EFFICIENT GOVERNMENT

EFFICIENCY OUTTURN REPORT FOR 2005/06

CONTENTS

What We Said We Would Do.. 3

What We Have Done. 4

Efficiency Workstreams. 4

What Has Been Achieved.. 6

2005/06 Outturn.. 8

Lessons Learned.. 13

Next Steps. 14

Heads of Departments Efficiency Statements. 15

Crown Office & Procurator Fiscal Service. 15

Enterprise Transport & Lifelong Learning.. 17

Education Department 19

Justice Department 21

Health & Community Care. 23

Finance And Central Services. 25

Development Department 27

Office of The Permanent Secretary. 29

Environment and Rural Affairs Department 31

What We Said We Would Do

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

'Building a Better Scotland, Efficient Government - Securing Efficiency, Effectiveness and Productivity' ("the Efficient Government Plan") was published in November 2004; a plan to secure efficiency gains of £745m cash and £300m time by the end of the 2004 Spending Review period, i.e. 2007/08, with the aspiration to realise an aggregate efficiency gain of £1,500m by then.

2. This three year programme of efficiency gains was always recognised as being part of a continuum, an ever-evolving environment of progress and improvement in the delivery of public services and the support systems that underpin them.

3. We said that as gains released resources they would be moved to the people and places that matter and deliver real benefits to the public. Adding those efficiency improvements to the extra investment in the Spending Review, this would result in an additional 5% resource for investment in frontline services.

4. In addition we said that resources could be released through: the application of best practice in asset management, by reducing sickness absence, better procurement and through sharing support services between public bodies. As part of this we gave a commitment to initiate a review of public sector procurement.

5. We said that we would be completing a thorough portfolio by portfolio and department by department examination to determine whether all opportunities to release efficiencies had indeed been identified.

6. In respect of productivity we said that through improvement in technology, workforce reform and by removing boundaries this would improve the productivity of the public service, thereby securing time-releasing savings.

7. To achieve this programme we said that we would seek assistance in this ambitious task from our most successful private sector companies, our world class academic community and from our partners in public life, thus ensuring we draw out the best practice for application to improve the delivery of services in Scotland.

8. We recognised that to ensure the process of continuous service improvement became embedded in the day-to-day business of Government and elsewhere in the public sector, and that enhancement in the level, quality and accessibility of public services was demonstrably real and measurable, the Efficient Government programme was and is a crucial instrument to fulfil that ambition.

What We Have Done

Efficiency Technical Notes

9. A chronology of events is helpful in summarising how the Efficient Government Programme in Scotland has progressed after the publication of 'Building a Better Scotland, Efficient Government - Securing Efficiency, Effectiveness and Productivity' in November 2004.

10. To help manage the risk of under achievement the progress on every project has been subject to periodic review and assessment by Efficient Government Delivery Division.

Efficiency Workstreams

Absence Management

11. Absence data across the public sector in Scotland is being collated and analysed. A series of visits across sectors was undertaken to review current polices, procedures and absence rates. A managing absence steering group, with representation from across the public sector in Scotland, has been established to provide expert guidance. We are looking to identify practical solutions, specific to the needs of each sector, which will enable public sector organisations to deliver improved absence management and to maximise productive time. We will not however be seeking to reinvent comprehensive guidance on this topic.

Asset Management

12. Initial scoping work has been undertaken to consider how best to promote better asset management across the public sector. There is potential to review assets identifiable as 'non-operational'; to promote the strategic approach to asset management that needs to be adopted more widely and forcefully; and to consider the available management information and the ease of sharing among community planning partners.

13. The Improvement Service is engaged on some work with local authorities who should support a strong developmental thrust in this sector.

Shared Services

14. A shared services sub-group of the Efficient Government Steering Group was set up to oversee the preparation of a national shared services strategy. The Sub-group membership comprised senior managers drawn from different parts of the public and private sector. The document "A Shared Approach to Building a Better Scotland - a consultation paper on a national strategy for shared services" was drawn up after significant research and liaison across the public and private sector and was approved for publication by the Sub-group.

Streamlining Bureaucracy

15. Work undertaken within the Executive includes: a review of statistical and administrative returns across the Executive; a review of the various funding streams to public sector bodies and a review of the different plans public sector organisations are required to submit to the Scottish Executive with the intention to streamline them. Work is currently underway investigating better tools and ICT systems to co-ordinate guidance and instruction to public bodies, thereby minimising duplication, overlap and contradiction, and for the development of a framework to improve the efficiency and effectiveness of joint working within the Executive. Work has commenced on the development of outcome agreements and the planned Inspection, Audit and Complaint Review. This workstream is being managed as part of the Executive's public service reform agenda.

