radical scotland

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DISCUSSION PAPER

RADICALSCOTLANDConfronting the challenges facing

Scotlands public services

Laura Bunt and Michael Harris, with Ruth Puttick


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FOREWORD 2

FOREWORD

Scotlands public services are vital to the countryseconomic and social wellbeing. Hundreds o thousandso public service employees, whether at the rontline

or administering and managing services, are committed tomeeting the needs o the people o Scotland rom health andcare, to education and housing.

Because o this, it is important to engage directly with the

pressures to reduce spending on public services. Traditionaleciencies will not be enough to meet the scale o the savingsrequired. Given changing and deepening social challenges, itis especially important that Scotland responds creatively tobudget cuts and develops radical new solutions to addressthese challenges.

Reading this report, one is encouraged by the innovativeapproaches to public service delivery being led by

proessionals, communities and enterprises, in Scotland andacross the UK. Making sustainable savings requires more othese approaches, and more support or innovation in publicservices.

As ever, we welcome your comments and views.

Jonathan KestenbaumChie Executive, NESTA

October 2010


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EXECUTIVE SUMMARY 3

EXECUTIVE

SUMMARY

1. This paper is an independent analysis o the economic andsocial challenges acing Scotlands public services, and howthe radical reorm o services through innovation could helpto meet some o these challenges. It argues that innovation developing new approaches that are better at preventingand solving problems or and with citizens is critical tomaking sustainable savings in public services and to ensuring astronger, saer, healthier and more productive Scotland.

2. As has been identied by the Chie Economic Adviser and theIndependent Budget Review (IBR), public spending in Scotlandaces substantial reductions in real terms ollowing the nancialcrisis and the decit reduction plan set out by the WestminsterGovernment. Estimates ahead o the Comprehensive SpendingReview (due October 2010) suggest that the ScottishGovernments budget will be reduced by a total o 3.7 billionby 2014-15 the largest reduction in spending since the SecondWorld War. Even a range o highly contentious measuresconsidered in the IBR would produce only around three-quarterso these savings, leaving a gap o 1 billion which could only belled by direct cuts to public services.

3. Such reductions could risk signicant economic and socialharm. Managing reductions in spending in a careul andconsidered way is especially important or Scotland. Publicservices represent a larger proportion o the economy than

they do in the UK as a whole, hence reductions in spendinghave an even greater potential to harm not only individuals andcommunities directly, but also Scotlands economy and societygenerally.


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4. However, a careul and considered response to spendingreductions is not the same as a conservative approach. Evenwithout needing to make savings, Scottish public services havebeen struggling to meet rising demand and respond to thechanging needs o citizens.

5. Scotland aces some deeper social challenges than therest o the UK. Conditions such as those associated withobesity, entrenched inequalities and high rates o re-oendinghave traditionally been hard to meet through largely uniormprovision and are putting urgent and expensive pressureson public services. Over the next 15 years Scotlands publicservices will need to cope with additional demands in health,social care and justice alone amounting to more than 27billion, due in particular to an ageing society and the prevalenceo certain ill-health conditions.

6. Services need to innovate to respond more eectivelyand eciently to complex social problems that cannot easilybe xed by standardised provision. This paper highlightsexamples o innovation (including rom Scotland) that

demonstrate how to save money and improve outcomesby managing and reducing demand or services, throughmeeting peoples needs more eectively and building theirown capability to prevent and respond to problems. Theseinnovations can be characterised by their distinctly localapproach and how they engage the public directly in designingand delivering services. The more that this kind o innovationplays a role in reducing spending and improving outcomes, theless emphasis might need to be placed on other contentiousand potentially harmul measures.

7. We propose an ambitious new way or local public servicesto lead the next stage o radical reorm in Scotland that savesmoney and improves outcomes or citizens. We propose newpowers and responsibilities or leading authorities and publicbodies that take orward the Concordat, Single OutcomeAgreements and existing rameworks. This mechanism a NewCommunity Status would provide greater local agency or

developing new approaches in public services that are bothbetter and cheaper. Locally led innovation would be guided andsupported by national programmes o reorm and reinvestment,

EXECUTIVE SUMMARY 4


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to progressively decommission some capacity rom someexisting services (such as acute care in hospitals) and shitinvestment to new approaches that manage and reducedemand more eectively.

8. New community status would grant more public servicessuch as local authorities and health boards access each year toa rebate equivalent to up to 1 per cent o their annual budgetsin health, justice or social care, unded through disinvestmentin existing demand-led services. In return, providers would haveto return hal o the savings they make as a result o innovationactivities to central government each year, and they would haveto repay at least hal o the rebate to central government bythe end o the Spending Review period.

9. New community status would also mean an obligation toconduct a local assessment o where resources are currentlyspent and how eective this spending is, to develop new moreappropriate measures o success, and to work in partnershipwith employees, the social sector, and the local communityto develop and deliver new approaches. I successul, new

community status could become the normal relationshipbetween local providers and central government during theollowing Spending Review period (that is, post 2014-15).

EXECUTIVE SUMMARY 5


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CONTENTS 6

CONTENTS

Part 1: The challenges acing public services in 7Scotland

Part 2: How radical reorm in public services can 16reduce demand and improve outcomes

Part 3: Transorming Scotlands public services 31

Conclusion 47

Endnotes 48

NESTA in Scotland: Innovation in public services 55


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PART 1: THE CHALLENGES FACING PUBLIC SERVICES IN SCOTLAND

PART 1:

THE CHALLENGESFACING PUBLIC

SERVICES IN

SCOTLAND

The fnancial challenge

10. Public services in Scotland ace substantial reductionsin real terms, ollowing the nancial crisis and the decitreduction plan set out by the Westminster Government.Estimates provided to the Independent Budget Review (IBR)by the Scottish Governments Chie Economic Adviser basedon analysis o the Westminster Governments Budget in June

2010 indicate that the resources controlled by the ScottishGovernment are projected to all by 3.3 per cent per year onaverage in real terms over the next our years.1 In total, theScottish Governments departmental (DEL) budget is expectedto reduce by 3.7 billion or 12.5 per cent over the next SpendingReview period to 2014-15. This represents the largest reductionin spending since the Second World War. This reduction inspending is comparatively greater in Scotland than it is in therest o the UK, since the Scottish Governments budget hasincreased by 5-6 per cent a year over the past decade.

11. Given the size o the total UK decit, this reduction islikely to be sustained or many years. According to the ChieEconomic Adviser, real terms budgets may not climb back totheir 2009-10 level until 2025-26 (i indeed they ever do).2 Thisequates to 42 billion less in total spending between 2010-11and 2025-26 equivalent to nearly our years spending on NHSScotland.3

12. Despite the size o these likely reductions in spending andthe diculty there will be in achieving them it should alsobe noted that they would broadly return Scotland to the levels

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PART 1: THE CHALLENGES FACING PUBLIC SERVICES IN SCOTLAND 8

o spending on public services that existed just over ten yearsago. On these projections, the Scottish Government will have atotal departmental (DEL) budget o 28.1 billion (25.6 billionin real terms) in 2014-15.4 The undamental question is not onlyhow reductions in spending will be achieved, it is also how theresources available to Scotland are spent most eectively.

13. The analysis in this section suggests that the radical reormo Scotlands public services will need to orm a part o theScottish Governments approach to reducing public spending:rstly, because o the policy options available to the ScottishGovernment; secondly, because even with signicant additionalinvestment, Scottish public services have been struggling tomeet rising demands.

The limits o efciencies and reductions in provision

14. Any government has ve basic options to reduce decits(or in the case o Scotland, the gap between current levels ospending and its anticipated allocation rom the WestminsterGovernment):

Relying on uture economic growth to increase revenuesrom taxation.

Raising additional taxation revenue.

Achieving eciencies within existing programmes andservices (without reinvesting these savings in other areas).

Reducing and/or halting some existing programmes andservices.

The radical reorm o programmes and services to reducecosts.

In most cases, governments will rely on some combinationo these ve. The potential o these options or Scotland isdiscussed below.

15. The Independent Budget Review (IBR) has determined thatthere are no current orecasts or economic growth that wouldallow Scotland to grow its way out o the problem within thetimerame o Spending Review 2010 (2011-12 to 2014-15).5 Thesituation could be even more dicult i the UK enters a double-


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dip recession.

