Scottish Government

1.1 The Efficient Government initiative was launched in June 2004 - a 5 year programme to reduce waste, bureaucracy and duplication in Scotland's public sector and a programme that aimed to establish Scotland as leader in efficiency, innovation and productivity in public services.

Absence Management

3.2 The Executive has continued to monitor sickness absence across the public sector. To raise awareness the Executive joined forces with the Health and Safety Executive (HSE) to help emphasise the importance of managing sickness absence by participating in the HSE Healthy Workplace Solution Workshops which were delivered across Scotland during autumn 2006. Five sector specific events were held in Stirling to engage with public sector HR and staff representative professionals in local government, schools, higher and further education and health bodies.

Procurement

3.3 The Scottish Executive continued to liaise with all parts of the public sector in Scotland in the promotion and implementation of eProcurement Scotl@nd (ePS). Following the independent review of public procurement provision by John McClelland, published in March 2006, enhanced governance and advisory arrangements have been put in place. Improved procurement structures, including centres of expertise, have been introduced and work continues on improving cross-public sector performance, although the delivery of benefits is proving slower than anticipated.

3.4 The Scottish Procurement Directorate (SPD) sits within DG Economy of the Scottish Government. It has a remit to monitor and report procurement activity across central government, NDPBs and Agencies to the Efficient Government Delivery Division. Figures provided to, and validated by, SPD, confirm an outturn figure of £14.7m in procurement efficiency gains for 2006-07. The variance between the Year 1 figure of £24.6m and the outturn for Year 2 is explained by 3 factors. Firstly, the McClelland report and process of public sector reform has led to the extension of many contracts so they can be retendered on the new basis. Procurement activity therefore declined short term. Secondly, some significant savings on major contracts did not recur as the expenditure did not continue. Thirdly, some savings on police procurement which were counted in the 2005-06 outturn have now been recorded against Justice rather than this heading.

2005-06 Outturn

4.1 The Outturn Report for 2005-06 reported the delivery of £386.5m cash releasing efficiencies and £55.3m time releasing efficiencies. At the time of publication it was recognised that verification of the delivery of a number of efficiencies would occur later in the year and that there would be a need to revisit these. These include:

· Scottish Water efficiencies which could not be verified until the Water Industry Commission for Scotland reported in October 2006;

· Scottish Police Service efficiencies which required detailed scrutiny of the ACPOS Best Value Report, issued later in the summer of 2006.

· Increasing Consultant Related Productivity efficiencies. Returns validated in December 2006 confirm £32.8m of time releasing efficiencies were delivered against this Health portfolio project in 2005-06.

4.2 This additional efficiency information is now available and revised / updated efficiency outturns for 2005/06 for a number of efficiency areas are detailed in Annex A to this report.

4.3 This validation means that during 2005-06 £474.8m cash releasing efficiencies and £116.0m time releasing efficiencies were delivered across the Scottish public sector.

New Efficiency Projects

4.4 Additional efficiency areas were identified following publication of the 2005-06 Outturn Report and new Efficiency Technical Notes were published for these in March 2007. Since then further efficiency projects have been identified and Technical notes for these can be found at Annex C.

4.5 Table 1 illustrates the planned efficiencies for 2007/08 for each portfolio, and details the nature of significant projects.

4.6 Table 1 also highlights the significant progress made towards the efficiency target of £1,500m by 2007/08 which the Scottish Government remain firmly committed to.

Table 1: Summary of Efficiency Technical Notes March 2007

5.1 A Ministerial target was set to deliver cash efficiencies of £582m in the second year of the Efficient Government programme, 2006/07. As table 2 shows, taking confirmed cash and time savings together (£1061.5m), this has been achieved. On a cash only basis, £812.6m of recurring efficiencies can be confirmed as having been achieved by March 2007.

5.2 The outturn data for 2006/07 in respect of the portfolio targets as originally published in Building a Better Scotland is summarised in Table 2 below.

5.6 Those accountable for the delivery of efficiencies are required to provide assurance on the efficiencies delivered by year end. The mechanism to produce this assurance was previously subject to discussion and agreement with Audit Scotland.

