Finance Committee, 07 Dec 2004

Meeting date: Tuesday, December 7, 2004

Official Report 318KB pdf

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Efficient Government

The second item on our agenda is to take evidence on the Executive's efficient government plan, which was published last Monday and debated in the Parliament on Thursday.

I welcome Tom McCabe, the Minister for Finance and Public Service Reform, to the committee. With him are Colin McKay, who is head of the efficient government team, and Richard Dennis, who is the finance co-ordination team leader. I ask the minister to make an opening statement, if he wants to, and we will then move on to questions from committee members.

Thank you for the invitation to come to the committee and to go into more detail about our efficient government plan. I apologise for the need to reschedule the meeting in light of the slight hold-up in the plan's publication, but I expect this to be the first of many discussions that we will have on the subject in the months and years to come, as I am sure that the committee will take an increasing interest in the plan's progress.

The efficient government initiative is a long-term change programme. It is designed to achieve continuous improvement not only through targets for savings but through the culture change that is necessary throughout the public sector in Scotland. The programme is a challenge for Scotland's public sector in its entirety—Executive departments, non-departmental public bodies, national health service boards and local government. It excludes no one. As we seek the culture of continuous improvement, we need to make it clear to all aspects of the public sector in Scotland that they are included in the aim of establishing a different culture in how we go about our business.

That is all designed to achieve a system that delivers more efficient services to our customers. We want to do that by taking action that pays attention to the changing needs of society, the need to regenerate some of our more challenged communities in Scotland and the need to ensure that those who depend on public services have confidence in them. It is right that we ask hard questions about what we can do better and that, in doing so, we look outside individual organisations. People must be prepared to think across the public sector, not only in their own silos, and we need to examine the opportunities for joining up where we can. We need to ensure that individual organisations in Scotland do not continually reinvent the wheel, but show a willingness to learn from others and pick up the best practice that is established.

The efficient government initiative is about ensuring that we gain the maximum possible return from the substantially increased public resources that have been made available over the past five years and the continuing increases in some of the priority areas that were identified during the 2004 spending review. It has developed from a growing awareness that we need to become more sophisticated in how we do business. We have said on many occasions that we have new constitutional arrangements in Scotland. Those arrangements are maturing and it is important that the public be confident that they are generating a different, more productive approach. We should ask questions about how our society has performed in the past and seek to improve that performance in the future.

We debated the efficient government programme in the Parliament last Thursday and I was encouraged by the number of members who wanted to engage in analysing how we could have done better in the past and how we can do better in future. Of course, there were also members who tried to indicate that it is implicit in the improvement of efficiency now that we must have been wasting millions of pounds in the past but ignoring it. However, that takes no account at all of the changing situation, the development of technologies, the fact that structures that might have been appropriate 10 years ago are inappropriate now, the fact that structures have been imposed on some areas of the public sector, particularly local government, or the opportunities that now exist to right some of the wrongs of the past.

Within the plan, we have set out clearly what we intend to save. We have identified, by 2007-08, £745 million of recurring cash savings and £300 million of recurring time-releasing savings. We have indicated that our initial work suggests that we might be able to go further on both those figures, and it is important that we stretch our ambitions. We have also indicated that we will confirm how far we think we can go in the new year.

Those are the top-line figures, but the projects that will deliver the savings and combine to make up the totals are equally important. We have tried to build up the totals case by case.

The plan sets out a range of savings across the public sector. We have indicated that there will be central co-ordination in five specific areas: asset management; absence management; procurement; shared services; and the streamlining of bureaucracy. Of course, what is crucial is how we go about the programme. We intend to use a strong project-management approach to ensure that we are robust on analysis, milestones to monitor progress, governance, risk management and realising and tracking the benefits of the initiative so that we can demonstrate to people in Scotland what the outcomes have been and how those have benefited the services that they depend on.

We have also indicated that, in the new year, we will publish technical notes that will give more detail on some of the areas to which I have referred and will explain how we will measure and track progress across those areas.

We have established a team to drive forward the initiative within the Executive. We intend to second individuals from both the public and the private sectors and we will continue to work with the advisory panel of experts to develop longer-term plans to ensure that this is not a three-year or a five-year programme but a much longer programme of cultural change within the public service in Scotland.

Within the next two weeks, we will hold the first meeting of the reference group, which will try to ensure that we have strong communication to and between different parts of the public sector. I will also meet the public service forum, which will enable me to engage with trade unions to get their thoughts on how they can best contribute to the process of having more efficient government in Scotland. We will continue our discussions with John McClelland, who has kindly agreed to come on board and make available his expertise in procurement.

As we have done our best to make clear in the document, we are determined that the savings should be transparent and independently auditable. As the Minister for Finance and Public Service Reform, I will regularly monitor progress and will ensure that Audit Scotland also has a strong role.

As I said, I see this as being the first of many visits to the committee. I am keen to engage with the committee on how we can monitor progress in a robust way. I am keen for the committee to put forward any suggestions that it has for making the overall programme more effective in its impact.

We have done our best to demonstrate that we have high aspirations. We are determined to achieve them through robust analysis, careful planning and a focus on the long term and not only on short-term hits. As I said, the entire programme is predicated on a desire to improve public services and to ensure that they continue to have the confidence of the public. Our desire is to create a situation that maintains the high regard that people in Scotland have for the public services that they receive and which demonstrates to the public that we have an aspiration to ensure that, as our demographics and society change, we continue to provide services that are relevant to people's lives on a daily basis.

I am willing to answer any questions.

Thank you very much. I am sure that members have a series of detailed questions. I will kick off by asking a broad question about how the organisation will work. A number of comments in the press suggested that the route that you are going down would be akin to fulfilling the role that the Treasury plays in managing expenditure within departments—perhaps in this context the equivalent is the expenditure directorate within the Treasury. If that is an accurate analysis, how would that role pan out? Is there any intention to deal with the separate arrangements that operate for financial management in health as opposed to the rest of the Scottish Executive?

