Finance Committee

Meeting date: Wednesday, January 25, 2012

Official Report 487KB pdf

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Fiscal Sustainability (Universal Services)

Item 3 is the third of our four round-table discussions on the theme of fiscal sustainability. The discussion will focus on the provision and funding of free universal services.

I welcome to the meeting Robert Black, Auditor General for Scotland; Paul Brewer, from PricewaterhouseCoopers; Graeme Downie, from the National Endowment for Science, Technology and the Arts; Professor Jim Gallagher, from the University of Glasgow; Professor Jeremy Peat, from the David Hume Institute; and Dr Andrew Walker, from the University of Glasgow.

As we are taking evidence in a round-table format, there will be no opening statements and we will proceed straight to questions. If any of the participants would like to respond to a question or make a point, they should indicate to me or the clerk. Participants may be asked to answer questions that are put by other participants. We will try to keep things as informal and fast-moving as possible.

I will kick off by asking Robert Black about a quote in Audit Scotland’s submission to the committee, which is dated January 2012—he has been pre-warned about this. The submission says that the Audit Scotland report “A review of free personal and nursing care”, indicated that

“the legislation and guidance was ambiguous or unclear about whether personal care is a universal entitlement for older people, based on an assessment of need, or whether councils had discretion to manage demand and prioritise services within their available resources.”

The submission continues:

“While the Scottish Government has since provided clarification on entitlement, the principle of having clearly defined eligibility criteria is applicable to all universal services.”

Will you comment on that, Mr Black?

Over the years, we have done a couple of pieces of work on this area, because it seemed to us to be important to do so. I will summarise in a few words the results of the study. First, there is no doubt that the service was very popular with the public. One of the features of universal services is that there is a pretty close link between the service itself and the beneficiaries. That is quite transparent and appreciated.

However, free personal and nursing care was one of the more prominent examples of an area in which we made a finding that also applied to other pieces of work that we have done. We found that the upfront costing before the policy was committed to was not as robustly prepared as it perhaps should have been, and there was no absolute clarity around the benefits that were going to entail. In the earlier piece of work, we talked about that at some length. It is a prime example of a policy area where more homework should have been done in advance around the benefits and anticipated costs.

The work that we have done, and the work that has been done by the committee’s adviser, David Bell, have provided some estimates of the future costs of the policy, which will be substantial, particularly in view of the demographic change that is ahead of us. It is interesting that, between roughly 2004 and when we were doing our report in 2008-09, there was no serious attempt to update the costs, although, by that time, it was clear that we were heading into some challenging situations.

For me, free personal and nursing care is as good an example as I can identify of the need to ensure that, in any policy area, we identify the implications of demographic change, estimate the cost of new policies that are introduced as best we can, and design those policies using some key principles.

First, who will benefit? There are significant issues about who benefits from free personal and nursing care. Second is the ability to pay principle: who needs the support and who can afford to contribute? If people are making a contribution to a service—whether it is free personal and nursing care, national concessionary travel or whatever—the budget will go further. The ability to pay principle is an interesting one; we could perhaps talk about it a bit more.

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Third is what economists call the opportunity cost principle: if we do something, what can we no longer afford to do? The committee will be well aware from the evidence that it has taken of the tremendous pressures that are building up in health and social care in general.

There are also issues of equity and fairness. This is where we get into policy, and I will simply not go there—it would be wholly inappropriate for me as the Auditor General to do that. Any policy that is introduced must feel fair, and that is a judgment for politicians to make.

The final principle relates to intergenerational transfer. Free personal and nursing care is a good example of that, and David Bell and I have talked about it in the past. The point is that, by committing to policies now and making them a contractual entitlement, we are building up tax burdens for our children and grandchildren. We should think very seriously about that.

Thank you. I am glad that I asked you to kick off.

There are already a number of people who want to contribute, but before I let them in I want to touch on a point that Professor Robert Wright raised in our round-table session two weeks ago. He said that, although there is a high and rising cost to the provision of free personal and nursing care, the alternative policy would see more older people having to be in long-term residential accommodation, which would ultimately cost more money. We must consider not just the cost of implementing a policy but the costs of the alternative. Will you comment on that?

That goes beyond the bounds of audit evidence. However, I would say that the implications of the demographic change involve not only the growing number of people in need—the growing number of older people with chronic conditions, including dementia, and so on—but the supply-side issues. The workforce is shrinking, and we need to give equal attention to designing the services in the community and to ensuring that we have sustainable models of delivering healthcare in the community. That involves revisiting the expectations on us all as citizens to support one another in a community and thinking through from first principles the proper role of public sector and state institutions in assisting that.

I am interested in Mr Black’s comments, especially his stressing that we need better costing. If I understand Dr Walker’s paper correctly, he states that the national health service has done well at being given a sum and getting on with it—it has done well at adapting to the money that is available. Is it not the case in a number of areas that organisations will adapt to what is available?

Can we take cost, access and quality together? Public managers are pretty skilled these days at managing within a cost envelope, and they have done very well in responding to top-down efficiency savings. However, a separate question is whether we are delivering the best quality of care and making it as accessible as possible with the available budget. That is the efficiency and effectiveness question.

I accept that the health boards have been very good at managing within their cost envelope, but in our reports we have presented on many occasions the challenging message that activity costing is pretty underdeveloped in the health service, as is the ability in forward planning to take into account things such as developments in medical technology and new drugs and build them into the budget. The pressure in the base budget is building.

I have a couple of points relating to what Bob Black has said. The first is about cross-cutting issues and touches on that last response. It is incredibly difficult to do the costing across silos. There may well be beneficial impacts on the health service from free personal care, but we do not really know and we do not have the mechanism to figure that out.

