Richard Kerley: Value for money is required

As Lord Raglan found at Balaclava, the view from the hills was not a view shared by colleagues in the valley and the Light Brigade found that out the hard way. So it is with potential cuts; polite and bloodless budget lines at a national level mean tough and bloody choices at a local level.

I see some major flaws of perspective in our discussion so far. First, the high level view is one that looks at the array of public services in an aggregated, Scotland-wide form when the reality is far more variegated. There is an assumption that long-established activities and services are sacrosanct and only recent innovation is to be challenged; and thirdly there is a tendency for people to assume that structural reorganisation is the efficiency-enhancing and low-pain answer to problems.

We live in a country whose population is very inconveniently distributed for the easy provision and financing of public services in the form and to the extent we often assume they should be. Within Scotland we have the three smallest councils in Britain - Orkney, Shetland and Eilean Siar; the largest and smallest councils with housing responsibilities - Glasgow and Orkney; and the smallest police force outside the City of London in Dumfries and Galloway. It is also important to appreciate the marked sparsity of population in Scotland when compared with England. Eight of Scotland's councils are below the population density of the most sparsely populated English council. This population distribution makes it hard to pursue any approach based on consolidation and greater uniformity of services. One of the greatest challenges is the position of schools that operate under capacity, with few pupils enrolled in a school building designed for many more. The reasons for this are complex but in rural areas are typically related to remote locations and sparse populations. Recent figures show the extent of schools with extremely low occupancy rates – less than 50 per cent. In Argyll and Bute, home territory of education secretary Mike Russell, there 47 of 85 primary schools in this position; in Shetland, 14 out of 32; and in Aberdeenshire, 22 out of 151.

This difference between council areas is reflected clearly in patterns of expenditure on those services which are heterogeneous to a far greater extent than education, which is the most uniform council service across Scotland. The relative difference of service expenditure per capita between different councils and different (population-wide) services can be seen by comparing two services as provided by four mid-range councils of different degrees of urbanity/rurality. (Table, right)

The differences of demography, the different levels of service composition and the variations between councils all contribute to the difficulty of effecting reductions in expenditure based on a high level overview of services across the country as whole.

All our current discussion about cuts appears to be heavily influenced by assumptions that the starting point of any major programme review takes 1999 and the birth of the Parliament as Year Zero. The proposals discussed in the Report of the Independent Budget Review where it discusses the costs and benefits of universality actually represent an offer of policy choices based on precisely this "reverse incrementalism".

What has not yet surfaced is any debate about that entire array of services that have for a long time been provided at no user charge, and which often sit alongside similarly organised services for which charges are assumed. In many local authorities the same council department, or quasi department as in Glasgow Life, operates:

• Sports centres, where most of us pay a charge

• Public Art Galleries, where most of can enter for nothing but pay for special events;

• Libraries, where we use most facilities for no charge, but pay for some.

Why the difference?

Are free libraries and art galleries more socially desirable than free personal and nursing care or concessionary bus travel for older people? The reality is that our current set of assumptions about the position of "free" public services are actually circumscribed by legacy and many undiscussed assumptions.

There is also popular attractiveness to any proposed reorganisation of local government in Scotland which, it is argued, will achieve greater coherence, economies of scale and lower cost. Tom McCabe MSP, a former minister responsible for local government, was one who was moved to being a convert for reorganisation before he left office and whose views hardened afterwards. He has written: "It's as good as impossible to justify 32 education directors and the huge tier of professionals below that. You could say the same about finance and social work."

There may be a case for reorganising local government in Scotland - essentially reducing the number of councils and making most of those that remain much bigger - but it is not clear that it can be based on verifiable potential cost savings.

The last reorganisation of local government over the period of 1995-1996 reduced the number of councils from 65 to 32, partially through a process of combination of Regions and Districts to one council – for example in Fife - and partially through the disaggregation of councils such as Lothian to the boundaries of the four districts. Clearly there was no longer a need for 65 Chief Executives but 32 – a saving. However, 12 Directors of Education, Social Work, Highways and the like were replaced by 32.

Despite claims that such changes would save money there is little evidence to support this savings claim. Indeed, the eventual acceptance by the then Conservative government of very modest potential savings through reorganisation was reflected in their financial assumptions for the reorganisation year – 40 million, just 0.75 per cent of total budgeted local government expenditure. Even these claimed savings were never independently validated.

If we took the most heroic of assumptions and assumed that in central and support service costs, reorganisation savings of about 15 per cent are achievable, my estimate of these "back office" savings is that they might amount to somewhere in the order of 140 million.

Research elsewhere suggests that in public service mergers the savings achieved do not generally exceed 5 per cent. That might seem a lot of money but such savings are rarely cost-free and would amount to less than is needed to sustain the current provision of Concessionary Travel on an annual basis. And of course it would probably mean that East Renfrewshire, home of Scottish Conservative leader Annabelle Goldie MSP and East Lothian, Scottish Labour leader Iain Gray's constituency, would both disappear as decision centres moved elsewhere.

If we want to cut public expenditure in Scotland we should acknowledge a variant of the message that allegedly helped get Bill Clinton elected: "It's the economy, stupid". In public services "it's the programmes". The high level aggregation of country-wide programme costs; the sweeping summation of blocks of money and the appeal to apparently popular organisational solutions can be a starting point – but only that.

All such proposals end up in decisions about maintaining, removing and denying services for communities, families and individuals in localities throughout the country; with a lot of friction and a lot of pain.

• Richard Kerley is Professor of Management at Queen Margaret University

Richard Kerley: Value for money is required - but it costs