Procurement

16. The Scottish Executive has continued to liaise with all parts of the public sector in Scotland in the promotion and implementation of eProcurement Scotl@nd (ePS). Significant effort has been made to enhance management information reports to capture the impact of 'better procurement' decisions. An independent review of public procurement provision by John McClelland was commissioned in 2005 and the report published March 2006. Enhanced governance and advisory arrangements are in place to improve public procurement in Scotland: the Public Procurement Reference Board; the Public Procurement Advisory Group, as well as revisions to the membership of: the ePS Advisory Group and the ePS Benefits Tracking Group. A programme of training and development opportunities for procurement professionals has commenced.

What Has Been Achieved

Range and ambition of projects identified

17. The introduction of a proforma technical note proved to be a simple and effective framework for summarising the numerous efficiency projects in a consistent fashion and ensured the collation of all of the basic pieces of information required to enable subsequent reviews. The amount of underlying delivery planning varies significantly depending on the nature of the project and the stage it has reached.

18. As at March 2006 the level of planned savings for 2007/08 in each portfolio, and the nature of the significant schemes, were as follows:

Table 1: Summary of Efficiency Technical Notes March 2006

19. Table 1 highlights the significant progress made towards the efficiency target of £1,500m by 2007/08. We remain firmly committed to the delivery of the £1,500m target, therefore each Head of Department in the Scottish Executive has been conducting a thorough portfolio review. The results of this will be reflected in new Efficiency Technical Notes to be published in the autumn and will identify how the full target will be delivered.

2005/06 Outturn

20. A Ministerial target was set to deliver cash efficiencies of £405m in the first year of the Efficient Government programme, 2005/06. As table 2 shows, taking confirmed cash and time savings together (£441.8m), this has been achieved. On a cash only basis, £386.5m can be confirmed at this juncture as having been achieved. SEERAD are currently unable to confirm Scottish Water's achievement of the efficiency target because statutory responsibility for assessing Scottish Water's performance rests with the Water Industry Commission for Scotland. The Water Industry Commission for Scotland advises that it is not in a position to report until October 2006 at the earliest.

21. The outturn data for 2005/06 in respect of the portfolio targets as originally published in the Efficient Government Plan is summarised in Table 2 below.

Table 2 - 2005-06 outturn against targets published in the Efficient Government Plan

22. Successive technical notes did not alter the overall targets and aspirations in the Plan. In respect of Scottish Water, revisions were made which reduced planned gain in the first two years of the programme, and increased the planned gain in Year 3, 2007/08. Tables 3 and 4 show a more detailed breakdown of the in-year modified targets. These can be compared to the original published targets for 2005/06 shown in Table 2.

23. Table 3 (cash releasing efficiency gains) and Table 4 (time releasing efficiency gains) provide a more detailed breakdown of each portfolio outturn in respect of the technical notes issued in March 2006:

Table 3: Cash releasing efficiency gains 2005-06

24. The 2005/06 outturn for time-releasing gains was:

Table 4: Time releasing efficiency gains 2005-06

25. It has been recognised that while time-releasing efficiencies are harder to measure, they are just as important in delivering improved public services. A target of £300m was therefore set to be delivered by 2007/08. One project within the Transport portfolio - the procurement of the First ScotRail franchise will hereon be re-classified from 'cash' to 'time' in view of the nature of the gains achieved.

Year end reporting

26. Those accountable for the delivery of savings are required to provide assurance as to the level of efficiency gain realised by year end. The mechanism to produce this assurance was subject to discussion and agreement with Audit Scotland.

27. Each Project Manager was required to declare outturn efficiency savings on a Statement and submit this, along with supporting evidence to their respective line manager, e.g. Division or Group Head, or Chief Executive, if an NDPB or agency. In turn that individual provided assurance to the respective Head of Department in the Scottish Executive. Finally the comprehensive Efficiency Statement for each portfolio/department was signed off by that Head of Department. These are collated in Annex A.

28. All of the above has only been achieved because of the active participation of all parts of the public sector in Scotland and the time that key individuals have set aside to inform and expand upon plans and developments specific to their sector, sharing information with sponsoring teams, the Efficient Government Group, and interested parties from other sectors.