The other reason why the costing is difficult, ex ante, is that free personal and nursing care was a policy that was ostensibly about money but which has set in train a process of change in the system. The balance of care has moved much more towards care at home than towards residential care. There was much more emphasis on making the care-at-home system efficient; it was just going to be a more difficult thing to do at the outset. The committee needs to give serious thought to that, especially as the big thing about universal services is that they are open-ended commitments. I think that they should be revisited every five years to see whether they remain affordable.

I accept Robert Black’s points about the demographic change. We have taken evidence on that and the implications are clear. We heard that the share of the population who are aged over 85 will grow pretty rapidly. Much of the debate about universal services is about the cost, which is an important consideration for us as the Finance Committee. However, we have also heard from witnesses about the kind of society that we want to be. There is a judgment call—a value call—to be made about the value that we place on things such as quality of life and health outcomes for elderly people. We must decide how we view ourselves as a society and whether we care sufficiently about our elderly population to make decisions about free personal and nursing care that incur substantial costs.

It strikes me that a number of the universal benefits that we have talked about in the inquiry so far are preventative spending in that they prevent people from having negative health outcomes, negative social outcomes or a combination of the two. We heard evidence at our previous session that those who care for very elderly people are often elderly themselves and have their own complex medical needs. Leaving them to their own devices to look after their elderly relatives would place them in great difficulty and, in some cases, financial hardship.

Do the witnesses accept that there is an important value judgment to be made about the kind of society that we want to be and that, although cost is an important consideration to plan for, universal benefits are not a bad thing per se?

I will respond to Mr Wheelhouse’s question before addressing the interesting point that Mr Mason made.

Yes, of course this is about values and choice. However, it is not about one value choice; it is about a choice of choices. If we spend the money on one thing, we cannot spend it on another. That is Bob Black’s point about the opportunity cost: if we do one thing, what else are we not doing? That is where we make the value choice; it is not made in a vacuum.

On the financial issues, Mr Mason raises an interesting point. In the Scottish budget that you chaps are looking at, the services can be divided in all sorts of ways. Some of it is managed and some of it is demand determined. You gave the example of the NHS, which is a managed service. It has a budget and, within reason, it lives within that budget. You can set the budget at the beginning of the year and have a reasonable expectation that, by the end of the year, it will be in the right place.

Other services, particularly those that are based on entitlement, are driven by demand. Surprisingly few of those are in the Scottish budget—most of them are in the UK budget. The most obvious example of that is social security, on which we just have to pay what the rules say we have to pay. However, there are a couple of demand-determined bits in the Scottish budget, which, for that reason, have always been hard to manage. The obvious one—although it is relatively small—is legal aid, because there are rules and the number of cases determines the amount that is paid.

An interesting pair of examples relate to housing. Housing benefit, which is in the social security budget, is demand determined. A few years back, the UK Government ran an entitlement programme under the label of supporting people. As with the situation that Mr Wheelhouse described, that programme seemed highly desirable, but it blossomed hugely because it was entitlement driven. It was then transferred into the Scottish budget, so you chaps now have to worry about that particular bit of demand. It has to be managed down, which the Scottish ministers are doing, but that is not easy.

Through entitlements, we have—with the very best of intentions—created demand-driven engines in the budget. Student numbers, bus fares and free personal care are probably the three largest ones. With a demand-driven system in a fixed budget, you are not as in control of your choices as you need to be. I am attracted by David Bell’s idea about considering whether those entitlements can be sustained over long periods. They cannot be cut off just like that—we need to think strategically about how to manage that over five, 10 and 20-year periods.

I want to elicit comments on what is probably a much more fundamental issue that is about the sort of society in which we want to live. Either we can pay a significant level of taxation and receive universal benefits—in which case, the contract that people have with the state is that they pay their taxes to receive what they need—or we can pay less taxation and have benefits that are targeted at people who need them, while others have to make their own provision. The benefit for them is that they have a choice about the provision that they want to make.

There has never been a fundamental discussion about why people pay taxes. Most people do not want to pay taxes, but they want to have universal benefits, which, to be frank, does not stack up. I am interested in the citizens jury project and how people’s opinions changed when they began to consider such issues in more detail. In Scotland, we have only limited tax-varying powers but, irrespective of the way in which the referendum goes, we will doubtless have greater tax-raising powers in the future. Surely we need some form of debate about the model that we want to follow—the Nordic model or the Irish one.

As my background paper for the work programme points out, the tax to gross domestic product ratio for the UK is pretty much smack in the middle of those for the developed countries. Elaine Murray poses exactly the right question, which is about whether Scotland wants to move up or down that spectrum. However, although the hadron collider might be able to do it, Scotland cannot be in both places at once.

I congratulate the committee on running this series of four round-table discussions. It is good that you are tackling important subjects in that way, so I thank you for that.

I have two fundamental points. One is that it is crucial to think about the opportunity costs, which, sadly, will get higher in the next few years. There is no easy outcome from the situation that we are in and the public finance position. Whether we have devo max, independence or the status quo, it will be tough. The choices will get more and more difficult and what we cannot do will get more and more valuable. It is therefore crucial that we think in those terms.

One of the difficulties with tackling universal benefits is that they are popular—of course they are popular; we all want them, but everyone wants a lot of things—so, if one tries to question them, it makes one appear to be of a Thatcherite persuasion. However, there must be questions.

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I am on a Church of Scotland commission on the economy, which will report soon. That has made me think long and hard about the issues and about equity and fairness. When universal benefits—which are expensive—are in place, it is difficult to challenge them. That means that other things do not happen that may be of more value to the people in society whom one is trying to help.

As David Bell has pointed out in previous papers, many universal benefits tend to be regressive. In other words, they tend to benefit more the better-off than the less well-off in relative terms. One needs to bear that point in mind when one considers the issue.

I am taken with David Bell’s suggestion of revisiting those open-ended commitments over, perhaps, five years. It might be easier if one said that the benefits would be in place until year X and would continue beyond that date only if the Parliament took a positive decision to that effect. That would force a proper examination.