I see my role as the Minister for Finance and Public Service Reform as being crucial in monitoring the process. I certainly intend to hold a series of bilaterals with my colleagues with other portfolios, which will assist us in monitoring progress towards the targets. In the longer term, I certainly see a place for a more co-ordinating role for the Finance and Central Services Department. I will resist drawing the direct analogy with the Treasury, but five years into devolution we need to develop the mechanisms for taking a more comprehensive approach to the monitoring of our overall expenditure. It is important that there is a discrete responsibility for driving the programme forward, which is what I will do by engaging with colleagues with other portfolios.

I note your claim that you have set out clearly in your document the proposed efficiency savings. I have a short question for you. There has been debate about whether savings proposed under the Gershon formula for England will be more or less than you are proposing to save here in Scotland. Will we be saving more or less?

I have said this on many occasions and I will say it again: I am determined to do what is right in the circumstances in which we find ourselves in Scotland. I do not believe that there is a direct comparison between the circumstances here and the circumstances that exist south of the border. For instance, a large proportion of the savings that are generated through the Gershon review come from departments such as the Ministry of Defence, the Inland Revenue and the Department for Work and Pensions. We do not have comparable departments here.

We were all elected to a new Scottish Parliament that would enable us to have a different focus on the situations in which we find ourselves and to come up with innovative solutions that improve those situations. That is what we are trying to do. Some people are determined to draw comparisons with other parts of the United Kingdom. I have said before that that is their business, but I do not necessarily think that it is my business.

But it was the First Minister—not anyone else—who made the comparison in the first place, at the Fraser of Allander institute, and it has been repeated more than once since then.

The First Minister indicated that his ambitions were as wide, or wider, than those of anyone else in the United Kingdom and that he was determined to create a set of circumstances that would ensure that we deliver in the most efficient way possible public services that are relevant to people's lives. The First Minister holds to that ambition and I agree with him entirely. In order to live up to that ambition, we have to react to the circumstances that we have here in Scotland. I do not think that we necessarily do that to best effect by continually comparing ourselves with others in different parts of the United Kingdom who deal with a completely different set of circumstances.

That is perhaps not so, because we believe that the appropriate figure for comparison with Whitehall is something like £650 million in cash-releasing savings plus £300 million in time-releasing savings, which gives a total of £950 million or 3.7 per cent of Scottish DEL to 2008. The comparable percentage target for savings throughout Whitehall was 7.3 per cent. If we compare like with like, our savings are approximately half the Whitehall savings.

I do not agree with that. The figures can be cut in a number of ways. I do not think that this kind of discussion is particularly helpful to people in Scotland. What they want to know is whether we intend to provide public services more efficiently and whether the resources that are released as a result of the process will be applied to deliver more comprehensive services. The answer is yes in both cases. People want to know what we are going to save year on year. We have been explicit about that in the document and have illustrated what the cumulative savings over the three-year period will be, which it was entirely right to do.

I know that this might not make good television, so I am sorry to come back to the table on page 4 of "Building a Better Scotland: Efficient Government—Securing Efficiency, Effectiveness and Productivity". You have added up the total aggregate cash savings to get a figure of £1,732 million and there is a percentage below that figure of 8 per cent. What does the 8 per cent refer to?

It is 8 per cent of the 2004-05 baseline.

However, the £1,732 million is accumulated over three years: it is the sum of what you will save in 2005-06, what you will save in 2006-07 and what you will save in 2007-08. How can it be valid to express three years of savings as a percentage of the figure for one year?

Are you saying that the figure is wrong?

I am saying that arithmetically it is absolutely meaningless.

That might be your view, but—

How can you take budgets for three years and express savings as a percentage of the figure for one year?

That might be your view, Mr Morgan, but we think that explaining to people in Scotland how much has been saved over a three-year period, which is what the figure does, is entirely meaningful.

I am sorry, but you are saying that you will save 8 per cent of one year's budget in three years, or in years 1, 2 and 3.

Yes—by 2007-08. I am encouraged that you have found that the table gives as much clarity as you have tried to indicate. The table is extremely clear. We are not trying to hide anything from people in Scotland. We have clearly said what we would save in each year and what the totality of the saving would be at the end of the three-year period and we have expressed that as a percentage of the budget that existed at the start of the process. That is a perfectly legitimate thing to do.

When working out percentages, is it not normal to use a numerator and a denominator that cover the same thing? Apples cannot be taken as a percentage of pears, which is what is done in the document.

I do not see any reference to apples or pears in the document.

I will ask another question. You have taken the savings as a percentage of the 2004-05 budget, which is rather strange, given that the Treasury document clearly talks about percentages of each year's budget. If you are taking savings as percentages of the budget, would it not be more sensible to include only savings that were in the budget and not the Scottish Water savings, which are not part of the budget? How can Scottish Water savings be taken as part of the budget?

The main topic of debate for people on Scotland's street corners this afternoon will not be that, although they will be saving £95 million, that figure is not contained in the departmental expenditure limits in Scotland. People will want to know that a saving has been identified in Scottish Water that adds to the total saving that will be generated in Scotland's public services. People will see that as a good thing, particularly if such savings are reinvested in services that are delivered to them.

But the Scottish Water figure is not part of the draft budget and the DEL of which we are calculating percentages. Therefore, why was it included in the percentage calculations?

Scottish Water does not operate in a parallel universe—it is an important public service. People in Scotland pay for it; it does not pay for itself. If it generates substantial savings, it is appropriate for me to illustrate that to the people of Scotland.

Perhaps one of your officials can explain how the percentage is reached and how it is arithmetically valid. I am sure that the First Minister would be interested, as he used to be a maths teacher.

You will notice that the table clearly refers to percentages of 2004-05 expenditure and not to the budget. We made an allowance for Scottish Water's turnover in addition to the 2004-05 DEL. Scottish Water's estimated turnover for this year is between £800 million and £1 billion. At the level of decimal points in the table, the percentages will stay exactly the same if that is included or excluded.

