Cabinet Secretary for Finance and Sustainable Growth John Swinney
Public Bodies Conference - June 16, 2009
Beardmore Hotel, Clydebank
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It's a pleasure to be here today and I want to start off, essentially, by picking up one of the issues that Lindsay Montgomery raised in his contribution which was the letter which was issued in May to public bodies. Essentially that set out the nature of the relationship that the Government wants to have with public bodies within Scotland, apart from the minor triumph that this was a note which set out all of the details on one side of A4, without stretching too much the margins or the point size of the document, and believe you me Ministers do like to get things on one side of A4.
I thought that piece of paper captured, very effectively, the nature of the relationship that the Government is trying to construct with public bodies because what it was trying to do, essentially, was to marshal some of the products of the first two years of the Government's agenda, principally the Government's Economic Strategy which drives our thinking in terms of the delivery of the Government's purpose.
The National Performance Framework that essentially structures how we align all of the different interventions that we make in the complex public sector of which we are a part. The Concordat with local government which fundamentally transforms the relationship between national and local government within Scotland. The agenda on Simplification which the First Minister has set out and which we've evidenced by the publication in the last few weeks of the Public Services Reform Bill. The whole shift of focus away from the concentration on inputs to the focus on outcomes as supported by the National Performance Framework, the Efficient Government Programme that involves all of us in delivering in a much tighter financial climate and the crucial area of streamlining and improving the effectiveness of scrutiny right across the public sector. And those six different elements are crucial in terms of the Government's agenda and its relationship with public bodies.
All of it is anchored around the delivery of the Government's Purpose of focusing government and public services on increasing opportunities for all within Scotland to flourish through higher sustainable economic growth giving that essential focus to all aspects of the Government's agenda and it should, of course, give focus to the agenda of public bodies into the bargain in terms of working in partnership with the Government in many of these respects.
And then that document went on to set out a number of areas, more styles of operation rather than points of substance about what we expect to be delivered but styles of working which are very important in relation to the way in which the Government relates to public bodies today. We want to give public bodies a clear framework of operation and I think it is clear beyond any doubt to me and to the Cabinet about the significance of the Government's Purpose and the clarity that gives to people right across the public sector as to what we expect the public sector to deliver.
I'm always reminded when I talk about the Government's Purpose of our early conversations before the election with civil servants and also particularly in the immediate aftermath of the election with the Permanent Secretary about the importance of there being absolute clarity about what the purpose of the Government happened to be so that that was understood and resonated through all of the actions of the public sector in Scotland. The contrast between the Scottish Government operating today with a very firm purpose and the United Kingdom Government which is, in my view, searching for a sense of what it remains to be about and what it tries to do makes the point about why it is so absolutely essential that we have a clear and unified purpose that can be understood within Central Government, within the public bodies, within local authorities and within all of the bodies in Scotland.
So that clear framework of operation, driven by the Government's Economic Strategy, supported by the National Performance Framework is there to give a clarity to all aspects of the public sector and for public bodies gives a clear context within which public bodies can determine what they can contribute towards achieving the Government's Purpose.
The second major style that's encompassed in the note that was issued is the clear alignment of functions to ensure that we are all pointing in the same direction and if there is duplication and overlap we don't just allow that to be a continuing and perpetual feature of the arrangements that we have. We confront that, we tackle it, we reduce that overlap because in the years to come overlap and duplication are simply intolerable within the constraints of the public finances that we will face.
The third characteristic is trust within this agreed framework. I sat at an event last night at the Forbes Conference in Stirling Castle beside a Chief Executive of an organisation in Germany who castigated the policy framework that believes in aggregating to the centre and to an inner core absolutely every single piece of decision making because in his view, which I have to say to you the Cabinet shares, that is a futile way of operating. We have to ensure that organisations know the framework in which they operate that are free to then get on without Government micromanaging all of those issues. And I hope in the relationships that public bodies have with Government officials that is an essential characteristic of what you experience.
Fourthly there has to be improved governance and accountability arrangements so we need to know exactly the plans and the approaches that have been taken. I'm struck that when I looked at the business plans this year for the Enterprise Networks, who report directly to me, Scottish Enterprise and Highlands and Islands Enterprise, it was abundantly clear from my first consideration of those business plans just how closely they were aligned to the focus and the thinking of Government without Ministers having to essentially re-engineer some alignment after the event.