The examination should be not only of the costs; it should be an examination of the costs with a view of the opportunity costs—I am sure that David Bell and others could advise the committee on what they were and how they were changing—and should also consider options. There are always options. For example, should bus passes start at 70 rather than 60 or 65? Should we ask whether the availability of some services should be limited to particular groups?

You should also examine a set of options, so that the Parliament—in the light of the overall public finance situation and of its view on priorities, equity, fairness and the policy issues—is able to make a decision about whether the continuation of a particular universal benefit is justified or whether there are options for other uses of the funds concerned that might, on balance, be preferable, given the Parliament’s view of what is good for Scotland more generally.

I am very supportive of examining universal benefits periodically, but one needs a framework that forces a decision to be taken transparently and objectively in a specified period with information about the costs of the options and a view of the opportunity costs at the time. That would be really helpful. It would be tough for the committee and MSPs, but it would lead to good policy making.

There is a wee bit of circling of the wagons. Not many people have come down to saying whether specific universal services should continue, so I hope that, one way or the other, there will be a wee bit more bite as we progress. [Laughter.] I am just trying to stir things up.

There is clearly an opportunity cost to investing in universal services. I do not deny that. As an economist, I would be failing my lecturers at the University of Aberdeen if I did not mention it.

However, there is also an opportunity cost in that, if we start from the status quo—we already have universal benefits—and make a conscious decision to cut back certain benefits and universal services, such as bus passes or free personal and nursing care, there will be consequences for public spending in other areas.

The convener made the point that a higher proportion of folk might be in long-term residential care if they are not enabled to live in their own houses for longer with support under the free personal and nursing care policy. One of the best examples of preventative spending is free eye tests, which are also a universal service and can save an absolute fortune for the health budget if a condition is picked up early.

I made too much of the apple pie and motherhood that we talked about earlier, but there is also good financial common sense in taking the universal approach to some benefits: it saves money for some key parts of our public services, such as acute hospitals. I wanted to make that point before the discussion developed.

I will pick up on Paul Wheelhouse’s earlier point about the type of society that we want to see, and come back to the other point that he has just made. There is a sense, as Professor Bell mentioned in his paper, that universal provision conveys a sense of shared responsibility for society.

However, we must be careful about polarising the debate between universal provision and means testing. Paul Wheelhouse’s point illustrates perfectly the good examples of where investing in universal services could save money down the line. There are increasing costs for things such as diagnostics for particular diseases, where a universal type of treatment might be more beneficial.

That brings us back to the point that Mr Black made at the start: it all comes down to having the right analysis and the right data available when a policy decision is being made. There is a bit of conflict between the information that is available from academics and from others, and around how that is interpreted in the policy arena. We need to watch that carefully.

We have been doing some work with the Washington State Institute of Public Policy, which, as members may be aware, does some stringent cost benefit analysis around preventative spending in particular. The committee might want to look at that in future.

With regard to Elaine Murray’s point, which was also covered in the previous session with Will Hutton, people are not stupid: when they are presented with the relevant information they tend to be very good at making the tough decisions that politicians and others are not always particularly good at making.

We ran a project called the local budget in some areas in England, which showed that people are keen to make those decisions for themselves. I look forward to hearing more from PricewaterhouseCoopers later about its citizens jury, which showed very similar results.

One of the questions that I considered in preparing for this session concerns the definition of the word “universalism” that we are grappling with. One issue is whether a specific service should be targeted, or whether it should be available for everyone. Another issue concerns the group of services that the independent budget review defined, which Audit Scotland suggests costs £870 million a year. The third issue is the question—obviously I am coming from the healthcare side on this—of whether the NHS should remain as a universal service. The debate sways back and forth around those three questions.

In the health policy world, at least in Scotland, we hardly talk about the second or third of those questions; the debate is mainly about specific services. As members may know, much of my work involves looking at new medicines and trying to decide whether they should be available to everybody who has the specific disease or only to a particular group within that.

We do much of the same type of cost benefit analysis work—and have a lot of the problems with costing—that Robert Black spoke about. We also touch on things that Paul Wheelhouse mentioned, such as having to value outcomes. If a new medicine costs an awful lot more money for only a small amount of benefit, is that good value or not?

There are ways in which we can take what could be a demand-led service and make it into a managed budget service by using that sort of capping mechanism. There is an interesting issue around the extent to which an organisation such as the Scottish Medicines Consortium devises its own set of value judgments on how much we are willing to pay for good health, and the extent to which that should be a broader debate that includes the Parliament and the people of Scotland.

I will take up your challenge to give the discussion some bite, convener. If we consider the independent budget review’s group of services that costs £870 million, the issue in healthcare would be whether we should reverse free eye tests and prescription charge abolition, and put those charges back on again. As I see it, that is the policy question for the NHS.

I tried to find some evidence for you on which we could base that decision, but the evidence is very slim indeed. The Welsh carried out one study when they abolished prescription charges to see whether prescriptions went up by a great amount. The answer is that they did, but they are going up everywhere all the time, and it is hard to separate out any prescription charge effect from anything else. There are a whole bunch of things going on.

The problem with cost benefit analysis in that regard is that there really is a lack of evidence on which to base it. We do not know whether prescription charges and eye test charges deter people. We suspect that if there was a flat rate for everybody, it would look a bit like the poll tax, which would probably be a bad thing. That was not what prescription charges were: all sorts of exemptions existed, and it was perhaps only people like us in this room who paid the charges—and perhaps were able to pay them.

It is not a simple question of having universal or user charges; there could be user charges on a flat rate for everyone, or user charges for a selected group. The problem is that you have to ask the question, “To what policy issue is imposing user charges the answer?” because they are not great for revenue raising.