So are you saying that it should have been excluded.

It makes no difference. We included it simply because we wanted to compare apples with apples.

Does the same apply to the money going to Scottish local authorities in 2006-07 and 2007-08, which is shown as deducted at source? I think that it is correct to say that the money that is deducted at source does not appear in the document and that it was taken out before the figures for those years in the document were calculated. Is that correct?

An assumption of a percentage efficiency saving that local government would make was made in the spending review.

It is therefore not a saving on the figures that are included in the document, yet it is calculated as a percentage of the figures that are shown in the document, as it is included in the percentages at the bottom of the table.

Yes. It still illustrates the level of savings that will be achieved in Scotland.

But that is invalid if we want to calculate a correct percentage. A comparison is meaningless if you are using percentages to compare with percentages elsewhere.

I am not sure that I follow that entirely. In relation to 2004-05, the savings are on the expenditure that is published in the draft budget document that you are looking at. We have assumed that those savings will be made in the forward years. The forward years' budgets that are published in the draft budget do not contain a local authority budget from which one must take off savings to get the amount that the Executive will pass to local government.

As I understand it, the English approach is also to take off the savings and show that amount as a percentage of the money that has been spent.

The matter might have been easier to understand if the approach had been more consistent, but we will leave that issue.

The minister would probably agree that it is wrong to argue about who has the highest target for savings, because there should be no limit to the savings to which we should aspire in the long run.

We have a lot of computers in this country and various organisations that do not seem to talk to one another. Tremendous savings could be made in debt collection—of council tax debts, for example. I see no reason why, when someone is liable for council tax and does not make the payment, the money should not be taken off through another computing system, such as pay as you earn. Does the minister agree that the present level of council tax debt is unacceptable?

Senior citizens may have their council tax raised because councils do not collect money properly or because they have not reached efficiency targets and so do not receive as much money from the Executive. Is there any way in which to ensure, through ring fencing, that senior citizens are not disadvantaged by increases? If council tax increases by 5 per cent while the pension goes up by only 2.5 per cent, that means an awful lot to senior citizens.

Your first point is absolutely valid. I have said from day one that the constant comparisons with Westminster are not greatly relevant. The First Minister made it clear that his ambition is without limit, which has certainly generated comments in the months since he made those remarks. He said that Scotland can be a beacon for the rest of the United Kingdom and for other parts of the world and that we should not limit our ambition. I agree with that.

I agree with your comments on council tax. I have said to local authorities that I see no reason why the rates of collection in Scotland should be lower than those in Wales. The collection methods in Wales are different—for instance, the method of collecting water charges is different. I have said that our minds should be open and that we should at least consider how robust the evidence is that such methods have a negative impact. Clearly, we need to improve our rate of collection of tax and possibilities exist to do so. I spoke earlier about structures being imposed on people in the past decade. We have 32 different council tax collection systems in Scottish local government, which seems strange in a country of 5 million people. Opportunities exist for local authorities to join up their collection services and to consider how to pursue more robustly those who can afford to pay but who do not do so.

I have reservations about your suggestion on senior citizens because an extensive list of people might want their contributions to be ring fenced, too. The best measure that we can take on council tax is to get the collection rate as high as possible and reassure people that we will pursue with vigour those who can pay but who do their best to avoid paying. We will thereby demonstrate to decent citizens who meet their obligations that we are doing our best to recognise their efforts.

I am sorry to be a bit of an anorak, but I want to touch on the issues that Alasdair Morgan raised. I have no problem at all with the argument that the aggregate cumulative cash-releasing savings of £1,732 million over the three years from 2005-06 to 2007-08 is not double or treble counting. It is clear that you are saying that that is what will be saved in the three years. I do not agree with the arguments about double and treble counting.

However, the percentages are a bit naughty. Not only are you comparing with a baseline that is further back than I would normally expect it to be—normally, I would expect percentages for one year to be based on the year before—but, with the cumulative cash saving, if we say that A is the expenditure limit in 2004-05, you are saying that the percentages for each year are X over A, Y over A and Z over A respectively and then you put X + Y + Z all over A for the total percentages. Mathematically, that is not correct: it should be X + Y + Z all over 3A. I know what you are trying to do, but it is not mathematically correct and it is a bit naughty.

However, I agree that nobody cares about that other than anoraks who are interested in maths; it is not the substance of the argument. My real question is: how confident are you about the robustness of some of the figures? For example, the Health Department is expected to make a £166 million saving in year 1. Other departments are building up to their maximum savings over time, but the Health Department is expected to make that saving from April next year. You say that that will be achieved through savings such as

"£25m through preventing inappropriate hospital admissions"

and reducing emergency admissions. What sort of analysis has been done to produce those figures? A measure such as reducing emergency admissions depends an awful lot on whether there is an epidemic or a spell of bad weather during which a lot of elderly people slip on the ice and come in with orthopaedic complaints, as you know from your previous experience in the Health Department.

How robust are the figures and how will they be reported back to us? You said that a group will be meeting early next year. Will we be able to see details of how the savings have been achieved at the end of the three years?

The figures are robust. They come from an engagement between officials in the Finance and Central Services Department and officials in the various portfolio departments and from an engagement with the various portfolio ministers. As I said earlier, the reporting mechanisms will include regular bilateral meetings between me and other portfolio ministers.

The savings are achievable. In fact, I will go further and say that we expect some of the savings that have been identified in the health service to be improved on as a result of the investment that has been made in it. As I said, we want to ensure that the programme is auditable. I am willing to engage with the committee on that. Obviously, we have our own plans to ensure auditability, but if the committee thinks that there are useful ways in which we could better track some of the progress, I am willing to hear about them.

I agree with your initial comments about the anorak nature of some of the debates. It makes good knockabout stuff, but it matters not one jot to people in Scotland, who are interested in whether their services will improve and whether we are doing our best to get the proper return for investment in public services, not in the abstract debates about percentages, whether we are doing better than Westminster or whether we are double or triple counting.

