This report considers how Scotland's systems of regulation, audit, and inspection (referred to as 'external scrutiny' throughout) and complaints handling for public services could be improved. In carrying out the Review, we have taken on board comments from a wide range, and significant number, of stakeholders. We have commissioned work from various organisations, and we have drawn on work done previously by others, and on submissions made to the Review.
Our analysis focuses on strategic issues rather than the operations of individual scrutiny regimes, and we highlight systems-level issues about application, focus, direction, leadership and control of external scrutiny and complaints handling.
We begin by describing the following in relation to external scrutiny:
- The context in which it currently operates;
- What its role and purpose should be;
- Its beneficiaries;
- The principles under which it should operate; and
- Concerns about how existing arrangements fail against these principles.
We then go on to describe the place of external scrutiny in a future framework for performance management, including how it should be applied in the future and the key issues to be considered before it is applied.
The report concludes with a separate examination of complaints handling - an important activity aligned to, and complementary to, external scrutiny.
Conclusions from analysis of evidence gathered by the Review
We have suggested that the unique role of external scrutiny is to provide independent assurance that services are well-managed, safe and fit for purpose and that public money is being used properly. This is an essential function in the system of governance and accountability that will always be required.
We argue throughout the report that primary responsibility for improving services lies with the organisations that provide them, but we recognise that external scrutiny can also be a catalyst for improvement where it influences behaviour and culture of providers, leading to improvements in the way that services are delivered. We have concluded that five principles should govern the application and use of external scrutiny - independence; public focus; proportionality; transparency; and accountability. These principles are well understood and have already been adopted in some form by most scrutiny bodies. We noted a particular issue about the independence and transparency of scrutiny in health.
We have found that there has not always been clarity of role and purpose or principle in the way that external scrutiny has been introduced in recent years. Existing external scrutiny arrangements have evolved to serve Government intentions at particular points in time. Growth in scrutiny reflects circumstances where the governments at the European, UK and Scottish levels have felt the need to increase the indirect supervision of public service delivery through increased inspection, audit and regulation. This is partly because of lack of confidence in service delivery, absence of robust performance management in many services, and partly because of new policy priorities. The growth also reflects the ongoing reality that changes in services, or emerging sector problems and unexpected high profile cases will continue to happen. The Scottish Government's intentions are changing, and it is now seeking to devolve more responsibility for managing and monitoring services to front-line providers and to streamline reporting processes. These developments have contributed to the debate about the role and future use of external scrutiny.
The growth in scrutiny has been accompanied by a growth in scrutiny costs. Providers believe that this has had a significant impact and is diverting resources from front-line delivery. This was particularly evident in local government. However it is difficult to assess costs across different scrutiny regimes, to assess compliance costs accurately, and to judge whether the "right" amount of resource is being allocated to scrutiny activity. There is a similar difficulty in assessing the impact of external scrutiny on performance by service providers. There is therefore a need for further work to enable a more accurate assessment of costs and benefits.
Scrutiny arrangements are complex. This is partly a reflection of the public service delivery landscape. Each external scrutiny regime performs the role they have been asked to perform by the Scottish Government and by the Parliament in auditing, regulating or inspecting public services. We do not question the integrity of individual regimes and organisations, but we do believe that it is necessary now to re-consider the overall aims and desired effect of external scrutiny, with a view to ensuring it is proportionate and minimises workload for providers. Allied to this objective is a need for a realistic assessment about the extent to which external scrutiny is an appropriate response to risks in public service delivery.
Complexity also arises from the way that scrutiny bodies carry out their business and the way they are set up and run. The result is a wide variety of scrutiny methodologies, organisational structures and governance arrangements, and large numbers of different players with the ability and right to both direct and create new scrutiny. Such complexity makes joint working on cross-cutting and complex issues more difficult to organise effectively. We believe there is scope to build more consistent leadership and control to ensure more strategic and flexible use of scrutiny resources.