5.7 This assurance process is a cascade process of Efficiency Statements. It begins with each Project Manager declaring their outturn efficiencies formally on an Efficiency Statement. This is submitted with a summary of supporting evidence to their respective line manager, e.g. Division Head / Director or Chief Executive, in the case of NDPBs and agencies. In turn that senior manager is responsible for signing an Efficiency Statement providing assurance to their respective Head of Department in the Scottish Executive. Finally the comprehensive Efficiency Statement for each portfolio/department is signed by the Head of Department. The Head of Department Efficiency Statement for 2006/07 are collated in Section 9 of this report.

5.8 The Scottish Executive changed its structure in May 2007 following the Scottish Parliament elections replacing Heads of Departments with a smaller number of Director Generals each of whom leads work on one of the Scottish Government's key strategic policy objectives. Each Director-General will now be the Accountable Officer for the relevant ministerial portfolio and responsible for assuring delivery of efficiencies in 2007/08 and beyond.

6.1 Measuring and validating efficiency gains has been and will continue to be a difficult challenge because the information systems that support public sector organisations were not always designed for this purpose. At the same time improvements in management information systems have to be achieved without diverting resources away from the primary objective of delivering improved and more efficient public services.

6.2 Similar challenges can arise in identifying appropriate baselines for efficiencies and where the landscape changes against which an efficiency project is monitored, for example during re-organisation unrelated to the Efficient Government programme.

6.3 We remain convinced that it would not be sensible to abandon those projects even in cases where it is not entirely possible to measure the efficiency contribution. We recognise that efficiency gains can be a by-product of wider service transformation and even if the gains cannot be fully measured the contribution to improved service delivery is no less important.

6.4 However, we do recognise that various limitations in public sector data systems and the robustness of management information systems need to be addressed. This is a challenge for senior service managers. Nevertheless it is important to press ahead with the programme and not stall the gains to be made while waiting for systems to catch up. So while more focus is needed on unit costs as part of performance management, we should not suppose that highly detailed activity-based costing will always be justified.

Development costs

6.5 We remain committed to netting off investment costs from efficiency claims, where it is possible to isolate development giving rise to efficiencies.

Risk of non-delivery of efficiencies

6.6 While we are determined to deliver the efficiency programme, we also recognise that in some efficiency areas there are significant threats to this delivery. Our internal process of assessments is designed to help identify and manage this risk. We remain committed to the philosophy that every pound gained through better efficiency can be used to enhance service delivery.

6.7 The disaggregation of the centralised procurement target is expected to increase ownership and improve delivery of procurement efficiencies in the longer term. Nevertheless, as noted in the McClelland procurement review report, some public sector areas are in the early stages of developing procurement efficiency programmes and baseline information can be difficult to establish. Therefore the challenge is a significant one.

Embedding the efficient government programme

6.8 Public bodies across Scotland are continuing to rise to the challenge of identifying, measuring, monitoring, and reporting progress on efficiencies. Different approaches have been adopted in different organisations and the profile of the importance of identifying and delivering efficiency gains can vary from organisation to organisation. For the delivery of public services, there is increasing evidence that in the decision-making process part of the evaluation includes consideration of what efficiencies will be delivered as a result of the proposed change for the service user and/or the service provider. The Efficient Government Delivery Division will continue to promote the efficient government message as integral to the duty of Best Value, which all public sector bodies must adopt, embed and demonstrate.

7.2 Since this progress report was published, work has continued on the development of new efficiency technical notes with particular attention being paid to baseline information, netting off of development costs and utilising robust methodologies for calculating efficiencies.

7.3 During the 2006/07 Efficiency Statement process, the Efficient Government Delivery Division also emphasised the importance of including clear detail and a summary of evidence to improve the level of information provided on efficiencies during the year end sign off process.

8.1 This programme will provide an excellent starting platform for future efficiency programmes. It will continue to build on the good work and achievements of the first two years as progress continues towards meeting the 2007/08 target in full.

8.2 The Government remains committed to delivering efficiencies across the public sector. The development of a new Efficient Government programme for 2008/09 onwards is an integral part of the spending review process. Detailed guidance will be issued at an early stage in the process. This guidance will include examples of efficiencies and lessons learned from the current efficiency programme.

Efficient Government Delivery Division

September 2007