The final style and characteristic, and Robert Gordon touched on this in his opening remarks, is the nature of effective partnership. Partnerships are a word that's been flogged endlessly but it is essential for the way of working in a modern and complex public sector in which we operate. We have to have organisations that are prepared to transcend, boundaries to be flexible in what they do and I'll say a little bit more about that within the context of the challenges we face.
So I hope the issue of that letter to public bodies in May of this year, which has about it an absolute crystal clear simplicity of how the Government intends to relate to public bodies, has been helpful in nurturing those relationships and I would point out the essential point which is in the covering letter which was issued with that note. It was the fact that this is an approach approved by the Cabinet, supported by all of my Cabinet colleagues, a clear recognition that we want to take this approach right across the public sector in Scotland and to provide that clarity to all public bodies.
I want to concentrate today on essentially three major challenges that I think we face over the next 12 months and for the remainder of this parliamentary term. The challenges that will be with us, not for just this parliamentary term, but challenges that will dominate our agenda very much in the years to come. And those three challenges are: the economic challenge; the public spending challenge and the climate challenge.
On the economic challenge the Government is well positioned to deal with what are incredibly turbulent times. We set out in our early actions as the Administration that our focus was to be on increasing sustainable economic growth because we viewed that as an Administration as the most effective way of improving the prospects and the opportunities within Scotland for individuals to be economically active and to contribute to our economy. What we didn't envisage was the type of economic difficulty that we have now but what is good about our position is that we started off with that focus from the start of our administration and what has happened is that the scale of the challenge has simply got greater as a consequence of the economic turmoil that we experience.
Now I'm profoundly grateful to public bodies for the way in which they have all engaged in the formulation of the Government's economic recovery programme which has essentially been our swift response to the circumstances that we face and how we can contribute more to delivering on the economic growth agenda. Let me just cite a few examples of that. Scottish Water took the relatively minor decision from their point of view to delay connection charges as part of new developments to the water and sewerage infrastructure which cost, probably, about £5m in cash flow within Scottish Water but for the development industry it was a massive opening of a door to new prospects of development. This in my view is a very simple illustration of how public bodies can take a different stance which doesn't fundamentally affect their performance but has a consequential impact, very constructively, in the wider economy. SEPA have taken decisions to relax and delay charges for its similar activities and as a consequence organisations have been able to undertake development and development activities which would not ordinarily have been undertaken. Scottish Enterprise's contribution of doubling the size of the Scottish Manufacturing Advisory Service clearly helps to support economic development in that process.
So the economic recovery programme which set out further details of that yesterday with more announcements on business support and on affordable housing development. Essentially it encapsulates three major themes about how we support employment in communities, how we develop education and skills, and how we invest in the industries of the future. This innovative programme, which has to involve all of the public sector because it gives life to our steps to deliver economic recovery, is a significant new opportunity for us to cooperate across the public sector in delivering on the Government's purpose and I welcome and encourage further consideration of how the public sector, as a whole, can work together under the umbrella of the Economic Recovery Programme to better support the process of economic recovery in Scotland. So the economic challenge is not something that's going to be solved in the next 12 months, it is something that will be with us for a considerable period and certainly for this Administration, will focus the policy agenda that we take forward in the period that lies ahead.
That of course will have to be done within the context of the public spending challenge, which is my second major challenge of the day. Some of you will have heard, in some detail, at previous events, my view of what lies ahead in terms of public expenditure and also Sir John Elvidge and Finance Director Alyson Stafford will share more details of that with you in a moment. And let me just in a sense put some of this into context by contrasting two parliamentary exchanges about the scale of the challenge that we face. Prime Minister's Questions last Wednesday was dominated by an exchange between the Prime Minister and the Leader of the Opposition where the Prime Minister was essentially setting out the choice at the forthcoming election between investment under a Labour Government and cuts under a Conservative Government and Mr Cameron was saying it will be cuts under both administrations.
On Thursday I was questioned by my predecessor Tom McCabe in the Scottish Parliament. Mr McCabe could have politically postured but essentially posed a question to me - which from a cursory examination of David Bell's analysis of the public finances in Scotland for the Finance Committee - conceded that whatever the outcome of the next election public spending cuts are going to follow in real terms.