Page 24 of the efficient government document identifies local government efficiency savings of £325 million in year 3, but the table on page 4 identifies a saving of only £246 million for finance and public services. It looks as though local government is being expected to save more than you are expecting to save in finance and public services.

That is because, in the table, the savings in procurement throughout the public sector are aggregated. Part of that line is a local government procurement saving, so the £325 million includes procurement savings.

So the balance is in the line "Other—non NHS procurement".

Yes.

The relatively poor contributions from the environment and rural affairs portfolio and the enterprise and lifelong learning portfolio leap out from the profile of the savings. As far as the environment and rural affairs portfolio is concerned, it seems that people from Scottish Natural Heritage are expected to drive around less.

That is no bad thing.

Perhaps not, but I therefore wonder why you are sending them to Inverness.

I presume that the arguments about multiple finance departments, multiple registries and multiple back-room functions apply to the university sector and further education sectors, too. Is there any intention to suggest that there could be collaboration in those areas? Do you expect to follow that up? Is that the kind of issue that you want to pursue in the environment and rural affairs and enterprise and lifelong learning portfolios?

I recognise that there will be differences, particularly in the first years, in the level of contributions from different portfolios. Clearly, we expect to generate significant additional savings in further and higher education, which could make an important contribution to closing the gap between the absolute figure of £745 million to which we have committed and the aspirational figure of £900 million.

You are right to identify the environment and rural affairs and enterprise and lifelong learning portfolios. We expect to drive out further savings in both those portfolios, particularly in further and higher education, which has had substantial investments. We are at the start of a process, but we intend to seek considerable additional savings.

I have one further anoraky question—I do not think that there is any harm in asking such questions. One of the big issues on which you are focusing is procurement, which is expected to deliver significant savings. However, in general, costs are associated with setting up procurement systems. Are any additional costs expected for NDPBs and agencies because of sharing services and getting into the procurement process? If so, have you quantified such sums as initial start-up cost or as recurring cost?

We have established a £60 million efficient government fund and we have invited bids into that fund. Some bids might call on the fund in order to create procurement platforms that will produce savings. We await bids and we will see what kind of call they make on the fund. However, there are existing platforms and expenditure streams that can be redirected. You referred to expenditure plans for NDPBs, but there are also expenditure plans for information technology and procurement within local government. Redirecting those funds could make a significant contribution to creating a new platform that would allow savings to be generated in the future.

Is there an issue about the size of NDPBs in that context? You said that you are fusing key back-room functions, but I am not sure where the boundary of that might be. In a sense, that calls into question whether it is viable to have as many NDPBs as we have, particularly the smaller ones.

I make no apology for saying that I am surprised by the number of NDPBs that we have in a country of 5 million people. There is a great case for considering how we can rationalise those bodies. Since the creation of the Scottish Parliament, there has perhaps been a fear within local government that we have a centralising agenda and that, in some ways, we are taking powers away from local government. However, other than the Parliament, local government is the only direct line of accountability that we have in Scotland. There may be opportunities for considering what current NDPB functions we could incorporate into local government, which might allow the amalgamation of back-office functions and help us to see where we can save in the operation of NDPBs, of which we have far too many.

We legislate in the Parliament and people complain about regulation, but they also demand a check-and-balance mechanism in Scotland. We create a considerable number of new NDPBs, but we must start paying attention to the other end of the spectrum and see which ones we can eliminate, if that is possible.

I am interested in the concept of beacon status. If we are to have that, we must have measurements in the first place and long-term credibility. I do not think that the document "Building a Better Scotland: Efficient Government—Securing Efficiency, Effectiveness and Productivity" gives us the credibility that external observers want to see. It would be good if John McClelland moved across from procurement and looked at what happens out in the real world. When people make savings, they book and bank them and move forward on a new cost basis; otherwise, they create not the mechanism to generate more savings, but a climate of complacency.

Beyond that, I am concerned about the accuracy of the data in the document. For example, there is a statement that health savings will be achieved by 2007-08 and yet the figures are reported from 2005-06. Then there is the issue of the finance and public sector background data not tying in with what is in the foreground summary statement, and likewise for justice. There is no detail about other non-NHS procurement and no detail on the Scottish Water non-DEL—in fact, there is a question mark about why Scottish Water should be included in the first place.

It is a weak document that would not stand up to audit and which would give comfort to Scotland's competitors.

The document details how we will save £1.7 billion, over a three-year period, for reinvestment in public services, yet you state that it will encourage complacency. Your statement is extremely strange. If we achieve those figures over those three years, as we are determined to do, it is a mystery to me how that translates into complacency. I can understand why you might make that statement, because of your political standpoint, but there is no evidence in the document to support it. People in Scotland who depend on public services, and who want public services that are more comprehensive and delivered more speedily, would not recognise that statement either.

There is recognition in the document that we have experienced advantageous financial allocations in the five years of the Parliament. There is also recognition that we will encounter substantial changes in the demographic make-up of Scotland and that we will have to be ready to deliver services that respond to those changes. One of the reasons why we are determined to ensure that any savings that are generated are reinvested into the delivery of front-line services is that we will need to take a hard look at the kind of services that we deliver at the front line as we move through the next 15 to 25 years. We need to ensure that we are best placed to deal with any economic shocks that might occur and that they will have minimal impact on the comprehensive delivery of public services. None of that indicates complacency; it indicates a degree of forward thinking, which people will be pleased about.

I do not know whether members have had a chance to look at the Whitehall efficiency technical notes—there are 400 or 500 pages that we poor officials have had to plough through. That level of technical detail is not appropriate for the type of document that we are discussing. You will hear much more auditable detail when our own technical notes are available. There is a clear commitment in the document that those notes will come out early in the new year.