16. For political and economic reasons, raising signicant

additional revenue is not a realistic option or Scotland. TheIBR notes the UK Governments calculation that a one pennychange in the Scottish variable rate (SVR) could be worthapproximately plus or minus 350 million in 2010-11 and plus orminus 400 million in 2011-12. The IBR also notes the potentialor charging or some currently ree provision; this is examinedbelow.

17. Scotland has made progress in achieving its eciency

savings target o 2 per cent per annum over the three-yearperiod 2008 to 2011, amounting to 1.6 billion in total (the latestEciency Delivery Plan suggests that uture savings couldagain be in excess o the target, as was achieved in 2008-09).6Yet even with savings in excess o the target, eciencies areonly likely to play a partial role in bridging the unding gap.As the IBR notes, achieving the current 2 per cent eciencytarget year-on-year could generate savings (excluding pay andcapital) in the last year o the next Spending Review period

(2014-15) o approximately 600 million (3 per cent wouldgenerate savings o 900 million).

18. In addition, the Simplication Programme will provide anestimated net nancial saving o 123 million during 2008-13and annual recurring savings o 36 million thereater.7 Further,the Public Procurement Reorm Programme has generated(cash and non-cash) savings o 327 million over the sameperiod. Lastly, in 2008-09, 160 million o cash-releasing

savings were realised through procurement.

19. The remaining unding gap will orce the ScottishGovernment and Scotlands public services to reduce and/orhalt some existing programmes and services. Currently, much othe debate in Scotland has ocused on which programmes andservices, including the implications o protecting some areaso spending.8 A particular issue with the IBR (and o the currentdebate more generally) is that it has adopted a primarily static

view o these choices, or example, which entitlements mightbe abolished or rozen.

20. While this is a necessary and important part o the


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debate, it has two main limitations. First, such reductions maybe necessary but they will not be sucient. The IBR notes arange o money-saving options and calculates the savings theycould achieve. For example, raising the age o entitlement orconcessionary travel rom 60 to 65 (and subsequently in linewith retirement age) would produce 279 million in estimatedsavings by 2014-15. Reducing ree personal care paymentsto 100 per week produces 120 million by the same year.Introducing prescription charges or charging or some NHSeye examinations would generate around 128 million and 93million respectively.9

21. These are highly contentious options, likely to havenegative consequences or other public services. The IBR hasprompted considerable debate between Scottish politicalparties on the viability and legitimacy o these options. TheScottish Government has already rejected some o the optionsdiscussed, including proposals to alter the eligibility criteria orconcessionary travel and personal care payments and endingthe reeze on Council Tax payments.

22. Yet even i all o the measures costed in the IBR werepublicly acceptable and enacted quickly, they only achievearound three-quarters o the required reductions in spending.This would still leave Scotland needing to nd a urther 1billion in spending reductions by 2014-15.10 Such gures shouldprompt to ocus the debate in Scotland away rom the viabilityo specic entitlements (important though this is) and towardsthe much larger issue o the overall sustainability o Scotlandspublic services.

23. Second, any reductions (whether o the types discussedabove or general reductions in service provision) need to be

judged not only in terms o how much they might save inthe short-term, but also their likely social impact, whetherthey protect the most vulnerable and how this might aectother public services or example, how the abolition o anentitlement might have the eect o merely displacing costsrom one service to another.

24. Reductions in spending could also have a signicant impacton the economy. Government spending in Scotland representsa proportionately larger part o the economy than it does or



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the UK as a whole,11 as does employment in the public sector,12and so reductions could have a greater impact on economicrecovery ollowing the recession.13 The recession has in somerespects had a deeper impact on Scotland than in other partso the UK, raising levels o unemployment and area-basedinequalities. The result o ill-judged reductions in spending onthe economy and society could be a deep social recession,whereby the economic recession is ollowed by a vicious circleo rising demand or public services but ewer resources.

25. Given the limits o the rst our options, the debate inScotland also needs to include the radical reorm o publicservices and how this might play an important role in bothsaving money and maintaining (and even improving) theoutcomes rom Scotlands public services. As the IBR itselnoted, the scale o the reductions required means that thedebate will also have to include the transormation o theorganisation and delivery o public services in Scotland tomeet uture needs. Indeed, the more that radical reorm playsa role in reducing spending and improving outcomes, the less

emphasis might need to be placed on other contentious andpotentially harmul measures.

26. Radical reorm does not mean avoiding dicult decisions.I new approaches are to save money, they must enablereduced spending in some aspects o existing provision (andby more than it costs to develop and implement reorm).Savings can derive rom shiting resources to other approaches,reducing demand by introducing eective new approaches,changing levels o entitlements, over time reducing the numbero public service employees within existing organisations,reducing the scope o (or in some cases abolishing) someexisting organisations, and lower procurement spending ongoods and supplies. The sources o potential savings romradical reorm are urther identied in Part 2.

The social challenge

27. I radical reorm is to play an important part in reducingspending, logically it needs to ocus on the major drivers ocosts or public services. Despite the important reorms o thepast ten years and the commitment o thousands o public



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service proessionals and carers Scotland aces a series olong-term challenges as a result o changing demands orpublic services. These changing demands are set to continue,urther pushing up costs. But this also helps to identiy where,with more eective interventions, there is the potential ormajor savings.

28. In some areas, signicant investment in public serviceshas produced improved results. For example, there has beenslightly better progress in reducing child poverty rates inScotland over the past ten years than in the rest o the UK.14Yet as is refected in other parts o the UK and OECD countries,the changing nature o demand is putting pressure on currentmodels or delivering public services.

29. High rates o poverty, income inequality and socialexclusion in Scotland have a corresponding eect on demandor services and many social issues are intimately linked tosocioeconomic circumstance.15 In 2008-09, 17 per cent oScots (860,000 people) were living in relative poverty (beorehousing costs).16 There are indicators that circumstances may

now be even more challenging or many in Scotland ollowingthe recession, giving rise to urther demand or services.17 Risingand increasingly complex demand is a particular challenge inareas o health, social care and justice three areas which arethe ocus o this paper.

30. Scotland has made signicant investment in health careprovision and spends proportionally more than rest o the UK;1,963 per capita compared to 1,772.18 The bold introduction

o the smoking ban in 2006 has led to a reduction in heart andlung condition rates and improved public health.19 Yet, despitesome improvements, overall Scotlands health remains poor incomparison to its OECD counterparts. Lie expectancy remainslow compared to many European countries. The ollowing tablecompares the health and wellbeing o Scotland to the UK asa whole and also to Finland (as a similarly sized nation o 5.4million people).



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31. It is increasingly long-term conditions and theirconsequences that are the dominant (cost) pressure or NHSScotland. People living with long-term conditions such ascoronary heart disease, cardiovascular disease, Type 2 diabetesand low-level mental health conditions account or 80 percent o all GP consultations.22 People with these conditions aretwice as likely to be admitted to hospital, will stay in hospitaldisproportionately longer and account or over 60 per cent ohospital bed days used.23

32. These conditions tend to be aected by socioeconomicconditions, behaviours such as excessive drinking, unhealthy

diet and lack o exercise, and are closely related to issueso poverty and inequality. More than two-thirds o the totalalcohol-related deaths were in the most deprived two-ths


Health indicator

Ischaemic heart disease-

related deaths per 100,000

people (ages 0-64) (2007)21

Respiratory disease-related

deaths per 100,000 people

(2007)

Diabetes-related deaths per

100,000 people (2007)

Alcohol-related deaths per

100,000 people (2007)

Smoking-related deaths per

100,000 people (2007)

Life expectancy at birth,

years (2006)

Finland

25.33

25.84

6.75

93.73

229.52

79.68

UK

22.98

73.39

6.43

51.02

223.17

79.66

Scotland

32.64

85.71

9.33

75.45

285.98

77.36

Table 1: Selected health indicators or Scotland, the UK andFinland, most recent comparative data20

Source: Scotland and European Health or All (HA) Database 2009.


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o areas and the so-called Scottish Eect o higher-than-expected mortality has been attributed in part to rates o drugabuse across Scotland.24 UK-wide data adjusted or Scotlandsuggest that long-term conditions cost NHS Scotland 1.74billion each year in 2007, and that this will increase to 2.15billion by 2025 (an increase o 410 million a year).25 Thisamounts to around 4 billion in additional costs or NHSScotland between now and 2025.