And the way I responded to that was essentially to welcome a tone of contribution in the Scottish Parliament which is a mature reflection of what we are going to face and in any reading of the Red Book - the Chancellor's Budget Statement, it is absolutely crystal clear that in the short and medium term there will be real terms reductions in public expenditure. How great will they be - I can't give you a definitive figure but what I am certain about is that in real terms we will have to manage a declining budget, not just for 2010-11 and 11-12, we will have to manage that on a sustained basis well into the middle of the next decade.
Now that is a completely different scenario to anything most public servants will have faced in the last decade. In the last decade the challenge every year has been how will we spend more money in real terms than we spent last year. The challenge in the next decade will be how can we, in real terms, reducing resources go further than we have been able to do in the past. So this is perhaps the most challenging environment that we could operate within but it is the environment we have to operate within and all of our skills will be tested in that respect and I want to say a little bit more about that in a moment.
The third challenge is the climate change challenge and Parliament next week, I would imagine, will support the Government's Climate Change Bill which brings with it an obligation for the whole of society it's not just a public sector issue, it's a hugely challenging issue about public sector behaviour but also individual behaviour about how we can adapt to the necessity and the imperative of tackling climate change and the Government doesn't view the issues of climate change as essentially a choice of delivering on climate change and not on the economy. I set out some weeks ago the opportunity that the Government sees for us to be able to deliver economic stimulus through delivering on our agenda of tackling climate change and the creation of green jobs and green employment. So the challenge that we all have is to embrace that agenda and to establish how we can contribute in our respective environments to support that.
I'm struck by the contrast of experience between the public sector and the private sector on many of the ways that we can reduce carbon footprint. Every time I go to visit the BT Headquarters in the Gyle the huge car park is empty and the reason why its empty is that most people are working from home, connected through broadband, to their working environment and I look at the way in which we have to wrestle some of the challenges the Government has to wrestle with about the issues of congestion on our transport networks because we are all trying to get to the same congested hubs within our country where there are quite clearly opportunities for us to change working practices if we learn some of these lessons from the private sector.
Now that's a pretty huge challenge that I throw out there, casually, to the public sector about changing working practices and there are obviously areas where that is easier to do than others within the public sector but I am certain that there are ways in which we can deliver leadership about how we change the way in which people move around the country, how they contribute because we change working practices to allow for all of this to happen.
So those are my three challenges: the economic challenge; the public spending challenge and the climate challenge and in a sense they capture for me what we have to deliver in the period going forward. It's not an agenda that's just going to be for this administration in this current parliament. It will be an agenda which I think will dominate the next decade of public sector activity within Scotland. Essentially the necessity to deliver economic stimulus at a time of reducing, in real terms, public expenditure and with it doing that in a sustainable challenge that we have to move to. It's a challenge which I think will tax every effort that we can make as public servants and I know from my own experience and my colleagues have the same experience that we have within the public sector immensely talented individual who have to lead us through this particular set of challenges and that in a sense has to dominate all of our thinking as to how we utilise the skills and the resources of the public sector to ensure that we meet these essential challenges in the period ahead. We will only meet the public spending challenge if we are open with each other about how we utilise resources and how we can better utilise the resources we have at our disposal. I am certain that we are able to deliver a better way of deploying our public finances than we are currently doing when we have to focus on what actually matters in terms of delivering the agenda that I've set out today. All of us have to address that essential challenge in delivering our agenda in the period ahead. So we have to ensure that all of the public bodies in Scotland working hand in hand with the Scottish Government are focused on these very clear objectives.
The final comment I want to make is obviously to comment on the dynamic environment in which we operate, as Robert Gordon mentioned a moment ago. We are in a very fluid political environment and we are operating within an environment where, just yesterday, we had an agenda of new provisions which essentially developed the devolved settlement further than was first envisaged when the Parliament was set up in 1999 .
The Government welcomes the conclusion of the Calman Commission as a variety of steps in the right direction. They wouldn't necessarily be the steps that we would have chosen but they are undoubted steps in the right direction. But what they confirm is that we are operating formally in a very dynamic environment and we all have to respond to that dynamic environment and the Government clearly by its leadership of the National Conversation responds to that dynamic agenda and we will continue to do so.
But what it means is that across the public sector we have to be ready to manage and to lead a process of dynamic change about how the devolved settlement operates and how within that devolved settlement we are able to deliver the maximum potential opportunity for the people of Scotland. That a focus for all of us in the public sector. I know within the Government and within our public bodies there is a real and ready willingness on that agenda and I think we now have in place the arrangements which allow us to prosper in that context.
Thank you very much.