There are 5 million people in Scotland and they visit their general practitioner perhaps twice a year, so that is 10 million visits. If we had a policy of charging £10 per GP visit, that would raise £100 million. That is a not inconsiderable sum, but it is less than 1 per cent of the NHS spend in Scotland. Would it be worth the hassle that we would go through to raise that amount of money? I cannot answer that question, but I lob it out there.

That is interesting. I call Michael McMahon, to be followed by John Mason.

It is right to say that it always comes back to politicians. We have to make a judgment call based on the information that is put in front of us. Mr Downie, Dr Walker and Mr Black commented on the availability of statistics that would allow us to make such judgments.

I am always happy to please the convener, so I am happy to say that I believe that we should look again at prescription charges and consider whether we can sustain paying tuition fees for university students. We talked earlier about the directors of Tesco. Is it right that we continue to pay for their sons and daughters to go to university for free at a time when ordinary working people who work for Tesco cannot afford for their kids to go to university because we are already paying for their directors’ children to go? We all have to answer such questions, but we have to do it on the basis of information on what it costs us.

To use Audit Scotland’s figures as an example of how diverse the figures can be, I note that the information that we have states that the cost of the concessionary travel scheme was £187 million in 2008-09 and £189 million in 2010-11, so there was an increase of £2 million. However, Audit Scotland concludes that, by 2025, the cost could be between £216 million and £537 million. There is a huge difference between those figures. We could have an increase over 25 years of no more than £27 million, or we could have an average increase of £27 million a year over that period. That is a huge difference in the statistics.

If we are to judge whether we can sustain the concessionary travel scheme over a period of time, we need statistics that allow us to say whether the cost will be close to £216 million, which might well be sustainable, or close to £537 million, which would be prohibitive. Unless we get the statistics, we cannot make a judgment on whether we can sustain free tuition fees, free prescriptions or free travel. Whatever the will of the politicians, if we are to make judgments on those things, we need to make them on the basis of firm statistics.

With reference to Dr Walker’s comments, when I have spoken to health officials about prescription charges, they have told me anecdotally that they do not think that the cost of prescriptions is having a huge impact. Doctors are being a bit more reticent and careful about signing prescriptions. However, costs are coming to the health service because people know that, if they get a prescription, it will not cost them anything. The number of people who want to visit their doctor has increased, and that is where costs are coming from, which is putting pressure on the health service. Unless we get statistics on and an analysis of that, the judgments that we will ultimately have to make will be difficult.

Unless we can get the Government to produce statistics—we talked earlier about the metrics and the projected costs—we are just shooting in the dark, are we not?

Michael McMahon has made some important and valid points. Politics is the art of the achievable and it is also about choice. We can always quote extremes, but the important point about universal services is how they impact on people at the margins, and we should also consider their effect on the uptake of such services.

We have argued many times that we need more robust data, and we have certainly made that clear to the Scottish Government. However, projections are more difficult to make the further ahead that they are made.

I call John Mason, to be followed by Robert Black.

Thank you for letting me back in.

The convener asked us to nail our colours to the mast—is that what it was? I believe that we must protect what we have and seek to expand universal services in the long term. Elaine Murray said, correctly, that we need to have that debate. I agree. As Professor Bell said, perhaps we should have it as a regular interlude.

It is interesting that, in the independent budget review and a number of other papers, it is the newer universal benefits that are under attack. If we go back on things like prescription charges and concessionary travel, is the next step to eat into the health service and education? One of the arguments that comes through in some of the papers is that people can afford to pay for their bus travel. Well, people can afford to pay to send their kid to a comprehensive school. Is that the next step? People can afford to pay for an ordinary operation on the NHS, so is that the next step?

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I would like to hear comments on where we are drawing the line. Is it just a matter of new and old, or is there some other reason? I am also interested in the point that Elaine Murray made about the citizens jury project. People went into that and, two days later, they had all moved to the right wing, or something like that. I would be interested to know from PricewaterhouseCoopers whether the jury was made up of experts who were all of a capitalist persuasion, or whether some were more of a socialist persuasion.

Will that do, convener?

Yes, indeed. You are not throwing the cat among the pigeons or anything, are you? That is good; it will stimulate folk’s thinking.

I am tempted to respond on the point about the citizens jury, but I will leave that for Paul Brewer to explain. I took part in the project and it was great fun. A real cross-section of folk out there in the street took part, and it was a really interesting and positive experience, but that might be for later.

Michael McMahon’s point was about concessionary travel. A moment ago, the convener challenged us to get real with some of this stuff. If I were to be polite, I would say that the devil is in the detail. Being less polite, I think that it is time to get down and dirty. It is tempting—we all do it—to talk generally about the type of society that we want and so on, but I will stick with the example of national concessionary travel. Those were broad projections but they contained some real short-term numbers that highlight some stuff that we must all consider. Within the national concessionary travel scheme, if you take the census data and look at the 60-pluses who are still working, you can do a fairly crude but nevertheless reasonably okay calculation that the cost of providing free transport to people who are over 60 and still in employment is £34 million or so. That is dead-weight expenditure if ever I saw it. The taxpayer is paying out that money unnecessarily. I do not think that anyone who is in employment should feel that they are entitled to travel free to work.

The Government estimates the cost of providing free eye tests to be about £87 million. An interesting question arises: is it better to have free eye tests for everyone at a cost of £87 million, not least because that contributes to the early detection of glaucoma and high blood pressure and so on, or could we fund some of that £87 million by the reasonable expectation that those of us who are over 60 will pay for our journeys to work? The Government could meet the cost of 40 per cent of the free eye tests by shaving concessionary fares.

That is what I mean by getting down and dirty. If we start to look at the numbers, there are some real choices to be made a level or two down from the generalities. That is where the link back to Paul Brewer’s interesting points on the citizens jury goes. When we present such information to folk, they recognise the reality of it. It is a case of finding a narrative that people can buy into.

I rose to your challenge, convener, and I think that I will stop now.