33. The Scottish Government has made a progressivecommitment to ensuring adequate social care is providedor those in need. Yet as in other parts o the UK, projecteddemands derived rom an ageing population will outpacerealistically available resources.26 In 2008, 16.4 per cent o theScottish population were 65 and over, compared with 16 percent or the UK as a whole.27 This section o the population isprojected to increase by 21 per cent between 2006 and 2016,and will be 62 per cent bigger by 2031.28 For those aged 85 andover, the population will rise by 38 per cent by 2016 and 144 percent by 2031. This is particularly signicant, as the need or care

is ar greater amongst over-85 year olds.34. Scotland currently spends 4.5 billion a year on providinghealth and care services or those over 65 years; 1.4 billion (30per cent) o this goes on emergency hospital admissions. By2016, the number o older Scots requiring some orm o care isexpected to rise by up to a quarter, rising to nearly two-thirdsby 2032.29 I Scotland continues to provide services in the sameway, current spending will need to increase by 1.1 billion by2016, and by 3.5 billion, or 74 per cent, by 2031.30

35. Criminal justice is another area where rising demand orservices is unsustainable given limits to supply. Though crimerates in Scotland have broadly decreased over the past decade,Scotlands prison population has increased by 31 per cent.31Despite the act that over 85 per cent o convictions resultin non-custodial sentences, there are currently around 7,900people in Scottish prisons more than they were intendedto accommodate. In 2008, over 75 per cent o all custodial

convictions were or six months or less (and hal were onlyor a three-month period). The two-year reconviction rate hasremained the same over the last ew years, at 45 per cent or



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the 2005-06 cohort.32

36. The Scottish Prison Service is expected to cost 485.9

million in 2010-11 (o which 349 million is current and 136.9million is capital expenditure).33 On current rates o growth, theprison population would be expected to rise to 9,600 prisonersby 2018-19.34 The Scottish Consortium on Crime and CriminalJustice has conducted an analysis based on a long-rangeprojection o 10,500 prisoners by 2030 (11,900 i the changesproposed in the Custodial Sentencing and Weapons (Scotland)Act are implemented)35 and estimated that these numberscould require seven new prisons and see the cost o prisons riseby 200-250 million a year to nearly 700 million a year (atotal additional cost o more than 6 billion over the ollowing25 years).36

37. As with health, there is a strong relationship between crimeand anti-social behaviour and poverty and inequality. Researchinto the concentration o prisoners in Scottish prisons oundthat a considerable number o inmates came rom the same ewcommunities. In 2003, a quarter o prisoners in Scotlands jails

came rom just 50 o 1,222 council wards. Furthermore, 1 in 29o all 23 year old men rom these communities was in prison.37

38. The data presented here suggest that Scotland acesadditional demands in these three areas o public serviceprovision alone amounting to more than 27 billion in the next15 years the period in which there is likely to be 42 billionless to spend. This suggests that Scotlands public servicesare currently unsustainable without radical reorm to ensure

that they are both more eective and ecient. Sustainablepublic services are those that are both aordable and garnerwidespread support rom the public. Reductions in spendingare likely to reduce provision or services that are strugglingto meet current demand, let alone projected uture demand.Understandably, public satisaction with services could declinemarkedly.38



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PART 2: RADICAL REFORM CAN REDUCE DEMAND AND IMPROVE OUTCOMES 16

PART 2:

HOW RADICALREFORM IN PUBLIC

SERVICES CAN

REDUCE DEMAND AND

IMPROVE OUTCOMES

39. Over the past ten years, Scotland has introduced somesignicant reorms to public services that have diered romdevelopments in the rest o the UK (and England in particular).Successive Scottish Governments have done much to increaseprovision o ree universal services, including ree personal and

nursing care at home or the elderly, ree prescriptions, eyetests, dental checks and concessionary travel.

40. The principles o universal services has stemmed roma critique o selectivity on the grounds that means-testedor needs-based provision brings stigma to those who maybe deemed eligible and increases the possibility o multiplelevels o service.39 Free pre-school places or all three andour year olds is a central tenet o Scottish Early Years policy,while Scotland no longer has tuition ees in higher education.Across all public services in Scotland, the Local GovernmentConcordat and Single Outcome Agreements have encouraged asharper ocus on what services ought to achieve as a driver orimprovement.40

41. Despite this, public services in Scotland (as elsewhere)still tend to be organised and monitored in terms o inputs levels o spending, the size o the public sector workorce andorganisational structures. The ocus o reorm has been largely

on the supply-side, in the sense o what services are deliveredand by whom.


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eective services are at helping people to meet their needs(that is, the outcome).

46. The dominant tendency in public services has beentowards incremental reorm and improvement, rather than amore undamental reorganisation o a new welare settlementthat better meets peoples needs at cheaper cost. I Scotland isto reduce spending without harming its economy and society,radical reorm in public services needs to become a moresignicant part o the strategy towards spending reductions.In particular, new approaches need to be developed andimplemented that are much more eective in managing andreducing demand.

47. The key to making this shit is to recognise that the wayservices are designed and delivered is crucial to how they canreduce demand. In order to do this, services need to meetpeoples needs more eectively, and/or help them rely onservices less by building their own capabilities to prevent andrespond to problems themselves. There are some areas oprovision where these sorts o approaches will obviously not

be appropriate, such as transport services and inrastructure.However, there is considerable scope or more o these sortso approaches in areas o service delivery where a signicantproportion o demand stems rom complex, behaviouralconditions that rely on public engagement.

48. This ocus serves as a basic denition o radical innovation the development and implementation o distinctively newapproaches in public services that seek to manage and reduce

demand more eectively (and so prove cheaper) than existingapproaches. Radical innovation is especially appropriate inhealth, justice and social care, addressed in turn below.

Re-balancing health towards more preventative

interventions

49. In health, the predominant model o care needs to

shit rom acute, hospital-based care to more preventativeinterventions.42 This is especially important given the majordemographic trends that are the predominant drivers o healthexpenditure.43 Eective prevention policies have been shown



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to reduce health inequalities and address the disproportionatecosts o high intensity users within the health service.44Developing sel-management skills amongst people with long-term conditions has shown to be eective in alleviating thesecosts and reducing the rate o unelected admissions that canresult.45

50. The Scottish Government has started to develop a morepreventative, community-based strategy to tackle Scotlandshealth issues. The recent Better Health, Better Care WhitePaper set out a route-map towards a mutual NHS in Scotland,involving the public not just as consumers o health servicesbut as owners, with rights and responsibilities in improvinghealth.46 Scotland has made a concerted eort to integratemental health improvement into health policy and has based itsapproach on a social model and understanding o mental healthas highly infuenced by our social networks and circumstance.47The introduction o Community Health Partnerships andthe emphasis on community-based care ollowed therecommendations o the Kerr Report or more targeted service

provision and better integration between health and socialcare providers to tackle the persistent health and socio-economic inequalities across Scotland.48

51. Nonetheless, the large majority o health spending stillgoes on acute care rather than preventative measures. In 2008-9, less than 4 per cent o health expenditure across the UK wasspent on prevention.49 Adult mental health costs governmentacross the UK 10 billion each year in benet payments alone,yet only 2 million is spent on prevention and alleviation, suchas promoting sel-esteem and coping skills.50

52. There are large-scale examples o where the necessary shithas been achieved. During the 1970s, Finland aced extremelyhigh rates o coronary heart disease (CHD) and amongst thelowest lie expectancy in the OECD. Prompted by a petitionrom the local people, the Finnish Government launched amajor community-based initiative to prevent the developmento these conditions by targeting the liestyles o the whole

population in a local area, not just those at high-risk. TheNorth Karelia Project drew on the expertise o grassroots andcommunity organisations to understand the barriers to healthy



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living and devolved responsibility or acting on them to thecommunities themselves. This meant that solutions were moreappropriate to tackle the complex aspects o public healthimprovement and more eective at prevention.

