To the victor, the spoils – at least under normal circumstances. But in the case of the winner of next May’s Holyrood election, the fiscal task awaiting Scotland’s new government will be truly daunting.
Accustomed to above-inflation budget increases throughout the short history of devolution, Scotland’s policy-makers and public servants will be expected to make savings of £332m as part of the wider UK cuts announced yesterday.
Although Scottish ministers have been allowed to defer the cuts until next year – a move which brings much needed certainty to the 2010/11 budget - yesterday’s reductions will be added to the cuts that will be revealed in this autumn’s Comprehensive Spending Review (CSR).
Dr Andrew Goudie, the chief economic adviser to the Scottish Government, has already forecast a reduction of around £900m in real terms for the first year of the CSR, 2011/12. This means that whichever party wins the election, at least £1bn of spending reductions will have to be implemented within the first 12 months of taking power - about 3 per cent of the Scottish Government's £30bn budget.
With this in mind, the Scottish Government will have no alternative but to fundamentally re-evaluate its spending priorities and Concordat commitments. Intense pressure on key services, including free care for the elderly, free prescriptions and schools meals, will be unavoidable.
To recognise the challenge of the impending future reductions in revenue, alongside increases in demand for particular public services, public servants need to move away from looking at annual budgets and seek a solution over a longer term.
Local authorities and the NHS, in particular, will not be able to meet the future financial challenges and level of growth pressures with short-term solutions such as year-on-year efficiency savings or salami slicing. Past experience demonstrates that although these approaches may deliver savings in the short term, in the longer term, they are not sustainable and could break the organisation's capacity, expertise, flexibility and ability to respond to future change and challenges.
An incremental approach tends to result in departments making the easiest savings which might work for a year or two, but which lack a longer-term plan of the redesign and changes needed to make efficiency savings sustainable while maintaining service levels and staff morale.
There is also a role for Scottish Government centrally. There are significant savings to be made by centralising support and administrative services at both a regional and national level. There has been much talk, and indeed a number of reports, highlighting the benefits of doing so. The Scottish Government needs to play its part and incentivise the public sector in Scotland to make this happen.
While next year’s election will slow the pace of decision making as polling day approaches, Scottish public servants have an opportunity over the next nine months to plan effectively for the impending reductions in funding.
With politicians poised to swing the axe, the need to start identifying how and what will be delivered by the public sector is all too apparent.
Paula Speirs is a director of Ernst & Young’s Scottish government practice