I am pleased that you have, and I am sure that Paul Brewer will want to speak to his report later, given the number of people who have commented on it.

Elaine Murray is keen to come in with a brief supplementary.

I seek clarification of how the £34 million was calculated. Was it on the basis of the number of people who are over 60, who are in work and who are entitled, and the number of journeys that they are likely to take to work? Is there a statistic that says that £34 million is being used by people who are in work? It is important to understand exactly what the statistics mean.

I apologise—I cannot give you chapter and verse. I would be happy to supply the committee with a note. It is a ballpark figure, which involved looking at the number of people over 60 who are in full-time employment, of whom there are about 220,000 in Scotland, and then looking at the take-up of concessionary travel passes and applying that to the labour force number. We do not have figures for the over-60s, so it is an approximation. Quite frankly, it is the sort of thing that we should analyse in more detail.

James, you are in that category—

It is not my birthday yet—I am surprised that you do not remember. Thank you for that.

I will pick up on a couple of the points that have been made. I agree with John Mason that we should hold on to the universal benefits that we have because that sends out a message about the society that we want to live in.

Michael McMahon made a point about visits to the doctor and free prescriptions, and the effect that more people going to the doctor is having on the uptake of prescriptions. Until we get a full and in-depth analysis of cost, we will not know what is happening, but perhaps that suggests that, because people do not have to pay for prescriptions, they are more willing to go to the doctor. In the long term, that might well save money in the NHS, because people are being treated cheaply at an early stage.

I understand why anyone would want to use the Tesco example in relation to student fees. That is fair—a working-class kid should not be disadvantaged to pay for a multimillionaire’s son or daughter to go to university, but what about those who are on the margins? If we were to introduce student fees at a certain level, how would that affect the people who were just above that level? Wherever we set the level, someone would just miss out. That is extremely important. A lot of work needs to be done to see what the cost would be for individuals and for the budget as a whole.

I have a brief point. In a previous session, we were given evidence on the concessionary travel scheme. Elaine Murray and I asked about its effectiveness in rural areas as opposed to urban areas. If we are nailing our colours to the mast, I would not want to see the concessionary travel scheme scrapped—far from it, because I think that it has great value, where there are bus services that can be used—but I would be keen to get views from those who have looked at the issue on whether there is a need for a differentiated scheme for rural areas. Something needs to be done to enable the scheme to be more effective, because it is clear that there are large parts of Scotland where there are very few, if any, bus services, which means that its effectiveness in delivering the desired social impacts is somewhat limited.

If the Auditor General can get down and dirty—which is a great event for the nation—maybe I should mix it up a little just to stir up the committee.

It is very easy to say, “I like the present benefits. I wouldn’t want to take any of them away—indeed, I’d like rather more of them,” but it comes back to choice. Let us leave the tax question aside for the moment, because there is always an issue about increasing tax, which no one is terribly keen on. We should forget about tax for now, because at the moment we are looking at a fixed budget.

If you spend money on universal services based on entitlement, you will not spend it on employing people and paying them wages. If we look at what has happened over the past 10 years, we see that public expenditure since devolution has gone up hugely. It turned out that we were spending money that we should not have had—we were spending fairy gold—and we are retrenching now. Over that period of 10 years or so, we spent money on three things. We spent some of it on improving the infrastructure—that was a good investment, but capital has now been cut—we spent some of it on increasing the number and the wages of people in the public sector, and we spent some of it on entitlement services.

Some of that spending will have to give. Capital has already given, so if we maintain entitlement services, the inevitable consequence, if we do not put up taxes, is that we will employ fewer people or we will pay them less. In a fixed budget, that is the arithmetic. That is a political choice. It is possible to make a case for either option. Quite a good case can be made for free services, but a jolly good case can also be made for folk having jobs and wages.

To mix it up a wee bit further, I suggest that it would be good to look at the entitlement services. If it was down to me I would set some criteria for whether to keep any individual benefit or change it in some way. Those criteria might be something like ease of co-payment. It would be a real hassle to put a £10 note through the doctor’s box, as it were, but it is relatively easy to pay on the buses.

I would also think about regressiveness. If the whole purpose of benefits is to send a signal about the kind of society we want, the ones that we should concentrate on most are the ones that benefit the less well-off most. That is an interesting test for existing benefits.

I would then look at how much money was involved, because, at the end of the day, this is a budgetary decision. Finally, I would look at the extent of the truth in the stories that we tell ourselves about how preventative things are. How many eye tests does it take to prevent one case of glaucoma? How many people discover high blood pressure at the optician’s? Might it be better to make it obligatory for opticians to pay for eye tests, since they make a fortune out of flogging the spectacles that follow from them? There are always options.

Once I had looked at that set of rules, I would ask in what order I should look at the services. I would look at buses first. It is barking, frankly, that we send bus passes to 60-year-old judges of my acquaintance who are paid £140,000 a year plus a generous pension. That is not right.

I would then look at students. I would not necessarily say that we should fix the fees, but there are things that we can do at the margins. For example, is it right that all students get interest-free loans for their maintenance? They get their fees paid. Do we have to subsidise every student’s learning? The answer is not obvious.

I would then look at free personal care, because of the regressiveness issue. Free personal care principally benefits the children and grandchildren of the better off. It is folk who inherit who get the economic benefit of free personal care. There are other benefits, but the economic benefit goes to them. John Mason is right. We are reasonably entitled to ask, “What about all the other stuff we get free? What about libraries?” That is a good question. However, those are the ones I would start with. The convener told us to stir it up. It is stirred up.

Thank you for that. It is important that we bring these things out into the open. I will let Michael McMahon in with a brief point, followed by Professor Peat and John Mason. Time is against us, so I would like to move on after that. I give Graeme Downie a bit of advance warning that I want him to touch on his make it work pilot scheme in Sunderland and to talk about improving services. I would also like Paul Brewer to talk about his report on the citizens jury at some point.

