Scottish Spending Review 2011 and Draft Budget 2012-13

Chapter 5 Renewing Public Services

INTRODUCTION

The people of Scotland attach the highest value to their public services, and the Government shares this view. High quality services play a crucial role in shaping a flourishing, productive and equitable society.

In challenging times, the power of public services to improve people's quality of life and enhance their opportunities is especially important. Protecting our vital health, education and community safety services will be the embodiment of our partnership with the Scottish people.

This Government is ambitious for Scottish public services at a time when incremental improvements will no longer be sufficient to meet the challenges set by the financial context and demographic trends. We will implement the bold and imaginative programme of renewal and reform necessary to maintain the quality of public services that the people of Scotland expect and want. In doing so, we will focus all of Scotland's public bodies on transforming their operations to deliver radical service improvements, targeted to secure better outcomes for individuals and their communities.

We are committed to:

• ensuring the future sustainability of services;
• reducing inequalities;
• identifying those at risk and intervening early to prevent risks from materialising;
• shifting the focus from service delivery to building the capacity of individuals, families and communities; and
• unlocking resources currently invested in dealing with acute problems.

Our programme of reform will draw on the best evidence available and continue to be informed by independent expert analysis and advice. In 2010, we asked the Independent Budget Review ( IBR) Panel to report publicly on areas where savings might be made to help Scotland manage in a constrained financial environment. ^[1] Their authoritative analysis presented a wide range of savings options, many of which we have adopted. In June this year, the Commission on the Future Delivery of Public Services ("the Christie Commission") reported its findings, based on a longer-term analysis of the challenges facing public services. ^[2]

The Christie Commission made a significant contribution to the debate on the future direction of our public services by presenting a radical roadmap to better public services. Building on the Christie Commission's recommendations, we will reform our public services through:

• a decisive shift towards prevention;
• greater integration of public services at a local level, driven by better partnership, collaboration and effective service delivery;
• workforce development; and
• significant enhancements to the transparency of performance reporting.

We are publishing a separate document alongside the Spending Review that describes in detail our approach to public service reform in light of the Christie Commission's conclusions, and highlights key early actions we are taking as part of our programme for renewal and improvement.

PROGRESS SINCE 2007

We have invested in and improved our key public services - for example through record investment in health and our Healthcare Quality Strategy and putting 1,000 extra police officers on our streets. The public recognises improvements to their key public services.

Public satisfaction with the quality of key public services has increased since 2007 - over 85 per cent of people are now satisfied with the quality of their local health services, while 83 per cent are satisfied with the quality of their local schools.

People are feeling more comfortable and safer in their neighbourhoods - over 90 per cent of people rate their neighbourhood as a very or fairly good place to live, up from 2006. Scotland's crime rate is falling, and people recognise this: 71 per cent of people think that the crime rate has stayed the same or improved, compared to 65 per cent in 2006.

We have made Scotland fairer, through the introduction of measures such as abolishing prescription charges and freezing the council tax.

Our focus on value for money has delivered real efficiencies. In our 2007 Spending Review, we set clear annual efficiency targets that aimed to achieve in-year savings of at least £534 million (2 per cent of our 2007-08 DEL baseline) in 2008-09, £1,069 million (4 per cent) in 2009-10 and £1,603 million (6 per cent) in 2010-11. We were able to invest these back into communities and vital public services:

• In 2008-09, we delivered savings of £839 million (3.1 per cent of the baseline). This included: £160.4 million from improved Procurement; £81.9 million from better Asset Management; and £11.5 million from Shared Services.
• In 2009-10, savings rose to £1,470.5 million (5.5 per cent of baseline), with savings from improved Procurement rising to £312.2 million, Asset Management to £64.0 million and Shared Services to £25.4 million.
• The figure for efficiencies delivered in 2010-11 is £2,276 million (8.5 per cent of baseline). Savings from each workstream continue to rise, with improved Procurement delivering £375.0 million, Asset Management £81.0 million and Shared Services £71.3 million.
• The number of national devolved public bodies has already been reduced to 145, from a baseline of 199 in 2007. On present plans, this is expected to reduce further to around 114, exceeding the original commitment to a 25 per cent reduction. This will deliver estimated net savings of around £125 million by 2013 and estimated net recurring savings of around £39 million every year thereafter.