The creation of the Scottish Parliament has changed the accountability landscape. We suggest that there is a need for a revised model of accountability where independence from Ministers is balanced by responsibility to the Parliament. There is scope to strengthen democratic scrutiny through further refinement of the Parliament's role in the scrutiny process, and for Parliament to be more proactive in seeking assurance. We propose placing a strong and appropriate duty on scrutiny bodies to account to the Parliament for their activities and use of resources.
Given the importance of the public as beneficiaries of external scrutiny, it is important that scrutiny contributes to wider policy intentions to focus services more effectively on their needs. We have found that whilst most scrutiny regimes are working in this direction, there is scope to go further to involve the public more effectively, and to improve transparency, measurement and reporting. Scrutiny bodies will require to work in conjunction with other stakeholders to develop better ways to measure and evaluate provider performance, and will require more involvement of service users and the public in the process. However, this will not be easy. It has to be done in a way that is proportionate. There are cost implications to doing it thoroughly and, as a number of contributors have highlighted, resources may need to be diverted to achieve this objective.
The future of external scrutiny: Recommendations
We propose that the core purpose of external scrutiny is to provide independent assurance within a wider performance management and reporting framework, and that the functions of external scrutiny and the organisations responsible for carrying them out should now operate as a system. This will require a much greater degree of leadership and directed co-ordination than at present, and a much greater focus on performance management and associated self-assessment by service providers. Below is a summary of our key recommendations.
Role, purpose and principles
The unique role of external scrutiny is to provide independent assurance that services are well-managed, safe and fit-for-purpose, and that public money is being used properly. The five guiding principles for external scrutiny should be public focus, independence, proportionality, transparency and accountability.
Scrutiny priorities must reflect the public and user interest. Focusing external scrutiny outputs in a way that is more meaningful to the public should be an overriding principle of any change and will assist both in targeting external scrutiny and in informing stakeholders about performance. The Scottish Government should work with external scrutiny organisations and providers, and consumer representatives to achieve this.
Performance management and self-assessment
External scrutiny is part of a wider performance management and reporting framework. The primary responsibility for demonstrating compliance and performance should rest with service providers. Ministers and the Parliament should accept this principle and continue to support the development of robust performance management and outcome-focused self-assessment amongst service providers.
Over time Ministers and the Parliament should rely more on self-assessment by providers, enabling a reduction in the volume of external scrutiny. In future Ministers and Parliament should consider the extent to which the assurance they require can be provided by providers, before commissioning external audit, inspection or regulation.
Features of a scrutiny system
External scrutiny should operate as a coherent system. The features of this should include:
- Strategic priorities agreed by Ministers and Parliament, and focusing on areas where assurance about public services are most important. We recommend that financial audit should be one of the priorities;
- Core risk criteria agreed by Ministers, and considered by the Parliament, to assess the need for current and future external scrutiny;
- Self-assessment by providers as the main source of information about performance. Performance management frameworks are still being developed, so reliance on self-assessment is a longer term goal;
- Two stages in considering the application of scrutiny. First, there must be an assessment of risk against the core criteria agreed by Ministers. Second there must be an assessment of the appropriate external scrutiny required;
- Where scrutiny is needed, if there is more than one existing organisation, only one should be asked to do the work and to be responsible and fully accountable. Creating a new external scrutiny organisation to attend to the issue should not be an option;
- A timeframe with a preset 'sunset';clause for each external scrutiny initiative or programme;
- Cyclical inspection, audit and regulatory programmes happening only where all other options have been considered and ruled out; and
- Existing scrutiny being removed or scaled back when new scrutiny is introduced.
Responsibility for decisions to create scrutiny should rest with Ministers, the Parliament or the Auditor General. At Ministerial level a Cabinet-level committee or group should take leadership on this. The Parliament should identify a suitable committee or group to take responsibility within the Parliamentary system. Independent expert panels, drawn from the scrutiny sector, service users and providers, should provide advice on the application of scrutiny. Co-ordination of the panels could be provided by the Auditor General.