53. The project targeted our key risk actors in order to reducecardiovascular mortality: dietary changes, lowering smokingrates, reducing high blood pressure, and increasing physicalactivity. The approach achieved a signicant reduction in healthexpenditure; by 2002, the annual CHD mortality rate amongstmen had reduced by 75 per cent, lung cancer rates were 70 percent lower, and lie expectancy had increased by six years ormen and seven years or women.51

54. It is important to recognise that health improvement inFinland during this period would have been infuenced by otheractors such as the growth o the economy and employmentgenerally and advances in health care and technology. However,evidence suggests that the targeted, multi-agency interventionin North Karelia was able to aect public behaviour in asustainable and supportive way and that the health o the area

was more markedly improved than other parts o Finland.52The project has since expanded across Finland and has beenused as a basis or a number o health prevention initiativesinternationally.53 Evidence o success indicates that a well-planned, inclusive, community-based prevention programmecan have an enormous impact on liestyle to improve healthand lie chances within communities.54

55. The community-based, integrated approach o the North

Karelia Project is refected in the Healthy Weight CommunityProjects, being developed in a number o local authoritiesacross Scotland. Rapidly rising rates o obesity particularlyamongst children are an increasing concern, with direct coststo NHS Scotland estimated to be in excess o 175 million(with costs projected to almost double by 2030).55 Basedexplicitly on Frances EPODE (Ensemble, Prvenons lObsitdes Enants) Programme to tackle childhood obesity whichmanaged to reduce obesity rates by 25 per cent in participating

areas the project aims to harness community eorts to makehealthier ood choices and encourage more physical activityin everyday lie. North Lanarkshire Council is one area taking



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part, where the Council is ocusing eorts in linking amilies,nurseries and schools to promote healthy eating and exercise.56

56. Similarly, the intensive, inter-agency approach is animportant eature o West Dunbartonshires integrated schemeto reduce smoking in the local area. Forty per cent o residentssmoke in the Whitecrook neighbourhood near Clydebank,leading the Council to bid to become one o Scotlands EquallyWell Test Sites, a structured programme to reduce inequalityin local health and wellbeing. Dierent smoking cessationinitiatives pitched at dierent audiences simultaneously willtest a collaborative, joined-up approach to prevention targetedat a local area. Other places are testing new approaches toreducing health inequalities through improving wellbeing,access to employment and skills development and communityregeneration. With encouragement to learn across areas, theEqually Well sites aim to cultivate the conditions or serviceredesign and integration, agreeing shared outcomes across anumber o agencies and developing services that look and eeldierent or service users.57

57. There are many examples o voluntary or community-basedhealth initiatives to improve health across Scotland, rangingrom the British Trust or Conservation Volunteers Green Gymsthat combine gardening and conservation work with physicalactivity and community action, to larger-scale programmessuch as the Dundee Healthy Living Initiative, a community-ledinitiative to promote wellbeing and reduce health inequalities.The ongoing Pilton Community Health Project, a charity thatruns a number o community health projects with NHS Lothianand the City o Edinburgh Council, promotes communityengagement in targeting mental health, improved diet andphysical activity. Some o the more remote parts o Scotlandhave a particular incentive to make use o community assetsand networks in promoting health given the challenges oremote provision.58

58. Nonetheless, these sorts o public health initiatives tend tobe marginalised as health promotion activities, and could be

identied as sot targets or spending reductions. Importantthough health promotion is, it is short o a broader and moreradical re-interpretation o public health that would rebalance



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care away rom acute care towards more community-based andled initiatives to health and wellbeing. As the nature o demandor health services changes ollowing the trends set out in Part1, there is scope or more rigorous, structured approaches tocommunity-led prevention and health care.

59. Eective preventative measures can also be appliedto drug and alcohol abuse. An estimated 52,000 people inScotland are problem drug-users, and drug and alcohol-relateddeaths are amongst the highest in Europe.59 As noted in Part1, poor health and health inequalities are tied to social andeconomic circumstance and can be aected by these sorts obehavioural or habitual actors. Audit Scotland has estimatedthat the wider costs to society o drug and alcohol abuseamount to almost 5 billion (o which 3.4 billion is bornedirectly by public services).60

60. There are a number o local authorities in Scotland thathave made progress in developing integrated approaches todrug and alcohol intervention that prevent or better manageaddiction, in line with the Scottish Governments commitment

to better prevention through a recovery approach.61

61. In Dumries and Galloway or example, the Sunrise Projectwas commissioned by the local Alcohol and Drug ActionTeam (ADAT) to encourage uptake o services and earlyintervention through coordinated support rom a number oagencies including NHS Scotland, Drug and Alcohol Supportservices and the voluntary organisation Turning Point. Byrebalancing the provision o support rom statutory to non-

statutory services, Sunrise has enabled a reduction in demandor medical help. With more people entering and staying inrehabilitation and progressively more services being providedby voluntary services, the newly adopted Integrated DrugsService designed ollowing evaluation o the Sunrise project has dramatically increased its capacity or supporting the moreextreme cases (rom capacity or 70 clients to near 200).62

62. In Aberdeen, the drug treatment charity Phoenix Futures

has been working with the local authority and a number oother partners to provide coordinated, specialist support ordrug users at a community level. The Integrated Drug ServiceCommunity Rehabilitation (IDSCR) programme oers people



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a package o co-ordinated support and specialist interventionsaround drugs, housing, employment and training. Theprogramme provides service users with a key contact across arange o services and users have the opportunity to participatein a range o community activities volunteering, attendingsocial and training sessions and rehabilitation.63

63. Yet there remains scope or more radical approaches such as those that involve users directly in service designand delivery to achieve more complete transormation odrugs services. Working with drug service providers in WestSussex in England, the RSA trained service users in researchand evaluation techniques to understand the needs o otherusers in the community, and designed services to meet them.The proposals or new services emphasised the value o peerand community support, recovery communities to strengthencollective resilience and strength against addiction as well asbetter signposting and personalisation. Placing users at thecentre o the design process also increases the likelihood oeective intervention and compliance.64

64. In 2007-08, Scotland spent 173 million directly onmanaging the eects o drug and alcohol abuse.65 The largemajority o this is spent on treatment and care services, withonly 6 per cent applied to prevention. For illustrative purposes,i a proportion o this spending were redirected towards moreeective prevention measures that reduce the wider costs odrug and alcohol abuse by only 1 per cent, this could suggestsavings o around 50 million each year or Scotland.

Redesigning social care to draw on and build community

resources

65. Social care is another area subject to changing demands andexpectations. As demographics shit, it will become increasinglyimportant to ensure that care is provided in the most appropriate,personal way that can eectively respond to local needs.Support or the young old will vary rom support or the most

aged; support will also be shaped by the urban or rural context.Meaningul engagement o service users to help meet diverseneeds will be an important aspect o the uture o care.66



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66. The Reshaping Care or Older People programme has madesignicant progress in re-thinking provision. Led by the ScottishGovernment, NHS Scotland and COSLA, the programme is anexample o a strategic and innovative approach to re-designingservices or older people, strengthened by an emphasis onstakeholder and public engagement. Work so ar indicates alikely shit in the balance o care away rom hospital settings,providing the necessary support and treatment in or close tohome, helping people remain sae, condent and able to lookater themselves. This shit includes more anticipatory andpreventative approaches, increased support or volunteer and

community carers as well as a greater scope or sel-care, otensupported by technology.

67. The shit in the shape o social care rom an emphasison standardised services towards supporting independence is an example o a broader approach to public servicereorm that has come to be known as co-production. Co-production demonstrates how services could achieve morei they were able to draw on peoples existing networks and

resources and build skills or sel-management. Co-productionapproaches are based on the principles o shared decision-making and designing services with users and the public.Increasing evidence suggests that co-production can improvepeoples experience o public services and can improve theirindependence, thereby reducing costs.67

68. At the moment however, social care remains ocused oninstitutional care. Over 60 per cent o Scottish Governmentspending on care or older people is on care in hospitals andcare homes, and almost one-third is spent on emergency orunelected admissions (around 1.4 billion a year). Only 6.7 percent o the budget is allocated to providing care at home.68

69. Instead, social care services should build peoplescapabilities and wellness in older age, rather than reactingwhen need becomes most acute.69 This was the step takenthrough the introduction o Local Area Coordinators (LACs) inWestern Australia in order to re-balance the provision o care

rom expensive, residential services to cheaper, community-based services that are better or the user.