If you were to try giving a 400 to 500-page document to the board of any plc, you would get very short shrift. One needs to be able to depend on the data in the summary document and one needs to see the audit trail if the proposals are to have credibility. The efficient government document lacks credibility because it does not contain that.

The key issue is benchmarking Scotland against other countries. Where else are people who make savings in year 1 allowed to hang on to that achievement as a putty medal and to add to it year 2 and year 3 savings?

The UK Government for a start.

In what context?

In the context of the Gershon report. The UK Government has adopted exactly the same methodology in the presentation of its figures.

I worry for the UK, as you probably well know.

Selectively, of course. We worry for the UK when it suits us and we hold it up as a shining example when it suits us. That is selective worrying.

I realise the discomfort that arises from holding any minister accountable for what other members of the Administration have said. Instead, I will focus on what Tom McCabe has said.

You were helpful enough to confirm to me at the end of September that

"The Scottish Executive is undertaking an efficiency initiative that is as ambitious as the Gershon review in its scope and will seek to secure comparable or greater gains in efficiency."—[Official Report, Written Answers, 24 September 2004; S2W-10531.]

That answer was music to my ears. The efficient government document specifies savings of 4 per cent of the Scottish DEL in year 3, compared with a UK saving of more than 7 per cent in year 3. I accept that further aspirations are laid out in the document, but even the most ambitious aspiration amounts to 6 per cent of the Scottish DEL in year 3. How can you reconcile that with the desire for comparable or greater efficiency gains?

I can explain the ambition by restating our aim of achieving a culture of continuous improvement and a culture change throughout Scotland's public sector. We aim to do that over the long term—not three or five years, but a longer period. Experience tells me that when any organisation engages in a change management programme, that cannot be a tick-box process; the programme must be held to and driven over a long time. Cultures are changed not over three or five years, but over a longer period. In that context, we are at least as ambitious as is anyone else in the United Kingdom.

Our constitutional arrangements are set. We are required to deliver services efficiently. We are fairly firm in the view that doing that will require substantial organisational change and that is exactly what the document tries to achieve. It represents the start of a process; it is by no means the end. If the programme applied for only three or five years, my firm view is that it would not achieve the degree of change that we require to make a success of our new constitutional arrangements.

You did not touch on any figures. You may say that the committee is not the place to do that. The written commitment is to secure comparable or greater efficiency gains. You said that you were not trying to hide anything and your officials said that it was important to compare apples with apples. Two weeks ago, Andrew Goudie told us that he wanted like-for-like comparisons. Given all that, are you willing to publish a table that uses the conventions that have been used not in England, as Colin McKay said, but in the UK? Will you publish a like-for-like, apples-with-apples table to show that we are not trying to hide anything?

We are not trying to hide anything. I will not make commitments in this forum about which tables I will or will not publish. I may have got through to some people but not to others when I have tried, several times, to explain the scope of our ambition. We are in this for the longer term.

Direct comparisons do not always exist between our situation and the situation down south. Some people are fond of comparing what we do in Scotland with what happens down south. People who are elected to the House of Commons and who are members of its Public Accounts Committee scrutinise and pass a view on the plans there. That is their job. Our job is to consider the ambitions that we set out for Scotland. If the Finance Committee wishes to assist the Executive, a major part of its work will be to help us to monitor and track how the savings are achieved and how the resulting benefits are applied.

We have undertaken much modelling to ensure that we miss no tricks in the savings that are being delivered down south. Before I try to give an answer about a directly comparable saving, I will explain why the question is not meaningful. If Colin McKay and I both deliver programmes to 100 people and he does it for £10 million but I do it for £5 million, and I make no efficiency saving but he makes a 10 per cent efficiency saving, I am still far more efficient than he is. Until we have the proper measurement for which the committee has pressed on public sector productivity, we do not have the same starting point, so who is being more ambitious? The question is whether we are being as efficient as we can be and not whether we are doing relatively better.

As for playing games with the figures, I am sure that Arthur Midwinter has done much of what I have done. The £21.45 billion saving that is set out in the spending review document down south is about 7.4 per cent of 2007-08 DEL and is time releasing and cash releasing. Ploughing through all the efficiency technical notes shows that about 53 per cent is cash releasing. We may say, "Gosh—a department such as the Ministry of Defence is doing more than £2 billion of cash releasing. What do we do about that?" We can take the basis of a straight population share, which makes our target about £900 million; we can take the basis that Scottish programmes are on average about 70 per cent comparable with UK programmes, which gives us a target of just over £800 million in cash-releasing terms only; or we can put every efficiency saving down south through the Barnett formula, which produces a figure of about £850 million. Why might that not be comparing apples with apples? Many of the savings are being delivered from departments with huge electronic processing operations, such as the DWP and the Inland Revenue. All the job cuts are coming from effective mechanisation and the use of IT. We have no services that are remotely like that.

This is an issue of trust. The Minister for Finance and Public Service Reform said that the Executive would

"seek to secure comparable or greater gains in efficiency."—[Official Report, Written Answers, 24 September 2004; S2W-10531.]

I am saying that you should publish a like-for-like table and let people reach a judgment. I leave that on the table.

My final questions also relate to transparency. You have indicated that there will be an efficiency technical note. Will there be one note for each portfolio? When will the notes be published? To ensure confidence and credibility in the process—the reason that has been offered elsewhere—will Audit Scotland be invited independently to scrutinise the documents before publication, as has happened in the rest of the UK? If not, why will it not carry out that scrutiny?

Colin McKay will answer those questions, but I would like to comment first. I disagree fundamentally that this is an issue of trust. We have tried our best to illustrate that there are very distinct differences and that it is extremely difficult to make direct comparisons. We have said clearly, many times, that we intend to do what we think is right in the circumstances that exist in Scotland. It is entirely wrong to say that this is an issue of trust. I make clear on the record that I disagree fundamentally with that suggestion.

It is helpful to consider how we have gone about making comparisons. We have built up information project by project. We have examined all the identified projects down south, what is being done at UK level and what comparable activity we are undertaking. We are confident that, where there is comparable activity, we are doing at least the same things, if not more.