Lessons Learned

Baselines, measurement and monitoring

29. Measuring and validating efficiency gains has been and will continue to prove a difficult challenge because the information systems that support public sector organisations were not always designed for this purpose. Improvement in management information systems has to be achieved without diverting resources away from the primary objective of delivering improved and more efficient public services. These same challenges arise in the context of identifying appropriate baselines for the scope of the efficiency project in question, and also in connection with the ever-changing landscape against which the project has to be monitored (e.g. re-organisations which are unrelated to the Efficient Government programme).

30. We do not believe that it would be sensible to abandon those projects where it is not entirely possible to measure the efficiency contribution. Often the efficiency gains are a by-product of a wider service transformation and even if the gains cannot be fully measured the contribution to improved service delivery is no less important.

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

Development costs

32. We recognise that there are issues surrounding how capital investment costs were handled. How each project was handled is clearly indicated in each technical note. Where investments are based primarily on the delivery of efficiencies, it seems appropriate to net off investment costs.

Risk of non-delivery of efficiencies

33. While we are determined to deliver the efficiency programme, it has been observed that there is a threat that efficiencies will not be delivered. The greater risk is to do nothing and therefore achieve nothing. Every pound gained through better efficiency can be used to enhance service delivery. An internal process of periodic review is designed to help manage risk.

34. We have recognised the need for departments to assume responsibility for delivering procurement efficiencies and as a result we have taken steps to disaggregate the centralised procurement target. This is expected to increase ownership and improve delivery of procurement efficiencies in the longer term. Nevertheless, as noted in the McClelland procurement review report, some public sector areas are in the early stages of developing procurement efficiency programmes and baseline information can be difficult to establish. Therefore the challenge is a significant one.

Embedding the efficient government programme

35. Year 1 of the Efficient Government Programme, 2005/06, has been a year of new requirements from all parts of the public sector. And this is over and above all established reporting lines for planning, monitoring and reporting for the discharge of public services. Public bodies across Scotland have risen to the challenge to share their delivery plans, consider means of measurement and monitoring, and reported on the progress of their efficiency projects. Different approaches have been adopted in different organisations, and the profile of the importance of identifying and delivering efficiency gains can vary from organisation to organisation. Increasingly, however, there is evidence that in the decision-making process, for the delivery of public services, part of the evaluation process includes consideration of what efficiencies will be delivered, for the service user and/or the service provider, as a result of the proposed change. The Efficient Government Group will continue to promote the efficient government message as integral to the duty of Best Value, which all public sector bodies must adopt, embed and demonstrate.

Next Steps

36. The programme will continue to build on the good work and achievements of the first year. The target published in the Efficient Government Plan for efficiency gains for 2006/07 is £582m.

Efficient Government Group

July 2006

Heads of Departments Efficiency Statements

Crown Office & Procurator Fiscal Service

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £2.8m of cash-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; indeed, for the first time COPFS met of its published targets in 2005-06; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £2.84m of cash-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Norman McFadyen

Crown Agent and Chief Executive

1 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: COPFS

Enterprise Transport & Lifelong Learning

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £15.67m of cash-releasing and £12.3m of time-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £24.465m of cash-releasing and £18.0m of time-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Philip Rycroft

23 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: Enterprise, Transport and Lifelong Learning

* Subsequent to this year-end, this project's efficiency target savings will be reclassified as time from 06/07 onwards.

Education Department

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £0.3m of cash-releasing and £10.0m of time-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £0.78 m of cash-releasing and £11.7 m of time-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Mike Ewart

Head of SEED

26 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: Education and Young People

Tourism, Culture and Sport

Justice Department

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £7.1 million of cash-releasing and £10.9 million of time-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £7.623 m of cash-releasing and £10.9 m of time-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Robert Gordon

Head of Justice Department

19th June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: Justice

* For 2005-06, £176700 procurement efficiencies are reported centrally via the Scottish Procurement Directorate

Health & Community Care

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £169.1million of cash releasing savings in 2005-06 and make progress in 2005-06 towards the achievement of £173.3million time releasing savings by year ending 2007-08.