70. LACs act as a local point o contact in communities and



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organise a range o care services around a service user. TheLAC tries to match the personal needs o service users within aparticular area to what local providers, existing social networksand community assets can oer. The approach is designed tohelp people remain independent build specialist skills or sel-management and to strengthen relationships.

71. With the introduction o LACs, Western Australia realiseda 35 per cent cost saving rom traditional social service-ledapproaches. Per capita costs were only A$3,316 per LAC giventheir broad geographical spread and the low set-up costs o theprogramme. From their position within the community, LACswere able to access traditionally hard-to-reach people andencourage take-up o preventative services.70

72. Some areas in Scotland have already adopted LACs aspart o their strategy to improve independent living and drawon other community providers to oer their support services.North Lanarkshire Council has introduced LACs alongside abroader package o sel-directed support to help people stayout o statutory care services by connecting them to local

networks and support. By decentralising the coordination oservices, developing a deeper and more personal relationshipwith service users and simpliying access to care, LACs arehaving a radical eect on the way services are organised, andthe lives o the people who use them.

73. The coordinator role so critical to the LAC approach sharescharacteristics with the key worker unction in Partners orInclusion, a successul approach to delivering support to

individuals with mental or physical disabilities in Scotland.Partners or Inclusion assists service users throughout Ayrshire,Renrewshire and East Renrewshire to access the ull range oavailable services, including community services, local socialnetworks and the relationships within peoples lives.

74. Partners or Inclusion works with users with complexneeds who have ound it dicult to navigate existing serviceprovision and co-design a personalised care package with

them. The charity then recruits someone (sometimes evena amily member) to provide the relevant care. Partners orInclusion also develops links with local businesses to scopeemployment opportunities and raise awareness o disability and



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mental health accessibility. The annual cost o providing thisintegrated, personalised care has been estimated at 70,000,over 50 per cent less than the cost o a traditional residentialcare package.71

75. Further, West Lothian Council has started to demonstratehow telecare and telehealth technologies can help peopleremain independent and stay out o institutional care. Recently,West Lothians Community Health and Care Partnership (CHCP)has developed an electronic sel assessment tool Sae atHome that has expert knowledge built in to calculate andprovide a prescription o services targeted to the specicservice user. The Council has integrated telecare services anda home health approach into delivery across health and careservices. Telecare solutions have reduced pressure on thehealth authority and West Lothian has estimated the cost othe care package to be over 60 per cent lower than the cost oproviding care in an institutional setting.72

76. In Renrewshire, the Council or Community Services anda number o community volunteers have developed a social

approach to delivering orms o support or older people.Reaching Older People in Renrewshire (ROAR) is a localmentoring and beriending service or older people, activelyconnecting them into a community and skills exchange. Theservice helps to address issues o social isolation that can aectpeople with dementia and early stages o Alzheimers.

77. The service shares some o the social aspects characteristico co-production. Timebanks, or example, are a vehicle or

skills exchange and social interaction. Timebanks are reciprocalvolunteering schemes, occasionally attached to local publicservices. In the Highlands, timebanks in Inverness, Lochaberand Badenoch and Stathspey are oering a way or peopleto get involved in community activities. Timebanks are aneective way o creating incentives or participation andactivity which can have both physical and emotional benets.Where timebanks have been attached to GP Practices orexample, they can incentivise healthy liestyles and behaviour.

Rushey Green GP Practice in South London was able to achievea 50 per cent reduction in the cost o GP consultations byredirecting demand or resources towards the timebank.73



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community justice providers, the voluntary sector, the policeand victim support.78

82. Evidence rom the US suggests that a bold strategicapproach to diverting spending rom containing to preventingproblems can save money and improve outcomes. Facedwith a rapidly expanding prison population, state ocials inTexas rejected plans to spend $500 million on constructinga new prison and instead invested the money in tackling rootcauses o crime. The approach became known as JusticeReinvestment, redirecting spending rom capital or institutionalinvestment towards rehabilitation and earlier intervention at acommunity level.

83. Texas redirected hal o the money set aside or the newprison on expanding residential and out-patient treatmentcentres or mental health, substance abuse and post-prisonsupport. Parole revocations saw a 25 per cent drop andthe prison population increased by 90 per cent less thananticipated. Texas estimated savings o $201.5 million in2008-09, with savings rom averted prison construction o an

additional $233 million.79

84. Justice Reinvestment enabled investment in rehabilitative,preventative interventions because it saved money throughcapital disinvestment. This approach is relevant to Scotlandgiven the strain on institutional capacity and the earlyindications o the success o alternative approaches.80Reinvesting the resources diverted rom capital spending intocommunity approaches allowed the State o Texas to grow the

capacity o local, community services and social enterprises indelivering services to prevent oending.

85. There are examples o these sorts o community-basedintervention that have demonstrated successul impact inScotland. East Renrewshire Councils School, Social Work,Police and Community (SSPC) programme, or example, isan innovative approach to prevent and break out o cycleso crime and anti-social behaviour. The programme brings

together all local agencies involved in tackling youth oendingalongside the oenders and their amilies to address theinter-generational and social aspects o violent and anti-socialbehaviour. It designs appropriate activities suited to the young



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A total o 5 million was invested in the project which overan 18-month evaluation period has seen an average 46 percent reduction in the level o violent oending by the 368gang members who engaged with the programme. The peerapproach also enabled an 18.5 per cent reduction in violentoending by members who reused to engage.87

90. The Scottish Prison Service is budgeted to cost 485.9million in 2010-11, including 136.8 million in capital costs.88 I asmall proportion o this spend was reinvested into approachessuch as Glasgows Community Initiative to Reduce Violence that is, approaches that reduce demand or statutory servicesthrough better prevention the impact across Scotland couldbe signicant. A 10 per cent reduction in the costs o the prisonsystem would suggest savings o approaching 50 million ayear.



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PART 3: TRANSFORMING SCOTLANDS PUBLIC SERVICES 31

PART 3:

TRANSFORMINGSCOTLANDS

PUBLIC SERVICES

The need or innovation to meet the challenges acing

Scotlands public services

91. I Scotland is to meet the need or savings withoutsubsequent harm to its economy and society (or at least theextent to which it seems likely at present), radical innovation led by a ocus on saving money needs to play a much moresignicant role in the strategy towards spending reductions.

While we shouldnt underestimate the diculties in reorm,the scale and immediacy o the pressures aced by Scotlandspublic services should be used to provide the necessaryimpetus to radical thinking and bold action required at all levelsin Scotlands public services, rom national government to localproviders.

92. As illustrated by the examples in Part 2, new approachesto delivering public services are already being put into

practice in Scotland, in the rest o the UK and internationally.These approaches can save money and improve outcomesthrough better demand management, and thereby reducingcosts or statutory services. The question is how the ScottishGovernment can stimulate and support the development andspread o new approaches that manage and reduce demandmore eectively and ensure universally better outcomes orcitizens.

93. This requires more innovation in Scotland creating agreater appetite or new approaches and providing moresupport to develop and implement them, and help thesuccessul ones spread. Even though some o these approaches


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will be developed outside o existing public services (orexample, by social enterprises), the state has a critical strategicrole setting the direction o travel and in creating the rightconditions or new approaches to be developed, through policy,regulation, perormance measurement and audit, and undingand commissioning.

94. This will o course be particularly dicult in the contexto the next ew years o reductions in public spending. Therewill be an understandable tendency to either resist reductionsor to try to save money rom within existing services withoutaecting provision. However, as noted in Part 1, it is highlyunlikely that eciencies within existing services and/orreducing some services will achieve the scale o savingsrequired, while also risking signicant economic and socialharm.

95. As public services represent a larger part o the economyin Scotland than they do in the UK as a whole, radical reormis even more important in Scotland to ensure that servicemodels continue to meet changing demand. The alternative

approach incremental cuts to already struggling services risks undermining the ability o services and sta to cope withcurrent (let alone uture) demands.

The conditions or radical innovation

96. As illustrated by the case studies included in Part 2,developing and delivering radical innovation requires the

ollowing conditions: a widespread culture and practice olocal experimentation; incentives, investment and support; astrong social economy o community organisations and socialenterprises and a culture o partnership working in publicservices; and public engagement to inorm, support and deliverchange. These are discussed in turn below.