PRIORITISING SPEND TO SUPPORT AND RENEW PUBLIC SERVICES

The strategic priorities informing our Spending Review allocations reflect our core values, as set out in the Programme for Government and the Government Economic Strategy. Our long-term approach has been to provide stability and resilience and to continue to support economic growth. Although our focus is on growth, it is not at any cost: that is why 'Equity' is one of the strategic principles in the Government Economic Strategy - we want to ensure that everyone has an opportunity to succeed.

Even in this period of constrained resources, we continue to take a distinctively Scottish approach to safeguarding essential services. Our spending plans reflect this commitment to maximise resources for those services which matter the most to people and which, in these harsh economic times, are relied upon most by the most vulnerable in our society.

Investing in health services

We have protected health spending and the NHS budget in Scotland. The NHS will receive in full the resource budget consequentials from increases in health spending in England. This will enable us to continue our focus under the Healthcare Quality Strategy on world class, safe, person-centred and effective care and to face up to the unprecedented challenges facing health and social care in Scotland, as elsewhere in the world. Our total healthcare funding in 2012-13 of £11.6 billion reflects an increase of £214.3 million.

Protecting this budget not only secures NHS services for all of Scotland - including some of the most vulnerable people in society - it also secures the livelihoods of thousands of people within the NHS workforce and supports Scotland's labour market. Within this overall support for health, we will:

• introduce an Alcohol Minimum Pricing Bill;
• deliver health and social care integration;
• deliver the Family Nurse Partnerships programme to first-time pregnant teenagers, thereby improving maternal health, child health and development and family economic self-sufficiency;
• aim to increase the number of cancers detected at the first stage of the disease by 25 per cent;
• further invest in dementia services; and
• ring-fence support for carers, implementing the commitments in our Carers and Young Carers Strategy.

Investing in services for our young people

We are investing in Scotland's future by prioritising spend that benefits young people. We will introduce an Early Years Change Fund, we will keep higher education free and we will deliver an unprecedented package of skills and training support for our 16-19 year olds, including a record 25,000 Modern Apprenticeship opportunities.

The implementation of Getting it right for every child and A Curriculum for Excellence will continue, including the roll-out of new qualifications, maintaining smaller class sizes in the early years and continuing to develop the professionalism of the teaching workforce.

Our commitment to making record investment in our young people, and in their skills and training in particular, makes Scotland a highly attractive place to live, invest, employ and grow and supports Scotland's long-term economic growth.

Investing in services for fairer and safer communities

We recognise the economic pressures on people, including rising prices and the costs of VAT. We are keeping our commitment to building a fair society, tackling discrimination and the barriers to equality of opportunity, and protecting families and individuals via the Social Wage. Council tax is frozen, and prescriptions and personal care are free.

The recent energy price rises have further increased pressure on household budgets, leaving many of the most vulnerable households facing fuel poverty. We will continue to support improvements to energy efficiency for Scottish households, and we will seek to maximise support from energy companies from their regulated obligations. We are also extending the Energy Assistance Package to Carers.

We are committed to delivering 30,000 affordable homes (including 5,000 council homes) over the life of the Parliament.

We are prioritising safety on our streets - recorded crime is at its lowest level since 1976, and down 23 per cent since 2006-07 - and our spending plans include funding to maintain the record level of frontline police officers on our streets.

A decisive shift to preventative spending

The Scottish Government's spending plans are also designed to deliver a step change in the way in which we fund and deliver public services.

There is a growing body of evidence which demonstrates that spending on prevention can deliver better solutions and outcomes for individuals and avert future costs on the public sector. This starts with a focus on the first few years of life, where we know that a good start will bear dividends for a lifetime. Since 2007, the Scottish Government has taken work forward with our local authority partners and others to support this approach, including through the Early Years framework. But we are not limiting our efforts to early years: we are driving forward a range of policies - from shifting the balance of care to enable older people to remain at home, to our work to reduce offending and reoffending.

Now we need to take this work to the next stage. We have therefore identified significant funding to support a transition across public services away from dealing with the symptoms of disadvantage and inequality towards tackling their root causes. This will help deliver outcomes at reduced cost over the period of the Spending Review and this parliamentary term as a whole. The third sector has a crucial role to play in delivery, because of its specialist expertise, its ability to engage with vulnerable groups and its flexible and innovative approach.