I am satisfied, subject to NHS Boards ensuring that evidence is held locally of savings claimed for H/C7 NHS Efficiency Savings, on the basis of project managers statements of assurance that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £165.5million of cash releasing and £11.3million of time releasing savings for the year ended 2005-06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes. The delivered saving exceeds my original target by £11million. Our time releasing gains have accrued more slowly than our plans showed but we continue to make progress towards the 2007-08 target. In addition to the figures shown, non-recurrent cash releasing savings of £42million have been reported by NHS Boards. I can confirm that action has been taken to ensure the delivery of the savings for 2006-07 in full.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Kevin Woods

28 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: Health

Finance And Central Services

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £113million of cash-releasing and no time-releasing savings for the year ending 2005/06.

Subsequent to the minute from Peter Russell (8 November) setting out the target for FCSD for 2005/06 of £109.311 million, it was agreed that the cash releasing savings target of £4 million for the Scottish Police Service would also be included within the FCSD target.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided.

I confirm that the actual saving achieved was £156m of cash-releasing savings for the year ended 2005/06. This exceeds our target by £43m. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

In the course of the year it has become apparent that procurement savings accruing to local government should be monitored as part of all local government savings and not within non-NHS procurement. Consequently the target of £27 million local government procurement savings is now shown against local government rather than non-NHS procurement - this obviously does not affect the overall FCSD target.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

Andrew Goudie

Head of FCSD

28 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: FCSD

(1) Local Government target procurement savings (£27m) now to be monitored as part of assumed Local Government efficiency savings, rather than non-NHS procurement.

Development Department

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £18.9m of cash-releasing and £0.6 of time-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and/or departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

I confirm that the actual saving achieved was £24.9m of cash-releasing and £0.8m of time-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

N S MUNRO

Head of Development Department

7 July 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: Development

Office of The Permanent Secretary

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £0.5 million of cash-releasing savings for the year ending 2005/06.

I am satisfied, on the basis of supporting assurance statements from the responsible departmental managers, that the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided.

I confirm that the actual saving achieved was £0.5m of cash-releasing savings for the year ended 2005/06. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

John Elvidge

Head of OPS

16 June 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: OPS

Environment and Rural Affairs Department

Head of Department Statement of Efficiency Savings

As Head of Department, I am aware of the overall need to ensure the delivery of government services as efficiently as possible. In terms of the Efficient Government Plan (Building A Better Scotland: Efficient Government - Securing Efficiency, Effectiveness and Productivity) I acknowledge my responsibility to plan accordingly to achieve £1.534 million of cash-releasing and £3.154 million of time-releasing savings for the year ending 2005/06 for the Environment and Rural Affairs Portfolio, and £54 million of cash-releasing savings for Scottish Water in the "Other" portfolio.

I am satisfied, on the basis of supporting assurance statements from the responsible delivery organisations and departmental managers that, in the case of cash-releasing savings, the costs of the activities in question have been reduced by the amounts shown below without material detriment to the quality or quantity of service provided; and that, in the case of time releasing savings, the amounts shown below are a fair estimate of the value of time released from the activities in question for other productive purposes.

For the ERAD portfolio, I confirm that the actual saving achieved was £3.574m of cash-releasing and £2.73m of time-releasing savings for the year ended 2005/06. Some of the cash-releasing savings have been re-classified as time-releasing savings, and vice versa. The attached table shows outturn against target and records any changes to the target since the first publication of the relevant Efficiency Technical Notes.

For the ERAD portfolio overall, the delivered saving exceeds my target for 2005-06. However, this was due to certain projects exceeding their targets. For those projects which did not meet their targets, I can confirm that corrective action has been put in place to ensure the delivery of the savings for 2006-07 in full.

For the "Other" Portfolio, it is not possible to certify that Scottish Water efficiencies have been delivered, primarily because Scottish Water's independent regulators have not yet reported on Scottish Water's performance for 2005-06.

I am satisfied that the savings identified fall within the published definition of an efficiency gain.

RICHARD WAKEFORD

6 July 2006

EFFICIENT GOVERNMENT: DELIVERY OF EFFICIENT GOVERNMENT SAVINGS

PORTFOLIO OUTTURN SUMMARY: ERAD

[1] SEERAD are currently unable to confirm SW's achievement of the efficiency target because the statutory responsibility for assessing SW's performance rests with the Water Industry Commission for Scotland. The WICS advises that it will not be in a position to report until October 2006 at the earliest. The WICS will publish three reports in October 2006 regarding the delivery of efficiencies and services by Scottish Water in 2005-06. These reports will be published following an in-depth, OFWAT style, review of the Scottish Water's 2005-06 Annual Report and Accounts and other regulatory returns and will confirm Scottish Water's delivery of efficiency.