Local experimentation

97. Radical innovation requires a widespread culture and

practice o local experimentation, with a greater capacity andrelevant reedoms at a local level to develop and implementnew approaches. Public services are o course primarily


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delivered locally or by non-national organisations (such as localauthorities and health boards). These are the organisationsthat need to implement reorm, but it is now also vital that theydevelop and lead innovation.

98. This is or two main reasons. Firstly, there are limits towhat constitutes supposedly generalisable best practice inpublic services when social problems are intimately linked tohow people live their lives and local circumstances. One o themost critical actors in the success o the East Renrewshireapproach, or example, was that it was locally managed andthus able to target interventions appropriately or the specicneeds and circumstances o its community.89

99. Secondly, a greater variety o approaches can be valuablewhen specic social contexts, behaviours and personalnetworks have a demonstrable impact on peoples actions andattitudes. Like the rest o the UK, Scotland already suers romhealth and wealth inequalities between localities, due oten tothe particular eatures and circumstances o the area (urbandevelopment, access to employment and transport links, or

example).90

100. For these reasons, more eective and ecient approachesin public services cannot be designed rom the centre. Thetypes o innovation that are now most important need to bedeveloped by drawing on the expertise and insight o rontlineworkers and by working closely with users and communities.

101. The Local Government Concordat and Single Outcome

Agreements have been an important step orward in providinglocal authorities with greater reedoms to allocate resourcesand design services that meet local needs and objectives.In addition, the Scottish Government has sought to reducethe burden o perormance management regimes and auditgenerally.91 This should continue as reductions in spending aremade over the next ew years.

102. While there are important pockets o local innovationin Scotland at the moment, it is not suciently widespreador radical or the challenges acing public services now.In particular, local innovation requires a stronger sense oownership by local providers, as well as more resourcing and



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support.

103. The greater diversity o provision that is likely to result rom

more local experimentation naturally brings with it concernsregarding access and equity. These concerns might be greaterin Scotland than in some other parts o the UK, given Scotlandstraditional emphasis on universal and equitable provision andalso because some o its population lives in very remote areas.Further, relatively high levels o poverty and income inequalityin Scotland raise concerns that those living on low incomes orwithout easy access to services are appropriately provided or.However, these concerns should not inhibit the considerationo new approaches. Diversity doesnt necessarily undermineuniversality, and the broad goal o universally better outcomesshouldnt dictate uniorm service provision, especially given thevery dierent local conditions in some Scottish communities.

104. For example, Local Area Coordinators have been able toreduce spending on residential care services by drawing on theull range o local resources to meet the needs o the serviceuser. The LACs role becomes ensuring that public services

get delivered, rather than necessarily delivering servicesthemselves. Access to services has improved as a result; LACshave been able to access traditionally hard-to-reach serviceusers and take-up o preventative services is 58 per cent higherthan the national average.92

Incentives, investment and support

105. Local experimentation needs to be supported by a strong

but more strategic role or central government. The role ocentral government (and politicians) should not be to micro-manage local provision (or example, by intervening in agreedplans to change provision at a local level); rather it should beto create the best possible conditions or local providers toinnovate.

106. This has two main aspects. Firstly, central government hasa crucial role in setting out new strategic, long-term visionsor how public services need to act and look dierently in theuture. The larger-scale case studies highlighted in Part 2 (suchas Justice Reinvestment) suggest that local innovation requiresthe centre (in this case, the state government o Texas) to



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provide the leadership and indeed political cover or radicalchange at a local level. Only central government can lead anational debate on the uture o public services, especiallythe potentially controversial systemic shit rom demand-ledprovision towards demand-managing and reducing approaches,and bring together the national organisations that representpublic service providers in order to agree how in broad termsthis shit will be achieved.

107. In this regard, Scotland has an advantage over some otherparts o the UK in its comparatively cohesive and progressivepolitical culture, smaller policymaking and senior decision-making community (through which, or example, there is thepotential or new ideas and approaches to be shared andagreed more rapidly), relatively coherent outcomes rameworkson the basis o Single Outcome Agreements and a generaldesire to dierentiate itsel rom approaches taken in someother countries.

108. There is o course a possible tension between strategicchange led rom the centre and the importance o locally

led experimentation (and also between centrally led changeand public engagement, discussed below). Nonetheless,these are issues that the Scottish Government and Scotlandspublic services will have to negotiate anyway over the nextew years, whether in managing eciencies, reductions inservice provision or innovation. Engaging local public serviceproviders and the public will be crucial either way. Becausethey also ocus on improving outcomes, positive programmeso innovative reorm stand a greater chance o engenderingengagement and support than the alternatives.

109. Secondly, only central government can ensure that thenecessary incentives, investment and support are availableto local providers o public services in order or them toinnovate. Given increasing budget allocations in many publicservices over the past ew years (in Scotland but also acrossthe UK), it is understandable that incentives and support havelargely been ocused on improvement and eciency within

existing models o service delivery, rather than the radicalreorm o these models. This will have to change i Scotlandspublic services are to be supported to ocus much more on



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innovation. The challenge now is to ensure that the appropriateincentives, investment and support are made available orradical innovation, during a period when resources will be muchless available generally (we propose a specic mechanism orthis below). Even so, it is worth noting that any private sectorbusiness that wants to create uture market-leading productsand services needs to invest in innovation even in a recessionwhen resources are constrained.

A strong social sector and a culture o partnership

110. Existing rameworks o Single Outcome Agreements

and the Local Government Concordat already encouragepartnership working and shared strategic priorities acrosslocal providers. Yet there remains scope or more eectivepartnership working across service areas, in particular betweensocial care and health and between local authorities. Thoughmechanisms such as pooled budgets have been trialled in someareas in Tayside between NHS Tayside and Perth and KinrossCouncil or in Clackmannanshire between community healthservices these ormal incentives need to be supported by a

culture o partnership on the basis o shared objectives.93

111. Public services can also work more closely with thesocial sector social enterprises, charities and communityorganisations which can be a powerul source o innovativeresponses to social problems and a source o new providersand resources.94 Many o the innovations highlighted heredepend on mainstream public service providers working inpartnership with the social sector to develop new approaches

and deliver them.

112. Such innovations draw on a wider variety o socialresources than is typical or public services; this is an importantreason why they are both better and cheaper than traditionalapproaches. Further, innovation in public services should aimto strengthen this social capital; stronger communities willbe more able to develop solutions to their own problems, soreducing demand on public services and the state.

113. The Scottish Government has done much already tosupport the development o the third sector. Its Third Sectorbudget seeks to secure the progression o an innovative,



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sustainable and inclusive third sector, to support morecohesive communities, contribute to public services andimprove economic growth. The 2010-11 budget allocated20.8 million or third sector development and 14.8 millionor the Scottish Investment Fund (a total o 35.6 million).The Scottish Investment Fund supports enterprise in the thirdsector by investing in assets, business development and theskills o people working in the sector. The budget also supportsvolunteering and a series o strategic partnerships with nationalthird sector organisations aimed at building third sectorcapacity.

114. Given its potential to help improve public services andsupport communities, it is vital that programmes o supportand investment or Scotlands social sector are not seen assot targets or reduced spending over the next ew years.But it is also important that support or the social sector is notregarded as a separate activity to innovation in mainstreampublic services; or example, there is little point in investing inthe development o the sector i it is unable to gain access to

commissions or new services. Support or the social sectorneeds to be integrated with the stronger ocus on locallyled innovation; this might have implications or whether acentralised model o disbursing unding or the social sector ismost appropriate.

Widespread public engagement

115. Given the need to make deep savings, there is a seriousdanger o concerted (and understandable) proessional

and public resistance to reductions in provision, even i it ispart o a shit to alternative orms o provision. Yet many othese innovations highlighted here rely on ongoing publicengagement, involvement and support ranging romproviding a mandate or reorm to the public being involvedthemselves in developing and delivering new approaches (orexample, through social sector organisations).

116. The public can be allies in transormation only i the need

or change is discussed more openly and consistently, and ithere are individual and collective opportunities or the publicto be involved. This might also allow government and publicservice providers to be bolder in making more radical reorms.