We propose a revised model of accountability where independence from Ministers is balanced by responsibility to the Parliament. Parliament should become more proactive in seeking assurance. This would involve placing a strong and appropriate duty on scrutiny bodies to give an account for their activities and use of resources to the Parliament, which will require adapting the existing governance and reporting arrangements for scrutiny bodies.
The complexity of organisational structures is a constraint on a strategic approach to developing and delivering an appropriate scrutiny regime across public services. There is a need to remove constraints to joint working and to simplify the scrutiny governance infrastructure. In view of this we are recommending that all external scrutiny organisations should have one "status", with clearly defined lines of accountability to the Parliament and to Ministers.
Costs and impact of external scrutiny
There is a need for work to more accurately assess the costs and impact of external scrutiny. We recommend that:
- Ministers should commission Audit Scotland to develop cost and impact measures to enable comparisons between scrutiny regimes;
- Cost/benefit analysis should become a routine element of any decisions about the use of external scrutiny; and
- Scrutiny bodies should report to Ministers and the Parliament against cost and impact measures.
Reviews of scrutiny activity
The Scottish Government should carry out a programme of specific activity, co-ordinated at Cabinet level, to assess existing cyclical scrutiny activity against the recommendations in this report, with the aim of reducing activity. This should include:
- Cyclical inspection programmes;
- Joint and multi-agency inspection programmes, ensuring that no further joint or multi-agency inspections should commence without first securing the advice of independent experts;
- Thematic inspections, ensuring that these are aligned with the strategic priorities set for external scrutiny by Ministers and the Parliament; and
- Regulatory functions, particularly inspection activity associated with regulation.
We also recommend that future performance audits should be aligned with the strategic priorities for external scrutiny as agreed by Ministers and the Parliament.
All reviews of specific inspection and regulatory functions should also assess the scope for amalgamating bodies with common interests, re-allocating responsibilities to one organisation where there are unnecessary direct overlaps and opportunities to share resources (including staff) to deal with overlaps. The legislative changes required should also be identified as part of this process.
- Existing external scrutiny organisations should review the data they gather, with a view to reducing overall requests and to eliminate any duplicate requests. Ministers should place a high priority on this and ensure that priorities and leadership are assigned to taking such work forward;
- The Scottish Government and scrutiny organisations should develop an external scrutiny website, or portal where all planned scrutiny activity will be logged;
- Ministers should also ensure that parallel work to improve data gathering across public services more generally links with work in the scrutiny sector.
Recommendations for local government and health
We make some specific recommendations for local government and health. In local government we recommend that the Accounts Commission should work with other scrutiny organisations to develop a corporate performance audit which absorbs other corporate level inspections in local government, and that local government should be a priority sector in which self-assessment becomes the core tool of accountability, with less reliance on external scrutiny. We also propose that Ministers should identify and appoint an appropriate scrutiny body to co-ordinate scrutiny of local government until the longer term changes are implemented fully.
We propose one significant change to scrutiny in the health sector, where we believe that, in order to ensure independence, the functions and resources currently controlled by NHS Quality Improvement Scotland ( QIS), along with resources controlled by the Care Commission in relation to private hospitals and related treatment, and some of those controlled by the Scottish Government's health directorates should be redistributed to one external scrutiny organisation.
Single national scrutiny body
In the longer term we expect our proposals to lead to a significant reduction in scrutiny activity and an associated reduction in the number of external scrutiny organisations culminating in a single national scrutiny body. This level of change will require significant commitment and direction by Ministers, the Parliament and other key stakeholders.
We make radical proposals for improvements to the complaints handling system that should give the public better access to redress and scrutiny as well as giving scrutiny organisations better information on the public experience. We recommend a standard time-framed system of complaints handling for all public services with the Scottish Public Services Ombudsman ( SPSO) taking responsibility for its implementation and patrol. We propose that the localised standard complaints process should conclude the public services complaint in a robust and independent manner. There will no longer be a final appeal to the SPSO except in circumstances where the complaints process and methodologies have not been followed.