Eddie Frizzell: Change of culture is key to our prosperity

First, whether, despite three decades of "reform" kicked off by the Thatcher government's Financial Management Initiative in 1982, the quest for culture change in our public services has largely passed Scotland by? And second, whether this suggests that in Scotland, where the public sector accounts for around half of GDP and employs more than half a million voters, the political incentive to press for real change will always be weak.

The Scottish Government may have made "high quality, continually improving, and efficient public services responsive to local people's needs" one of its 15 National Outcomes, but apart from increasing the previous efficiency savings targets from 1.5% to 2% a year, the SNP's approach has been on reducing the number of public bodies, not the work they do, and on procurement and has been reluctant to involve the private sector in the public sector.

However, like their Labour/LibDem predecessors, SNP ministers have stressed efficiency savings would not have implications for public sector jobs, although staff costs account for some 50% of the Scottish budget, unsustainable beyond this year. And despite growth in public sector employment, and a lack of reliable baseline, cost and other data - to which the Auditor General has drawn attention - both the current administration and its predecessors reported efficiency savings have been made.

Whether or not productivity is satisfactory, it would be unfair not to acknowledge some positive changes. ICT has enhanced access to information and services at national and local level, and Scots have benefited from improvements in services provided by UK bodies such as the DVLA, the Identity and Passport Service, and the Department of Work and Pensions. In Scotland, the Scottish Prison Service, Historic Scotland and the Students Awards Agency took advantage of changes in how government services were structured to embark on culture change. As a public body, Scottish Water has been an exemplar in achieving real unit cost reductions and service improvements.

If Scotland's public services overall were to deliver Scottish Water-equivalent productivity, the savings would be 2.25 billion.While in devolved Scotland the political drive for reform has been weaker than in England, the UK-wide reforms of the 1980s and 1990s have had an impact on the Scottish public sector. Performance measures and targets and customer engagement are part of the standard vocabulary of public service managers, though whether this is symptomatic of culture change as opposed to lip service is not proven. And well-publicised findings of public sector waste bear out auditors' concerns about financial management and the availability of robust information on the cost, efficiency and productivity of services which is needed to measure performance and identify areas for improvement.

But while ICT may be changing the interface between providers and users, it is not supporting joint working. Scotland's crowded landscape of public bodies is served by an equally crowded landscape of computer systems which do not interact. This inhibits efficiency, nowhere more than in the NHS, where despite substantial expenditure on an e-health strategy, progress with electronic patient records and data capture has been woefully slow.

Much remains to be done to achieve the comprehensive culture change which will produce the productivity improvements which the future demands. But foundations have been laid and effective managers and staff will build on them, provided their political masters have the courage to empower them to take risks, find new ways of working, and make difficult choices. Good management will be important, but political leadership and support are vital.

Culture change and productivity gains can only soften, not offset, the effects of the expected expenditure reductions. Nor can they be achieved quickly. It is clear significant pain will be unavoidable, particularly in the short to medium term, with service reductions, public sector job losses and pay freezes. It is also clear a long-term adjustment will be required, as it could be 15 years before recent expenditure is replicated in real terms.

This prospect has led to the possibility of a world in which people, "do more for themselves and each other, and look less to the State as provider of first resort". In Scotland the redefinition of the individual's relationship with the State will require a major shift in national culture. This will not easily be achieved. The expectation that "the Government" or "the Council" should do something about almost everything is ingrained in the collective Scottish mind. If only we had a minister - for tourism, for West Lothian, for small businesses - or a czar for drugs, for obesity, for alcohol - and a chunk of taxpayers' money to spend, then according to a prevailing mindset every problem would be solved.This mindset must change and political leadership - a scarce, but not totally absent, commodity since 1999 - will be required to bring it about. Now is the time for all politicians to lead culture change by reminding people that it is their personal commitment and hard work that will secure their future, not political institutions; that wealth creation is a respectable goal; that economic growth depends on a competitive private sector driven by enterprising individuals unburdened by the State; and that there is no such thing as a free lunch.

Now is the time also for ministers and opposition alike to be honest with the public about the choices they face; about the consequences of protecting particular policies and programmes; and about the need for public sector jobs to be lost. To acknowledge that expectations of what the State can provide must be adjusted; and above all to avoid pretending that any political party can make the pain go away. In responding to inevitable pressure to alleviate expenditure cuts in the longer term by using new tax-raising powers, they must also be honest about the implications. According to the Calman Commission, the yield from 1p in income tax in Scotland is about 0.5 billion. To recover a forecast real terms "loss" of spending of around 3.7 billion by 2014-15 would require an increase in income tax of more than 7p on the basic and higher rates - a burden so potentially damaging to enterprise and economic recovery that even the most committed big spenders would surely recoil.

Savings have to be made, and there is no get-out-of-jail-free card. Unemployment will rise. Services will suffer. But necessity may yet drive the change we require: in our public bodies as employees realise that their jobs depend on it, and in Scotland at large if the importance of private enterprise is recognised and a smaller public sector frees space for it to flourish. If, as a consequence, Scotland's rate of early stage entrepreneurial activity were to shift from being among the lowest in 20 developed countries to being among the highest, that would be the most desirable culture change of all - and by far the most important for all our futures. Let us hope that it happens.

• Eddie Frizzell is Visiting Professor of Public Services Management at Queen Margaret University, former head of the Scottish Executive's Enterprise, Transport and Lifelong Learning Department and former chief executive of the Scottish Prison Service