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3 REMIT, APPROACH AND CONTEXT
Strategic Context
3.1 The Chancellor announced on 19 July 2005 that the next three year UK Spending Review will take place in 2007, a year later than expected, and cover 2008-09 to 2010-11. The next Scottish Spending Review will also take place in 2007.
3.2 The SE is undertaking preparatory work to take a fresh look at its policy framework and its implications for resource allocations in the next Spending Review. This Review is part of that exercise.
3.3 The Ministers for Finance and Public Service Reform appointed the Group to review the Scottish Executive's Level 3 budgets (except for local authority expenditure) to identify any that do not fit with the Executive's commitments and priorities or are not performing well. They also asked us to propose action, where appropriate, and to identify the implications of any proposed change. The full remit is attached at Appendix B.
How we interpreted the remit
3.4 We use the term 'headroom' as shorthand for the principal aim of this project. We found some difficulties with elements of the remit:
- Classifying expenditure - we found no consistency across the SE in classifying expenditure and thus were unable (in most cases) to do more than estimate what spending fitted each of the proposed categories listed in Appendix B. Some of the problems arose from the way Ministerial priorities are developed and articulated (4.2). We also found little evidence of a consistent approach to new priorities that emerged after the PA and BABS (4.2 and 5.4-8). As our work progressed, we realised that 'discretionary spend' should not be considered as a separate line, available once statutory spend and PA commitments have been met. Discretion also exists in how efficiently statutory spend is undertaken. In some cases, contractual commitments can be renegotiated. That discretion can and should be exercised if it gives value for money. Equally, some contractual commitments do not meet Ministerial priorities and therefore could be considered 'discretionary spend'.
- We could not find strong evidence linking budgets/programmes to well defined outcomes and, in turn, SMART3 targets. We did find voluminous evidence of monitoring and measuring inputs, outputs and activities some of which did not appear to be making a direct contribution to the project it purported to measure (4.3.3).
- We accepted and used the performance rating tool devised by the Executive. Appendix F shows the blank pro-forma completed by each Level 3 budget holder. We noted the performance of the programme assessed by the budget holders and sought more information on performance where necessary. The performance information formed part of the evidence relating to the conclusions concerning individual programmes.
- The difficulties in classifying expenditure limited our ability to form hard judgements on the performance of most programmes. Chapter 6 gives a number of examples where programmes are performing well against specific targets, but have no clear link to the PA/ BABS. Much of this spend is 'core activity' that we have called 'legacy spend' (5.1).
- For similar reasons, we faced difficulties in assessing the implications of switching or reducing spend in any programme. We have tried to give some indication of any statutory, contractual or administrative consequences that might follow from any switch in resources recommended. We have not assessed any resultant political consequences, other than to note where some would inevitably follow a reduction in spending, for example where a clear political commitment exists. Given the limited time for this project, we have been unable to assess the consequences for the users, stakeholders, business or other affected parties of a recommended reallocation in spending.
Our approach
3.5 We split into small teams to focus at the portfolio level. Each team interviewed the budget holders and a range of people to gather evidence, based on the information that each budget holder provided. We met regularly as a group to share our emerging findings and to consider the cross-portfolio interaction. Appendix C details our methodology.
3.6 We recognised the balance to be struck between the scale of and time available for the task and the rigour with which we could investigate the value being achieved in programmes. We saw the timetable as critical if the SE is to be fully prepared for SR 2007. Accordingly, we focused our efforts on reviewing available evidence rather than seeking new information or evidence or commissioning further research or analysis. We reviewed available evidence and interviewed a wide range of Ministers, officials and stakeholders from November 2005 to March 2006. We analysed and wrote up our findings during April and May 2006. Our report reflects back the views and messages we heard as we sought to distil them into our findings. We make recommendations on various areas where we think the SE would benefit from further work.
3.7 For many reasons (outlined at 3.4 and detailed in Chapters 4 and 5), we could not derive any single estimate of potential headroom. Our conclusions cover a range of possibilities and amounts, and there are varying degrees of difficulty in implementing the changes. We have identified some scope for longer term potential headroom. In some cases we have applied our experience and judgement in estimating that potential. We have also found areas of spending pressures being created by current policies, and have highlighted examples.
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