Technical notes will be published for each portfolio. A series of technical notes on cash-releasing efficiencies will be published by March next year. Further technical notes on the identified priorities for time-releasing efficiencies will be published by May. Those will set out the detail of how the savings will be realised.

We have had discussions with Audit Scotland about its role in monitoring the efficiency programmes. We would be happy to speak to Audit Scotland about whether it sees itself as playing a role in monitoring the technical notes. We cannot commit to Audit Scotland's doing that before we have discussed the matter with it.

With respect, there is a difference between monitoring post hoc an efficiency technical note that has already been published and scrutinising it before publication. Critically, that is why the UK Government says that in the rest of the UK confidence and credibility will be assured by having the plan scrutinised before publication, to determine whether it has credibility. Monitoring is another issue. Perhaps you can write to us on that point. Why did you not adopt the approach of having an independent body scrutinise the plans in advance of publication? Why did you reject that approach, which has been in the public domain for six months, since the Gershon review south of the border?

We have not rejected that approach.

By March, will Audit Scotland have been invited to scrutinise the plans, for the sake of credibility?

We will speak to Audit Scotland about what it regards its role in monitoring the documents to be and whether that includes checking them before publication.

Perhaps we can exchange correspondence on that in due course, after that discussion has taken place.

"Government Expenditure and Revenue in Scotland"—the GERS document—is a good example of trying to put out information using estimates of comparisons, and it will probably never receive political consensus. My calculations from the UK SR show that, if we take Barnett into account, the devolved spending areas will have almost identical aggregate savings during that period. Frankly, my constituents regard efficient government as ringing up the council and not being told that they cannot be helped and that they should ring back next week. For them, efficient government is when they are told, "I can't help you but somebody else can, and I will put you through to them now." It is about the delivery of public services and about changing the culture of government, and I am pleased that there is now a single document that focuses on that.

During our inquiry we will, no doubt, get more and more into the figures, but where are the incentives for departments or, particularly, councils to do the work? The area is top-sliced for councils and we can identify individual projects that are doing things differently—that is to be welcomed, especially in relation to things such as prescribing and unnecessary admission to hospitals, which is a colossal waste to the public purse—but apart from that, where is the incentive for councils to change their culture? I talked earlier about the new ways project group in the Borders, which pulls together public sector working by different agencies. If the aim is to change the culture, rather than to focus on job losses—in my view, that is a perverse way of saying that more job losses from the public sector will necessarily bring about efficiencies—where are the incentives for the data to be captured and rewarded?

The incentive is in the savings that will be generated, which are assumed to be just over 1 per cent. Councils will be able to retain those savings and invest them in their priorities for their area. That is the main incentive for local government. We know that as a result of changes in demographics there will be substantial changes in the nature of community care services. Every local authority is keen to ensure that it can deliver those services as comprehensively as possible. That is just one service area, but if the savings that the local authorities generate are available for them to reinvest to improve the width of those services, that is a real incentive. They might regard other areas as priorities for investing the resources that have been released—again, that is at their local discretion.

One of the things that you said, which is not in the document—correct me if I heard you wrongly—is that there are far too many NDPBs. Do you have a hit list? Do you have any particular NDPBs in mind?

It would be wrong for me to mention specific NDPBs at the moment, but an examination of how we have subdivided many aspects of public life in Scotland is an important part of the process. In a sophisticated society, we should turn our minds to how we can re-rationalise a lot of those NDPBs. I do not have a specific list, but as part of the bilateral process there will be an examination with ministers of the various NDPBs that relate to their portfolios and of the possibility that their work could be done in a different way.

It is a bit of a nonsense that there are 32 local authorities, is it not?

I thought that in 1995, but we had a nonsense of a Government at Westminster at the time and we had to put up with it. My personal view is that is farcical that there are 32 directors of education. I have heard the former director of education in the former Strathclyde Regional Council say a number of times that something like 10 people do his old job now. He is right up to a point: there are more than 10, because a few structures are far from flat. Why do we have 32 separate IT departments and, as I said, why do we have 32 collection systems for council tax in a country of 5 million people? There is great scope for rationalisation. I could not agree with you more.

Do you also agree that delivery of services to communities is not necessarily about having central collection or a central payroll, but about coterminosity of agencies—even if they are rationalised—so that we get proper co-operation of public services as well as efficiency? It is not necessarily a case of there being one payroll or one processing system, which would not necessarily bring about better government.

You are right; it is about what fits best. There is no presumption that to have in Scotland one system of collecting council tax would be most appropriate. By the same token, it would be wrong to assume that to have one director of education would be appropriate for Scotland. However, everyone in local government in the mid-1990s recognised that a system that was far from ideal was being imposed on them. I have said many times that no one had a fondness for the structure that was created at that time, but a human reaction that kicks in is that when people get used to something they start to defend the structures. When we engage in dialogue with local government and with different parts of the public sector, people will start to see the possibilities for, at the very least, rationalisation.

Do you agree that the collection of revenue from a local income tax would be far more efficient than the current system?

You may say that; I could not possibly comment.

Such a system would be technically more efficient. It would not require a £50 million charge per annum. There would be a charge to the Inland Revenue, but administering the tax would not amount to more than £50 million per annum and there would be benefits associated with it.

I am not acquainted with the details of the revenue collection costs to the Inland Revenue—that is a reserved matter. If you would like to supply us with information on that, I am sure that people would be interested to read it.

I have information about the current cost of the collection of council tax, which you obviously see as a problem for every individual authority.

I am sorry. I picked you up wrong. I thought that you were talking about something different.

I presume that the independent review will consider the costs.

That will be a matter for the independent review.