Professor Bell has to leave because he has exams. [Laughter.] I hope you pass.

This is a follow-up to what Professor Gallagher was saying about the benefit of testing. I used this anecdote a couple of weeks ago and we never really got into it but the discussion has come back to that point again. We are focusing on preventative spend. The issue of testing people at certain ages to check whether they will have ill health later on was raised with me by a consultant in my local area, who said that as soon as someone reaches 50, they start to get checked for cancers, but the likelihood is that nothing will show up and they will present with cancer in future as an acute emergency. Therefore there is no real benefit in doing mass screening for particular illnesses. That falls under the category of preventative spend but it is a preventative spend that is extremely costly and does not meet the aim of identifying and cutting costs at the other end. Even when we talk about the good policies and the things that everyone would agree with, we still have to get it right and ensure that the money that we are spending achieves the outcome that we want.

I know that Andrew Walker wants to come in, but Professor Peat has been very patient.

12:15

Thank you.

First, I return to a point that John Mason made about challenging existing universal benefits and the risk that that raises of challenging free health and primary education services and so on. I assume that the Parliament and the citizens of Scotland see that there are various critical requirements that exist at all times and that one does not challenge the provision of free health and education services and a decent standard of living for all citizens. If we look at universal benefits, it is necessary to consider whether there is a set of such benefits that absolutely does not get scrutinised because they are fundamental human rights. I leave that issue for the politicians to pursue.

Secondly, I return to the question of nailing one’s colours to the mast. I am one of those in the category that Bob Black talked about, with my free bus pass, which I did not use this morning, although I should have. I, too, feel somewhat guilty using it, as I do when I receive a Christmas fuel allowance. I wonder whether I should pay it back. I make my own decisions on charitable giving, but I see no reason why I should receive a bus pass or why my wife and I should receive the fuel allowance. I would much prefer that that money went elsewhere, to others who have more need of that particular provision.

Higher education is a very difficult issue. I understand the point that has been made about those at the margin. If there is a move to a system involving some form of payment, it should be made after the event by those whose income has reached a certain level and on a tiered basis, so that there is not a sudden movement to paying everything back, but a movement to people paying back a growing proportion of their income as it reaches different levels. Mechanisms can be introduced. The difficulty is that the money is not received up front and some way of organising that system has to be found, but there are means by which some of the costs of higher education provision can be clawed back from those who go on to earn very large sums. That is appropriate.

I think that that is particularly the case when I look at the direct opportunity costs in the education budget. I am wholly convinced of the requirement to put as much as possible into early years provision and to work on that area. When I look at costs that are broken down by different segments of education I am worried by how HE dominates in spend per head and per segment of the population compared with early years provision and, indeed, primary and pre-primary provision. I would like to see an ability to vire amongst that.

There were a lot of quite happy HE principals and a lot of very unhappy further education principals after the budget that members are currently discussing. Was that the right decision? Is it right to rob FE to pay HE in order to continue free tuition for all in the HE sector? I am not sure that that decision was right.

I also worry about the perverse incentives that may arise in the HE sector. If I were a university principal and saw the way things were going, I would want to maximise the number of people who come to my university from locations where big bucks are paid. I would also want to maximise the income from overseas activity, as I would face a tight budget and would like to get those income flows coming. I would not necessarily have the education of Scottish students at the top of my priority list.

If I considered what I wanted out of the HE sector in Scotland, however, I would put high on my agenda the education of Scottish students and those who may stay in Scotland and research that will benefit the Scottish community. The incentive mechanisms that are set up by the fees structure and the way in which budgets work may not provide the same motivation for principals and courts that one would like if one was looking at things from the viewpoint of the interests of Scotland as a community and Scotland plc.

My final point is about looking at where to go when thinking about reducing universality. One consideration is the benefits and to whom they apply. Another is the costs of administrating alternative schemes. In some cases, it would be incredibly expensive to unpick what one has and find an alternative means of judging who gets what. It would be unwelcome to save £50 million of benefits but spend £40 million on the administration of that. Look at the costs of administration. As Jim Gallagher said, buses would be easy, but it would be difficult in other areas. Look at the details; get down and dirty, if you like, on individual areas, and be prepared to ask the difficult questions and think about some reduction of universal services, even in areas where they have existed for some time.

Dr Walker can come in now, to be followed by John Mason

Thank you for giving me the opportunity to respond to Michael McMahon’s point, convener. I am aware that I am jumping the queue.

I agree with what Michael McMahon said. One of the big dangers of policy making is that simple messages come through, such as that prevention or public health or any cancer service are good things, and that anything that has that label must be supported. Having worked in and studied the health service I can say that that is far from true. Michael McMahon gave an example of a preventative service that might be a very poor use of resources. I am intrigued to know more about that example, but I can perhaps ask him about it afterwards.

The broader principle is the basis on which we introduce such services, or any policy. Do we do that on the basis of something like a cost benefit analysis that presents all the numbers? That is one way to go. Or do we go down the route that some members have described as the approach that decides what type of society we want to live in? In the past decade, health policies from all Administrations have taken that approach. With the current Administration, it might be about prescription charges; with the previous Labour Government, it might have been about reducing waiting times, whereby it was decided, “We’re going to do this, then we’ll just pick up the bill when it comes along.” That is an alternative approach that is perfectly legitimate, but there is an issue for the political class about where the balance lies between those two things.

I want to press Professor Gallagher on his point, which I think was that we are choosing between universal services, and jobs and wages. Surely, whatever we do, there will be jobs and wages. The issue is whether they are in the public sector or whether they might involve, for example, bus drivers driving all the 60-year-olds around.

Or they might be profits for the bus companies, because an extra fare does not require an extra driver, or they might be profits for other suppliers. Yes, the money will be in the economy somewhere, but it will not necessarily be in public sector employment.

