further savings may lie and how this work can be supported.

Public body expenditure on corporate functions

The microdata provide a breakdown of public body expenditure by Cabinet Secretary portfolio in Scottish Government and for each public body individually. This more detailed information can be highly valuable for informing how public bodies can pursue further opportunities to release resource for frontline needs. However, there are important qualifications about the value of these data.

In particular, these data only offer a starting point for further exploration. They cannot and should not be used in themselves to reach judgements about how efficiently or otherwise any specific public body is operating. There are several reasons why this is the case.

Varied nature of different bodies. Scotland’s public bodies provide a multitude of services that are essential to our lives. Public bodies provide cherished healthcare, and pay out vital social security benefits. Public bodies support important industries and our wider economy, and protect our precious environment. Public bodies keep us safe, and also provide important safeguards for our public services through scrutiny.

The wide range of essential functions that public bodies undertake is reflected in the diversity of public bodies themselves. Some are large – for instance, territorial health boards, Scottish Prison Service and Social Security Scotland employ thousands of staff. Others are very small bodies with important but niche functions, such as Boundaries Scotland and the Scottish Criminal Cases Review Commission. Most public bodies cover all of Scotland, including the Scottish Police Authority, Creative Scotland and Accountant in Bankruptcy. But many perform vital services for specific regions and communities, such as the Crofting Commission, South of Scotland Enterprise and Cairngorms National Park Authority. Each public body needs to shape its corporate functions to meet the distinctive circumstances of its operations.

Even apparently similar bodies can have different operating arrangements. For instance, NHS Highland manages health and social care in its area in a distinctive way, with functions divided between it and Highland Council without a separate integrated joint board.

Total activity supported by corporate functions in some bodies is substantially greater than the data reveal. For instance, the Scottish Funding Council invested around £2 billion in Scotland’s colleges, higher education institutions and other delivery partners. which is not reflected in its own resource expenditure total. Other bodies undertook activity which was resourced through fees, rental income and other trading activities In some of these cases, public bodies provided figures for total resource expenditure which set out net rather than gross expenditure. For instance, the Scottish Qualification Authority (SQA)’s income accounts for more than half its outturn. When income is taken into account, SQA‘s expenditure in 2022-23 increased from £50.2 million to £108 million.

Distinctive circumstances during the year in question. For some public bodies, short-term factors during 2022-23 will have had a bearing on the level and nature of expenditure they incurred. For instance, this was the first year of operation for Consumer Scotland and the second full year for the Scottish National Investment Bank. Both undertook start-up activity, including staff recruitment and procurement. Health and social care bodies were recovering from Covid-19 pressures in 2022-23, which may have given rise to some variances in cost distribution.

Some corporate function expenditure directly supports the front line. Public bodies were asked to provide information on expenditure to third parties managed by corporate functions against four specific categories (including annual estate running costs, and Digital transformation costs); together with a total expenditure figure. The commission did not explicitly restrict information requested to expenditure which related to that organisation’s corporate functions. As a result, some bodies may have provided information which included expenditure relating to front-line operations, which their corporate functions managed on behalf of the organisation; while others did not.

The distinction between expenditure on corporate functions and spending on front-line activity is not necessarily clear cut. For example, investment by bodies in Digital and their IT estate may result in benefits for back office or front line, or both. Public bodies have reported that total expenditure often included a wide range of activity not covered under the four specific categories. Examples they cited included staff recruitment; temporary staffing; volunteer costs; remuneration and expenses for Board members; legal and audit fees; insurance; bank charges; procurement; external research and consultancy; statutory advertising, and shared service level agreements with other public bodies. Some of these areas of expenditure may have directly supported front-line delivery.

Nature of the exercise. Scottish Government undertook light touch verification work on responses which public bodies provided. However, the material collated is primarily self-reported information by public bodies. As a result, there will be some differences in how bodies chose to code aspects of expenditure and otherwise interpret elements in the commission. As a collective, public bodies in the Health and Social Care portfolio responded to the commission using a common interpretation which differed from that being applied by other public bodies. This is why results for Health and Social Care portfolio bodies are set out separately from others in the management information publication.

This does not present a problem, provided care is taken to understand what lies behind figures provided by another body before drawing conclusions. For instance, under the category “third party expenditure managed by corporate functions”, did that body include all expenditure paid to third parties, or only that which related to the work of its corporate services?

Provided these important qualifications are recognised, information such as this can be highly valuable for public bodies as they strive to identify resource that can be shifted towards the front line. The data offer a starting point for beginning to understand different bodies’ costs and operational needs, and for using that understanding to identify possible opportunities for further savings – through a combination of comparison, further discussion, exploration and collaboration where appropriate among public bodies.

Management of grant funds

The information which public bodies provided about management of grant funds (see the microdata)) can inform consideration about how grant funding best supports the priorities of Scottish Ministers and bodies themselves. For instance, are ways in which grant funds can be administered more efficiently than they are now? And do grant fund programmes align together as effectively as they could, in order to make the biggest positive difference overall where it’s most needed for supported organisations and communities? These questions bring into scope grant fund programmes set up and run by Scottish Government, as well as those which Scottish Government commissions public bodies and others to operate on its behalf, and programmes set up at the direct instigation of public bodies.