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117. There has been some consideration already about howgreater public discussion (i not direct engagement per se)might be achieved at a national level. For example the IBRfoated the idea o a Scottish Parliamentary cross-party workinggroup supported by a specialist advisory team, or a workinggroup o selected contributors, to consider the longer-termshape o public service provision in Scotland, reporting to theGovernment and Parliament ater the election in 2011.

118. As part o the budgeting process in 2011-12, we proposea national, cross-party commission looking into how servicesshould operate dierently in the uture. This commission wouldprovide a strategic direction or radical reorm, but it is alsocrucial that public engagement is developed at a local level tobuild the necessary understanding and ownership that betterenables transormation.

The overall context: reduced budgets combined with

radical reorm

119. We propose an ambitious new way or local public servicesto lead the next stage o radical reorm that saves money andimproves outcomes or citizens. We propose new powers andresponsibilities or leading authorities and public bodies thattake orward the Concordat, Single Outcome Agreements andexisting rameworks. This mechanism explained in more detailbelow would provide greater local agency or developing newapproaches in public services that are both better and cheaper,guided and supported by national programmes o reorm andreinvestment.

120. To set the context or locally led innovation, we proposethat the Scottish Government sets out broad programmes(strategies) o radical reorm in health, social care and justice,based on the Justice Reinvestment model o disinvestmentand reinvestment discussed in Part 2. The point o the JusticeReinvestment model is that is does not require additional netinvestment; in this model, any unding or new approaches

comes rom progressively disinvesting in some existingprovision and diverting a proportion o the savings to newcheaper, more eective approaches. This should be the case



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with these programmes, within a commitment to reducespending in each area overall.95

121. There should be three initial areas o ocus or thesereinvestment programmes: health, social care and justice. Theseshould in eect act as platorms that stimulate and supportradical innovation by local providers. These programmesshould begin in the next Spending Review period (2011-12to 2014-15) but last beyond this in order to realise the ullestpossible savings (probably through a ten-year deliveryplan). Underpinning each o these programmes should be aundamental shit in how services engage the public in orderto manage (and reduce) demand more eectively. As notedin Part 2, there is already some agreement on the requireddirection o radical reorm in these areas.

122. In health, the reinvestment programme should ocus on ashit rom management and acute care to more preventativeinterventions. A signicant area or potential savings isrom drug or alcohol abuse. While not underestimating thediculties o reorm and implementation, even a reduction o 1

per cent in the costs associated with drug and alcohol-relatedabuse would generate savings o around 200 million over thecourse o the next Spending Review period.

123. In social care, the reinvestment programme should buildon the outcome rom the Reshaping Care or Older Peopleprogramme (or which the public engagement phase has justended). There is signicant scope in social care services torebalance care away rom predominantly institutional provision

towards community-based care. For illustrative purposes,even a 10 per cent reduction in the cost o emergency hospitaladmissions each year would save 560 million during the nextSpending Review period.

124. In justice, the reinvestment programme should bemodelled directly on Justice Reinvestment, that is a shit romcontainment to prevention and rehabilitation. In this area, a10 per cent reduction in the costs o the prison system would

suggest savings o 200 million during the next SpendingReview period.

125. These areas are at once the most important and



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challenging areas or reorm as health, justice and care servicesare amongst those the public cares about most. Radical reormor spending cuts in these areas is likely to be a highly visibleand contested decision. However, the danger o insulatingany area rom reorm is that these services are the leastreormed, and so the most vulnerable to being overwhelmedby increasing demand. Services that play such a vital role inensuring a productive and healthy society also need to developbetter approaches to meeting changing needs.

126. These programmes would benet rom establishing achallenging headline (input or output) target alongside wideroutcome measures in order to drive change. The currenttarget or the Reshaping Care programme is doubling theproportion o spending on care at home (currently 6.7 percent). An equivalent headline target in justice might be thenumber o prison places removed rom the system, or example.Such targets would help to raise the bar or public services,stimulating responses that go beyond an improvement mind-set and towards generating more radical innovation.

127. These programmes would o course have to be developedand agreed with the services themselves, such as NHSScotland, COSLA (representing local authorities) and national

justice authorities. Further, all o these programmes (albeit ata broad level) would also need to be subject to an equalityimpact assessment or equivalent evaluation to determine asar as possible how they will aect society.96 Finally, theseprogrammes would require public engagement or theirdevelopment; again, the Reshaping Care or Older Peopleprogramme provides a model here.

128. In the context o these programmes, the introduction onew local agreements as described below does not requireadditional net resources. Any investment is unded throughthese programmes o disinvestment in existing demand-ledapproaches and services.



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during the ollowing Spending Review period (that is, post2014-15).

Funding and support

132. New community status would have a range o advantagesor local providers, principally unding (drawn rom savingsrom overall budget reductions), dedicated support orinnovation, and greater independence to innovate. But it wouldalso give providers a range o appropriate challenges to drivetheir innovation activities, including money-saving targetsand the responsibility to work with the social sector and their

communities to develop new approaches. These advantagesand challenges are described below.

133. In terms o unding, each year o the next spending reviewperiod a rebate would be made available, equivalent to up to 1per cent o the annual health, justice or social care budgets oparticipating providers, in return or a commitment to use thismoney to invest in innovation activities that seek to manageand reduce demand more eectively (and so prove cheaper)

than existing approaches.

134. This unding would come with two commitments:providers would have to return hal o the savings they makeas a result o innovation activities to central government eachyear; and they would have to repay at least hal o the rebateto central government by the end o the Spending Reviewperiod.99 This would in eect create a challenging target orthe level o savings that would need to be produced rom

innovation eorts. Providers would have the right to retain andreinvest the other hal o the savings rom innovation as theywish.

135. In justice and social care, local authorities would be ableto claim or a rebate in social work spending (which includesspending on community justice, CJSW, activities).100 In health,local health boards would be able to claim or a rebate in localhealth spending, with a duty to work in partnership with localauthorities and negotiate shared savings targets. Providerswould decide how much they want to claim, up to the 1 percent maximum per year (providers would o course be ree toinvest more o their own budgets i they wish, or to draw on



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a range o public service organisations.102

140. Part o the unding or this support would come rom the

additional resources available to providers through the rebate,but it is also likely that the Scottish Government would haveto increase its investment in existing support agencies such asthe Improvement Service while encouraging a greater ocus oninnovation alongside more traditional improvement activities.

Autonomy and responsibility

141. New community providers would be given greaterreedoms rom central audit, perormance measurement andinspection. For local authorities and health boards, there wouldbe ar ewer obligations to report on centrally determinedperormance measures and targets.103 For these providers,inspection and nancial audit would take the orm o a lighter-touch process o assurance to ensure basic saety and probity.

142. In return, there would be a greater emphasis on locally-developed measures that are more appropriate to newapproaches. Firstly, providers would be obliged to conducta local total value assessment o how and where resourcesare currently spent in their area o reorm, and to identiy andmake public their targets or reducing that spending which isprimarily demand-led.104 Secondly, providers would be undera duty to develop their own perormance indicators and long-term outcome-based measures o success, based on localpriorities and the outcomes that local users o services want.(Providers would be able to request external evaluation i local

indicators and/or user eedback suggest underlying, systemicproblems in services.)

143. More generally, new community status would bring with ita general obligation to openness. Providers would be expectedto share learning with other providers, central government,support organisations and the public. They should o courseengage in on-going internal and external evaluation, butwherever appropriate make this publicly available. They shouldalso open up their data to the public (including spendingdata, due to be published rom April in line with WestminsterGovernment commitments).



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Social partnership and public participation

144. Finally, new community status would be based on acommitment to work in partnership with employees, the socialsector, and the local community to develop and deliver newapproaches. While an obligation, this emphasis on working inpartnership should o course also be regarded by providers asan invaluable resource or innovation or new ideas and ornew collaborations to deliver these ideas in practice.

145. New community providers would make a commitment towork directly with rontline sta in designing and developingnew approaches. We recognise that this will be made moredicult by the general context o budget reductions andsta losses, but organisations will have to do more to engagetheir employees in innovation, especially to empower middlemanagement and rontline sta.105 This should includesupporting sta to explore alternative models o ownership orservices (such as co-operatives, mutuals or social enterprises)and oering assistance or workers acing redundancy tocreate new organisations along these lines. The latter would

be an important vehicle to capitalise on the skill and expertiseo these employees, and would be especially eective whereproviders agree to support the development o these newenterprises by commissioning them to deliver services.