But the people who save money on the bus fares will spend it in shops or whatever—it will still circulate.

A multiplier effect.

Indeed, the gearing effect.

Graeme, I am keen to look at some of the work that NESTA has been doing. I thought that some of it was quite interesting and innovative. Can you touch on that for us, please?

Certainly. NESTA’s position is that the debate is not polarised between universal services and means testing, or anything else, but that the crucial point is that the service does what it sets out to do. The expected change in demographic and social problems will far exceed the pressures put on the systems by universal services. Our figures put the cost at about £27 billion over the next 15 years for the implications of the demographic and social problems that we will face, which I am pretty sure Audit Scotland will confirm will dwarf the cost of universal services in the future.

Our view is that, although it is important to look at the type of society that we want in the future and at the best way of achieving that, the best way of tackling a problem is to find the communities that you are trying to speak to, speak to them very directly, offer them the choices and work very closely with them to design the proper intervention. In that way, you come across the real problems, as opposed to the problems that we sometimes perceive from our more detached worlds.

As the convener said, we drew a number of examples of such programmes to the committee’s attention in our written submission, including the make it work programme in Sunderland. It identified a clear problem and people were put on the ground to work day to day with the local community. Not only did they solve the problem, they were quite convinced that they solved the problem to the extent that they saved money as well, so it was the perfect win-win situation. It is not necessarily the case that that exact model could be translated from Sunderland to a part of Scotland, but we think that the way of working and the way in which the solution was developed can be transferred.

Dr Walker mentioned that when you put a particular tag on something, it automatically becomes popular. Without getting too buzzwordy, I will say that we have done an awful lot of work in Scotland and in the rest of the UK on the idea of co-production—a service is co-produced with users on the ground. In Scotland, we ran a programme called age unlimited Scotland that was quite community oriented and looked at working in very small communities with people aged over 50 and finding ways in which to keep them more active in older age. The problem was twofold. It was partly a preventative spending issue because, if you keep people more active in their old age, they are less likely to need services. However, rather than coming in with a solution, we asked them what they would like to do and what would help their wider community as well as themselves, and they came up with some interesting suggestions through that process.

Such initiatives seem like something that can be done only by local authorities, rather than central Government, but there is a sense in which Government can create the conditions under which those solutions can take hold. The problem is, of course, that Government has to take its hands off the process once it has created the conditions—it has to leave things alone and see what happens.

We have some experience of that through our work on a programme called the big green challenge, which was about creating community-led responses to climate change. Since we set it up in 2007, I have spoken about it to a number of people. It involved a £1 million challenge prize on carbon emissions. At the time, people said to us, “You’ll just get the usual suspects and the kind of more middle-class communities who are interested in that kind of thing.” However, we found quite the opposite. When presented with a key challenge about an issue that people saw as affecting everyone, we found that communities coalesced and expressed interest in the programme in rough areas of London, such as Kings Cross, and in Nottingham and other places like that.

If you create the right conditions, you will be amazed by people coming up with better solutions than Governments can. What is important is the need for Government to take its hands off the process sometimes, although it must maintain a safety net and ensure that it is not withdrawing a service that is required by the more socially disadvantaged groups.

Your submission says:

“NESTA’s experience supports the suggestion that one of the biggest challenges in radically transforming services is how to disinvest resources away from one service to invest in another. This is particularly the case in a context of reduced public spending.”

Can you comment on how we can achieve that? Obviously, some of the projects that NESTA has managed provide examples of that.

To some extent, it is a chicken-and-egg situation. You cannot and should not disinvest in a service before there is something coming down the line. That comes up an awful lot in discussions around preventative spending. The expectation is that, if you invest in a preventative measure, you will be able to disinvest from the more acute care that would otherwise be given later on. The problem is that you cannot disinvest from the acute care until you are convinced that the preventative care has been effective. I do not think that there is one solution in that regard—we are certainly not suggesting that we have that solution. We are trying to point out that, at a local level, you can start working with those examples. The challenge is always how to scale up those examples into a region-wide or Scotland-wide initiative.

Some of the disinvestment has to happen as a result of the increased financial pressures. Money is being taken out of the system, but where is it being put? Do you have to take £100 million out of a particular system? If you took £90 million out, could you spend the £10 million somewhere else? That is the balance that has to be got right. I am afraid that I will join in the buck passing that has been going on, because I am afraid that that becomes a value judgment for politicians. At what stage would you feel comfortable disinvesting in acute services and investing that money in scaling up a preventative initiative that will save you money down the line?

I think that you have hit the nail on the head. There are many innovative and successful projects out there, but there does not seem to be a way of ensuring best practice in order to ensure that such projects are implemented in other areas.

I think that the solution is beyond the measure of just sharing best practice.

Culture change.

Yes. NESTA is keen to work on the creation in Scotland of the kind of accelerator system that is used in the private sector in America and in parts of Europe whereby, if you get a really good idea, you rush it through quickly, with intensive support, and ensure that it can be scaled. What often happens with such good ideas is that, even though they might work well locally, Government or other parts of the country do not say, “We can steal that idea. Can you work with us to adapt it to other circumstances?” Instead, people take the existing model and try to apply it directly, which is usually not as successful. We need to ensure that the approach is changed so that the conditions exist that enable people to use the lessons that can be learned from an initiative, rather than just adopting the exact form of implementation.

PricewaterhouseCoopers’s citizens jury has been referred to by various people around the table. Paul, could you talk us through it?

12:30

To put the citizens jury into context, I should say first that the motivation behind it was our engagement with the Christie commission on the role that we might play in helping to expand its evidence base. The commission was quite aware that, with evidence-gathering sessions, including those to which the public are invited, the people who attend tend to be those who have opinions, so the commission was quite interested in the idea of using a professional public opinion research consultancy to get access to the views of a genuine cross-section of Scottish citizens.