As part of this approach, we are introducing three new funds to support preventative spending:

• a continuation of the Change Fund for older people's services. The fund currently amounts to £70 million within the NHS budget for 2011-12. This will increase to £80m/£80m/£70m within NHS budgets, supplemented by funding from local authority partners.
• an Early Years and Early Intervention Change Fund, to be overseen by the Early Years Taskforce, aimed at using evidence-based interventions to give our children the best start in life. The resourcing of this fund will be provided by NHS Boards and local authorities, working together to agree their local contributions and achieve maximum impact and value for money. As a central contribution to this, the Scottish Government will provide £50 million of resource over the parliamentary term through the Sure Start Fund component of the Scottish Futures Fund.
• a Reducing Reoffending Change Fund, focusing on preventative spend, will be created to bolster those interventions that we know can reduce reoffending. This work will take account of the particular contribution that can be made by third sector service providers. The fund will expand the coverage and impact of those interventions with a proven track record in reducing reoffending, as well as supporting innovation. This will help shift the focus of services, to get the correct balance between proactive and reactive services, as part of the next phase of the Government's Reducing Reoffending programme.

Taken together, these funds provide over £500 million of investment in preventative spending over the Spending Review period, bringing together new and existing expenditure. This continuing investment in preventative spend is directly aimed at improving outcomes and reducing the demand for a range of acute services over time. These funds will help drive the further integration of services and the sharing of vital resources. Corresponding budgets can therefore be reduced in future years, enabling us to manage costs across the Spending Review period as a whole.

Scottish Futures Fund - investment in jobs and a fairer future

This Government will also take an innovative approach to investment in jobs and infrastructure. The Spending Review confirms that the Government will deliver on its commitment to establish a £250 million Scottish Futures Fund to be delivered over the lifetime of this Parliament. The fund will have five components:

• Young Scots Fund - this is a youth talent initiative focused on sport, enterprise and creativity, including funding to take forward skills development for young people and the new national Football Academy;
• Next Generation Digital Fund - this will support the rollout of superfast broadband, particularly in rural areas of Scotland;
• Sure Start Fund - this will act as a change fund to deliver effective intervention in a child's life, as part of the Government's action to lead a decisive shift towards increased preventative spending, overseen by the Early Years Task Force;
• Warm Homes Fund - this will support the Government's concerted action to tackle fuel poverty and deliver renewable energy and energy-efficient homes in those communities worst affected by fuel poverty;
• Future Transport Fund - this wil enable us to reduce the impact of transport on our environment, reducing congestion and supporting better public transport, active travel and low carbon vehicles.

Together, these funds provide substantial additional investment, working across Government portfolios, in support of key economic, social and environmental objectives. The Spending Review provides funding of more than £160 million over the next three years across these five funds, with a further £90 million to be delivered in 2015-16. Further detail is set out in the portfolio sections of this document.

Greater local service integration

Evidence demonstrates clearly that improved outcomes for people and better use of resources can be achieved when local services are planned and delivered through effective, place-based partnerships. This Government will encourage and incentivise public service organisations to break through bureaucratic barriers and operate across organisational boundaries to produce integrated services that deliver better value for money and improve our social and economic wellbeing.

Community Planning partners will continue to play a significant role in identifying priority local outcomes and leading integration in their areas through the further development of Single Outcome Agreements and deployment of the Change Fund resources. We will champion effective local leadership among key players, which is critical in driving effective collaboration, and we will encourage all Partnerships to emulate the good practice of the best.

Workforce development

Public service workers are key to the design and delivery of services which meet people's needs. We are committed to enhancing the capability of the workforce, and we will continue to invest in workforce engagement and development and support leadership collaborations across public service ogranisations. Growing mutual understanding and shared purpose breaks down barriers between organisations and frees the front line to respond directly to the needs of individual service users.

Staff at all levels in public service organisations will be encouraged and supported to prepare for change; promote innovation; work flexibly; improve performance; and involve communities and service users in the design of services. Effective leaders will ensure that multi-disciplinary teams work across oganisational boundaries, focused on outcomes and not on bureaucratic structures.

Greater transparency of performance reporting

The scale of the fiscal challenge that we face means that we will need to maintain our focus on value for money over the coming years. Those who fund public services are entitled to know how public resources are used and to expect that maximum value is extracted from every pound.

The Government is committed to creating an open and rigorous performance culture within Scotland's public services, producing greater clarity about the objectives of public organisations and establishing clear lines of accountability that help to bolster standards of service and improve outcomes. We have asked all parts of the public sector to report publicly on their plans to improve the efficiency of public services, with details of actions undertaken and results achieved.

We will advance the performance improvement agenda further in this Parliament by intensifying our efforts to recognise and spread the benefits of good practice in service delivery, while also tackling any remaining sources of unexplained performance variation. As a part of this work, the Accounts Commission has been asked to develop proposals identifying how external scrutiny can support the delivery of better outcomes at the level of Commmunity Planning Partnerships, through assessing performance and promoting effective practice.