146. As might be expected, new community providers shouldalso orm partnerships with other relevant providers to developand deliver innovative approaches. For example, a healthboard wishing to shit to more community provision wouldneed to agree a partnership with the local authority, but sincepartnerships have already been ormed we would expectthese organisations to work through existing partnershiparrangements rather than new mechanisms.

147. Providers would also make a commitment to work in newsocial partnerships with a wider group o social enterprises,community groups and third sector organisations. This wouldhelp providers to identiy, develop and deliver new approaches;it would also strengthen the local social sector and local

communities.106

148. As part o this commitment, some providers might wishto establish small development unds or local social sector



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organisations. NESTAs Big Green Challenge (which inormedthe Scottish Governments Low Carbon Community Challenge)demonstrates the signicant impact that small amounts omoney can have when used to support highly innovative socialsector projects at an early stage.107 As well as developing newapproaches, such projects can help to build the capacity ocommunities to respond to local issues. One model or this isthe establishing o a local community endowment that caninvest in enterprises which can develop their own sustainablerevenues over time.

149. Providers should also ensure that the wider communityis engaged in innovation. Many Scottish local authorities haveestablished citizens juries; these should be continued andexpanded. In particular, providers could use participatorybudgeting techniques to inorm and shape their spendingpriorities. Involving the users o services and the public via suchtechniques can lead to an agreed ocus on priorities, betterdecisions on reductions in spending, and also stimulate thepublic to develop their own approaches to meeting needs that

have historically been met by the public sector.

108


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CONCLUSION 47

CONCLUSION

150. This paper suggests an approach to making sustainablesavings in Scotlands public services that can help to meet theshort-term challenges o the next ew years and the long-termchallenges o the uture. I Scotland is to reduce spendingwithout harming its economy and society, innovation in publicservices needs to play a much more signicant role in theScottish Governments strategy towards spending reductions starting as soon as possible.

151. Over the past ten years, Scotland has introduced someimportant reorms to public services. It is now critical to ocusreorm on managing and reducing demand, through serviceswhich meet peoples needs more eectively and build their owncapability to prevent and respond to problems. The examplesincluded in this paper demonstrate what can be achieved;the task now is to create the conditions to ensure that suchapproaches become the norm in Scotlands public services.

152. This kind o radical reorm does not mean avoiding dicultdecisions. I new approaches are to save money, they mustenable reduced spending in some aspects o existing provision.But even in these dicult times, the opportunity also existsto introduce new approaches in public services which couldhelp to ensure a stronger, saer, healthier and more productiveScotland.


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ENDNOTES 48

ENDNOTES

1. Goudie, A. (2010) Outlook or Scottish Government Expenditure June 2010Emergency Budget Update. Edinburgh: Oce o the Chie Economic Adviser, ScottishGovernment.

2. Ibid.

3. These gures do not include other commitments such as pension liabilities, suggestedas being 43-53 billion according to the Auditor General or Scotland, or the ScottishGovernments estimate o the potential cost o commitments on climate change(8 billion by 2022), both noted in the IBR. Projections or increasing costs in publicservices, or example due to an ageing population, are noted urther below.

4. This is dierent rom total public sector expenditure or Scotland, which includes

spending on non-devolved areas, especially welare payments and unemploymentbenets. This total was estimated at 56.5 billion in 2008-09 (equivalent to 9.4per cent o total UK public sector expenditure) when a share o the WestminsterGovernments nancial sector interventions is included, or 55.8 billion (9.4 per cento total UK public sector expenditure), when these are not included. See ScottishGovernment (2010) Government Expenditure and Revenue Scotland 2008-09.Edinburgh: Scottish Government.

5. Beveridge, C.W. (2010) Independent Budget Review. Edinburgh: ScotlandsIndependent Budget Review Panel.

6. However, as in the rest o the UK, Audit Scotland has stated that it is unable to assurethe accuracy o the reported savings. See Audit Scotland (2010) Improving PublicSector Eciency. Edinburgh: Audit Scotland.

7. In 2008, the Scottish Government published its plans to reduce the total numbero public bodies by 25 per cent by 2011. As a consequence o the SimplicationProgramme, the number o public bodies has been reduced rom 199 to its current levelo 160.

8. For example, according to the IBR, i the Scottish health budget (the health element othe Health and Wellbeing Portolio) is protected and increases at the projected rate oinfation, the budget or non-health spending could decline by 10 per cent in real termsin 2011-12 and by 20 per cent by 2014-15, compared with 2010-11.

9. The IBR also discusses a number o options which it doesnt cost, including: reducingscrutiny and regulation; shared services; outsourcing; rationalising procurement;better absence management; reviewing ree school meals; reviewing the graduatecontribution to higher education and tuition ees; alternative nancing methods orcapital procurement; rationalising public assets; road user charging; changing pensionsand employers National Insurance contributions; and the potential saving rom theabolition o Council Tax reeze (in the case o the latter, local authorities would likely becompensated by an increase in the local government settlement).


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10. This calculation is based on the total money-saving measures costed in the IBR andtheir projected savings by 2014-15. These savings amount to 2,792 billion in total,around three-quarters o the required reductions in spending. Costed measuresinclude: a one penny change in the Scottish variable rate (1,600 million); achieving

a higher 3 per cent eciency target (900 million); Simplication programme (195million); Option 1 on concessionary travel (279 million); Option 1 on residentialcare (279 million); a fat weekly ee o 77 or care at home clients (647 million);Option 5 on prescription charges (128 million); charges or NHS eye examinations ornon-exempt categories o people (93 million). Source: Independent Budget Reviewwith NESTA calculations. This calculation also includes Option 1 on a pay decision or2011-12 which amounts to 1.17 billion. This measure actually produces an additionalunding gap. I this were eliminated through redundancy or public sector workers, itwould mean a reduction in headcount o 40,000 people. The overall pay bill would stillincrease under these options because: sta would still receive progression pay; underOption 1 47 per cent o sta (those who are paid under 21,000) would be excludedrom the pay reeze and would receive an increase o at least 250; and increases inemployers National Insurance and employers pension contributions.

11. In 2008-09, the ratio o total managed expenditure (TME) or Scotland to GDP was 51.2per cent excluding North Sea GDP and 49.9 per cent including a per capita share (41per cent when an illustrative geographical share o North Sea GDP is included). SeeScottish Government (2010) Government Expenditure and Revenue Scotland 2008-09. Edinburgh: Scottish Government.

12. In the rst quarter o 2010 there were 573,900 people employed in the public sectorin Scotland (506,000 in devolved public bodies), representing 23.6 per cent o totalemployment. This is higher than the UK average o 19.8 per cent but below that inNorthern Ireland (28.8 per cent). See Scottish Government/National Statistics (2010)Public Sector Employment in Scotland: Statistics or 1st Quarter 2010. Edinburgh/Newport: Scottish Government/National Statistics.

13. According to one analysis, the public sector has contributed to over 30 per cent o

Scotlands GDP growth over the last ten years, compared to just 20 per cent in therest o the UK. See Ernst & Young Scottish Item Club (2010) Economic Prospects2010. London: Ernst & Young Scottish Item Club. One estimate suggests that spendingreductions could result in up to 126,000 job losses across the Scottish economy by2014-15 (comprising up to 90,000 public sector and 37,000 private sector jobs). SeeFraser o Allander Institute (2010) Economic Commentary. Vol.34, No.1, June. However,when fexibility in prices (especially wages) is allowed, the impact on job losses in thepublic sector is much smaller at 78,000 and private sector employment could rise by14,000. In terms o direct job losses, the IBR estimates that in order to close the gapin the pay bill budget, public sector employment would need to all by approximately5.7 per cent to 10 per cent (between 35,000 and 60,000 public sector jobs) by 2014-15(depending on the pay restraint options selected). This assumes a pay reeze in therst two years and pay restraint in the ollowing two years.

14. However, even in this area improvement has started to plateau and Scotland remainsa distance rom its target to ending child poverty by 2020. See Sinclair, S. andMcKendrick, J. (2009) Child Poverty in Scotland: taking the next steps. York: JosephRowntree Foundation.

15. For example, an infuential

radical scotland

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