I will pick up on the thrust of Jeremy Purvis's question. The minister said to us that £745 million is the amount of savings that he currently identifies as being deliverable over three years. He mentioned—perhaps in response to the initial question that I asked—some departments in which he feels more savings could be forthcoming. It seems, from the burden of our recent questioning, that significantly more savings could result from a general restructuring of non-departmental public bodies, local authorities and so on in Scotland following devolution. There are 32 local authorities, 12 health boards, 12 local enterprise agencies and so on. Perhaps Scotland is in a sense over-governed. Coupled with efficiencies being made within the structures, efficiencies could be achieved by changing the structures. Do we need to have that debate?

Here in Scotland people need to see the added value of the new constitutional arrangements. It seems to me that the great advantage of our arrangements is that we can focus on the type of issues that you have mentioned, consider further how we may do things more effectively and release more resources for delivery of important services.

One consequence of our new constitutional arrangements is that we can consider how things have been done in the past and examine the opportunities for doing them differently in the future. Those are big issues, some of which will not be resolved in the short term, but it is absolutely right that we raise them and analyse what can be done.

My concern is whether the issue should be raised in the context of a narrow debate about savings or of a broader debate about efficient government and the structures of government.

The minister said that he wants to build up trust with the committee—I am sure that we feel the same way. Does the minister accept that building trust involves giving straight answers to hard questions? Notwithstanding Richard Dennis's view that projected job losses in England cannot be compared with those in Scotland, the Chancellor of the Exchequer claimed that there would be 20,000 job losses in local government in the three devolved areas—Scotland, Northern Ireland and Wales. How many job losses are likely in Scotland as a result of the efficiency measures?

Shortly after the chancellor's statement, the Treasury confirmed that he was extrapolating when he suggested that jobs would be shed by the devolved Administrations. Members should know about what the chancellor said. A few days later, a Treasury spokesperson confirmed that

"It is for devolved administrations and local authorities to determine how they derive the efficiencies they have signed up to delivering".

Let me get this straight. You are saying that the chancellor's statement that there will be 20,000 job losses is not necessarily the case and that the figure was not included in the 80,000 jobs that the chancellor talked about.

The chancellor confirmed that he was extrapolating when he made the suggestion. A few days later, a Treasury spokesperson confirmed that it was for the devolved Administrations to determine how to achieve the efficiency savings.

You accept that there will be streamlining and a movement to front-line jobs and away from support jobs, as you said in last week's debate in Parliament on the issue. If the chancellor was prepared to give a figure of 70,000 to 80,000 job losses, surely you must have an idea of the likely number of job losses here.

I am answerable for what I am prepared to do, not for what other people are prepared to do. I have said time and again that we will do what we think is right for our circumstances. It would be entirely wrong to set an arbitrary figure for job cuts in Scotland. In the document on efficient government and in last week's debate, I said that we will see a move from back-office functions to front-line delivery and I acknowledged that we might as a consequence have a smaller public sector in Scotland. The right way to go about that is to engage with representatives of people who work in the public sector and to employ the best human resource practices to achieve the changes.

I have two questions, the first of which is about presentational issues. You have said in the efficient government document and today that the process is on-going and that it will continue into years 4 and 5 and beyond. The committee welcomes that, although members clearly have different views on the presentation. Will you produce more documents to update us as we go through the process? If so, will you use the same presentational method as is used on page 4 of the efficient government document? When will the clock be reset so that we stop accumulating savings from 2004-05 in the on-going process?

You are right that I said that the process will take longer than three or five years and that we will produce more documents for the committee and people in Scotland. We want to examine ways in which to demonstrate clearly and understandably to people that savings are being achieved, and how those savings are being applied in their interests. At present, I cannot say what the exact form of the documents will be, but it is a natural consequence of the process that we will prepare more work to illustrate our progress.

I have already made my point about the figures in the document. If over a three, five or 10-year period we demonstrate to people in Scotland that public resources have been realigned and applied to better effect in the delivery of services, that will be entirely appropriate.

The problem is that we will, if we do not reset the figures, eventually get to the stage at which the savings percentage comes to 100 per cent. Even the people out in the street who are not particularly interested in the figures might find that one a wee bit difficult to swallow.

Mr Morgan can worry about the point at which we reach 100 per cent. I will worry about more relevant things.

My second question relates to a difficult area for all of us. We would all welcome rationalisation of many services and of procurement, but that throws up two problems, and I wonder how much thought you have given to them. The first problem is how we ensure that people getting together to provide certain facilities does not just mean centralisation, which is at odds with the Government's job dispersal policy. How will you monitor what is happening in that respect? Secondly, to what extent will aggregating procurement take contracts over the tendering limit, so that they have to be published in the Official Journal of the European Communities? What thought have you given to the possibility that we may begin to lose work from Scotland that was hitherto kept here because the value of contracts was below the tendering limit?

The last time I looked, we were in an open market. Many contracts in Scotland require to be published in the Official Journal of the European Communities. People are less concerned about who delivers a service than they are about whether the service is appropriate and makes a difference to them. They are less concerned about the uniform that someone wears than they are about the standard of the service that is offered. There is nothing new about the possibility that contracts will reach a size that opens them up to wider competition. That is the way our society works. That is an obvious statement of fact.

How draconian do you intend to be in your pursuit of a more efficient Scotland? The media are full of redundancy figures. Would you be prepared to take a different step from redundancy and to say that there should be a moratorium on increases to—or even a reduction in—the salary of everyone who is paid from the public purse and earns more than £50,000 per annum?

The short answer to that question is no. A hefty sigh of relief will be breathed throughout Scotland because of that answer. We do not intend to be draconian. We intend to approach the issue properly, using the best human resource techniques available to us and through engaging with people who deliver important services, who in many respects do a good job and who are prepared to examine with us ways in which to deliver those services more comprehensively in the future.

I return to the schedule. Has the full impact of IT costs and redundancy payments, especially the substantial Scottish Water spend-to-save programme, been taken into account in formulating and tabling the planned savings?

In some instances, there may be employee-related costs, but we will discuss those with each organisation as the situation develops.