Managing with constrained resources

Our ambitious programme of public service reform and the promotion of a more preventative approach have a key part to play in ensuring that Scotland can live within its means. However, the scale of the budget reductions imposed on Scotland in last year's UK Spending Review is such that we have had to make some tough choices about short-term spending. This is a challenge that is shared by all Scottish Government portfolios and our partners in local government.

We have taken a strategic and collective approach to ensure that we have not compromised on our key priorities of investment, reform and preventative spend, or on our commitment to a Social Wage.

However, we have had to restrict our spending much more than we would have wished or thought reasonable:

• Reducing organisational costs - we are showing leadership by reducing Scottish Government administration costs by 18 per cent over the Spending Review period to free up resources for frontline services. We have already reduced the number of devolved public bodies by a third since 2007 and plan to make significant further reductions. In asking all public bodies to live within constrained budgets, we will expect them to take forward the recommendations of John McClelland's Review of ICT Infrastructure in the Public Sector in Scotland and protect the quality of the services they provide.
• Reforming public services - we have announced vigorous programmes of reform across Scotland's public services, including our police and fire services, our court service, adult social care and post-16 education, which will drive up the quality of outcomes, while delivering substantial cost reductions and value for money gains.
• Restricting pay costs - In asking staff across the public sector to work within very tight pay constraints and limiting new recruitment, we have renewed our commitment to No Compulsory Redundancy, and taken measures to support the lower paid. However, staff face very difficult issues as a result of the UK Government's approach to pensions and the pressures that have been placed on the Scottish Government around this issue.
• Maintaining investment in capital projects - the UK Government has made savage cuts to capital investment, despite the impact this has on economic recovery. We have used all available levers to maximise investment, through a range of innovative funding mechanisms and a significant transfer from resource budgets into capital.
• Business initiatives - We are supporting business by maintaining the most competitive business rates regime in the United Kingdom. However, we are also proposing the introduction of a public health supplement on large retailers and taking forward the reform of empty property relief to bring empty premises back into use, as well as maximising income generated through asset sales.

Alongside these spending plans, we have published the Government's Public Sector Pay Policy for 2012-13, covering staff pay remits and senior appointments. Public sector pay is a significant element of our budget. In setting a pay policy for the forthcoming year, we need to balance difficult decisions on tight pay constraint with the need to sustain employment opportunities across the public sector. To help reduce the impact on staffing levels, it is essential that we control pay growth and keep pay at an affordable and sustainable level. This year's pay policy therefore includes the continuation of the pay freeze implemented in 2011-12 and suspension of bonuses. Within that tight constraint, we have again been able to provide measures to support the lower paid, by maintaining our commitment to the Scottish Living Wage which will be uprated for 2012-13 and ensuring that any employee earning less than £21,000 receives at least a £250 increase. Reflecting this commitment to fairness, Ministers will also be freezing their pay in 201213 for the fourth year running.

If the UK Government does not change its position on public sector pensions, then the Scottish Government will be forced reluctantly to take a decision to increase employee contributions in schemes funded by Scottish Government DEL budgets. To do otherwise would require large scale cuts to the Scottish Budget and reductions in staff numbers through job losses, and both of these alternative measures would have a significant detrimental effect on the Scottish economy. The Scottish Government will leave decisions on contributions to the Local Government Pension Schemes to those schemes.

At a time when households, businesses and public bodies across Scotland face challenging financial circumstances, it is essential that the Scottish Government shows leadership by reducing its own costs as much as possible, to free up resources for deployment within frontline public services. These spending plans therefore include cash reductions in the Scottish Government's Administration budget of 18 per cent over three years and reductions of 25 per cent in the cost of the Senior Civil Service in Scotland by 2014-15. We have also reduced the Government's central marketing budget by over a third and will continue to build on reductions to date in travel and printing costs.

Taking these measures across government will help us manage the reductions to our resources, but the scale of the financial challenge we face makes reductions in some expenditure programmes unavoidable.

We have set out the implications in the portfolio sections of this document, but key points include:

• settlements which will be challenging for a range of agencies and NDPBs across Government portfolios;
• prioritising capital projects set out in Budget Plans 2011;
• focusing our spending within a number of large expenditure programmes, including on support for agriculture and the college sector, funding for the cultural sector and research; and
• driving down the cost of a range of transport and roads expenditure, while supporting modal shift, maintaining safety and taking forward key infrastructure projects.