The 24 people who took part were—as far as they could be—a statistically valid representative sample in terms of where people live, their age, whether they are in work, their ethnicity and so on. What we sought was a group of people who after two days would be able to say something of value to the Christie commission on their perception not just of what they want specifically from public services but of the values that should underpin the services. What, to them, would make a good system of public services?

With regard to the process, as Robert Black has pointed out he and others provided the group with briefings. However, that particular part of the content was relatively contained. People very much had the opportunity to discuss the issues in groups, and to reach conclusions and share them with the rest, which culminated in a collective view that a number of the jury presented directly to commission members and the supporting secretariat.

What I find interesting is how much of what the witnesses have said this morning was alighted on in one way or another by that group of people. Indeed, we have been surprised in a number of ways. For example—reflecting Graeme Downie’s point—I found it interesting how the group was able to identify issues and to move quite quickly to having views on tough decisions. Of course, that is very different from having to implement such decisions.

Moreover, when the group first got together, they were quite fearful about the current and future state of public services—more through uncertainty, than anything else. They could see that a period of austerity lay ahead and that significant cuts to public sector budgets had been made, and there was a lot of concern in the group about whether the services that they valued were going to continue to be provided in the same way. However, the whole tone changed when the scale of the spending cuts was put into context. For example, people were very surprised by Robert Black’s analysis, which demonstrated that real-terms spending was going back to 2007 levels, rather than to the levels of the last century that they had expected. It took them away from their initial concern and defensiveness about preserving what we have and gave them confidence to get on the front foot and to say what they want from their public services. As Robert Black said, the group was very engaged and the debate was very lively.

In saying what they want for public services, the group was asked to come up with descriptive phrases on which everyone could agree. At the top of the list, of course, were fairness and accessibility for people who are in need. However, we did not expect to see the word “disciplined”, and I think that that showed the group’s understanding of the fact that, if choices have to be made, they have to be made on an evidence base and in a robust way. As citizens, they felt that such evidence gets played out only in the media and in a way that they cannot access. They want confidence that public bodies and politicians, in making decisions on allocation and in implementing spending decisions, have such robust analysis to hand.

Another interesting adjective that was used was “entrepreneurial”. That had the flavour of a desire for more collaboration between public sector bodies. The group felt that the public sector, collectively, is relatively static in how it does things and they were interested in the concepts of co-development of services and community engagement. There was enthusiasm for some of the different ways of developing public services that Graeme Downie outlined.

An important underpinning concept was honesty: the group wanted to trust services and how they are delivered. There was a fairly strong theme of personal responsibility, which is what led the group into things such as enthusiasm for co-design of services.

Another overarching theme was a recognition that the demographics behind public spending are changing. The participants were anxious for more comfort that decisions are taken with a long-term perspective. In the context of universal benefits, there was strong awareness that demographic changes will impact on the take-up of services for older people. There was enthusiasm for a demonstration that government, in making decisions, looks at the longer-term evidence base. The group did not necessarily have a well-developed articulation of how they wanted that to happen, but they had the sense that long-term planning does not happen in government in the way that they would like.

At the end of the process, the people felt that they had reached different conclusions from those that they might have reached without a base of information; they felt better informed. To illustrate that, I point out that one of the people made a request for Robert Black to appear on television monthly.

Getting down and dirty. [Laughter.]

The group felt that, day to day, they do not have the evidence to form views and to reach the conclusions such as they reached in the session.

On priorities, there were no surprises in what the group saw as being essential and fundamental: healthcare, education and emergency services. They also came up with things that would be ideal to have and which they therefore felt are very important. This was perhaps just a feature of the particular group, but affordable sports and leisure facilities were a high priority because of the widely spread demographic. The group also included free library services and high-quality infrastructure.

The universal services that have been discussed today were thought to be nice to have rather than essential. When we get under the skin and consider what led to that, I think that part of it was to do with the dynamic of the group as it considered spending choices in a constrained spending environment. There was nervousness about some of the points that have been raised today to do with universal services passing benefits to those who can meet the costs under their own steam. There was debate about the behavioural impact of free prescriptions. On tuition fees, some of the points that have been discussed today about benefits, in constrained times, going to those who can meet the costs from their own resources, were made. The group questioned whether the resources that are tied up in that could have a higher impact in other areas of public service if they were taken away from those who can afford to meet the costs. There was concern about ensuring that protection is provided for those who need support in paying for those services, all of which were seen as being exceptionally important.

The group did not discuss how to make those choices and to prevent the problems of people dropping off the cliff edge of entitlement. When a line is drawn, there is a binary choice between those who have entitlement and those who do not, at certain levels. None of those issues was developed.

That gives the committee a flavour of the issues that were raised. All those services are highly valued. The questions were to do with prioritisation in a system in which spending is constrained and decisions must be made.

I noticed that 75 per cent of the people said that they would be willing to pay more taxes or charges to safeguard public services, which was a doubling of the figure from before the process started. That is interesting.

I am conscious of the time—it is 12.40 and the Parliament will meet today at 1.35 and we still have an item on our agenda. I therefore have to bring the discussion to a close, but Paul Wheelhouse has been trying to say something for a while, so I will let him have the last word.

It is about Mr Brewer’s interesting study. There was a transition in people’s views during the session. Personally, I am not particularly clear about the costs of administration of means testing and other measures, but how clear was it to the people who took part in the session that a cost would be incurred in taking away universality? We would need an administration to decide who was eligible, unless there was a technological solution through which people were passported to get certain services, perhaps because they had access to a particular benefit. Was that explored at all?

No. The mechanics of universal benefits were not explored. However, the group would recognise that point. Because we had a relatively constrained timescale and we were trying to get a sense of the group’s values in relation to public services and their prioritisation, there was no opportunity to go into the practicalities.

I thank everyone who participated in today’s discussion. I now close the public part of the meeting.

12:42 Meeting continued in private until 12:48.