I worry that the savings may be gross rather than net. I also worry about our long-term position vis-à-vis competitiveness. IMD is monitoring Scottish micro-competitiveness in respect of the functions of the Scottish Executive, Scottish Enterprise and so on. We are currently 38th out of 60 countries and regions that were examined. Do you expect the moves to have a beneficial effect on that rating, and if not, why not?

We should not do anything in the public sector that is a drag on our overall economic growth. We do not expect that anything that we do will be detrimental to the overall drive to grow Scotland's economy and to become more competitive.

I have two brief questions. In answer to an earlier question from me, you mentioned the series of bilateral discussions that you have had with other departments. What discussions have you had so far with the Convention of Scottish Local Authorities about local government efficiency savings? COSLA is absolutely crucial to determining whether such savings are delivered or are passed on as council tax increases.

You will remember as clearly as I do how in 1995, when local government was reformed, we faced the combined pressures of the expense of reforming local government and a strict and decreasing local government settlement. At that time, councils had to make difficult choices. You will be telling councils that they must do things differently and bring things together rather than cut services. How much discussion has there been with COSLA about how deliverable the level of savings will be?

COSLA has indicated to us that it agrees entirely with the principles behind efficient government. COSLA has also told us—I agree with it—that local government in Scotland has been pursuing efficiencies for a long time. However, local government recognises that there is additional scope within its systems for efficiencies, some of which are a consequence of the substantial increase in the resources that have been made available to local government in recent years.

To put the matter into perspective, we must remember that the financial situation in which local government operates today bears no comparison whatever with the situation in which it operated during and after local government reorganisation in the mid-1990s.

I want to ask you briefly about the supporting people programme. The efficient government document refers to

"savings from improvements in the management and delivery of the Supporting People programme, from the Communities Portfolio".

My understanding is that Westminster finances the supporting people programme, which evolved from the former housing benefit scheme. The cuts in the programme transpired after the Office of the Deputy Prime Minister had a look at why the programme was much more expensive than expected. Savings from the cuts will accrue to the Treasury and not to the Scottish Executive, so what does the efficient government document mean when it says that there will be a saving to the Executive from the cuts?

With regard to the supporting people programme, that means that the programme started off in 2001 at £50 million, doubled to £100 million, doubled again to £200 million and then went up again to more than £400 million.

But that money came from the Treasury, not from our budget.

Yes, but its levels of expenditure went up to over £400 million. There is now a strong feeling that, if people take the time to analyse patterns of expenditure and how expenditure is put to effect, they will see that there is undoubtedly scope for significant efficiency savings, which should be achievable without people experiencing loss of service.

A section in the efficient government document refers to managing absence and productivity within the public sector. I am pleased that you mentioned productivity within the public sector earlier. Paragraph 64 of the efficient government document states:

"With Audit Scotland, we are undertaking analysis of the pattern of sickness absence in public services."

What is the timeframe for your discussions with Audit Scotland? What will be the comparable area for local government?

The Audit Scotland analysis is almost complete. We understand that it should be with us within the next week or two. We will obviously need to discuss with Audit Scotland whether there are any gaps in the current information. If so, we would need to fill them.

Does that include work with local authorities, or is it purely about the Executive?

The initial information from Audit Scotland will come in. We will then engage with local government to take that forward.

Will Audit Scotland be asked to confirm that the savings have been delivered, rather than simply be asked to audit the system for delivering savings? Those are different tasks.

We will enter into discussions with Audit Scotland and it will tell us how it would like to approach the auditing. We will keep an open mind on that. If Audit Scotland feels that auditing savings would give it greater reassurance, we would strongly consider asking it to do that.

I think that the committee would want to be informed about your approach.

If there are to be stand-alone savings of £1.7 billion, why do the cash savings that the efficient government document identifies on pages 26 to 27 amount to only £628 million?

We will have to come back to you on that. I do not recognise that comparison.

Can your officials answer the question? The Executive has stated publicly in the media that the stand-alone savings will amount to £1.7 billion, but the cash savings that the document identifies amount to only £628 million. I wonder whether the officials can explain that.

The stand-alone savings over the three years are £1.7 billion. Like the minister, I do not recognise the figure that you are giving. We would need to do the sums and write to you with an explanation.

The issue might be what "stand-alone" means in the circumstances.

It is not our phrase, so we would have to get clarification on that and come back to you.

If I understand you correctly, you are referring to cumulative savings of £1.7 billion over three years. However, I think that the phrase "stand-alone" is—

The Executive's.

It needs clarification, which we would certainly welcome.

Where does the phrase come from?

The Executive, when asked what the £1.7 billion savings were, said that they are "stand-alone savings". The efficient government document identifies £628 million of savings, so I am simply trying to understand that.

When did the Executive use the phrase "stand-alone"?

It was reported in the Daily Record.

It was probably a comment by a press officer. We will make savings of £745 million by year 3 and the aggregate figure is £1.7 billion—those are the figures.

Perhaps you can clarify that the total cash savings that are identified in the document amount to £628 million. Irrespective of whether we have missed other savings, the document gives that total.

We just need to go back to the right section of the document and work out what is in it and what we possibly omitted.

Just to clarify, I think that Wendy Alexander's point relates to the document's narrative rather than to its tables. It is about the items that are listed between pages 20 and 27, I think, which show departments' contributions to the savings programme.

We will be pleased to come back to the committee in writing on the matter.

Perhaps we can have a written response.

I assure you that we will do that quickly, lest there be any misinterpretation.

I thank the minister and the officials for—

I want like-for-like, apples-with-apples comparisons, as the officials put it.

I thank the minister and his officials for coming along. I think that the committee will look again at efficient government. We agreed at our away day that we would do more work on it. It is planned that an approach paper that will detail suggestions on how the work can be taken forward will be brought to our meeting on 25 January. Obviously, we will identify how we should proceed from there.

Our remaining agenda items, which are on draft reports, will be in private.

Meeting continued in private until 13:28.