Fiscal sustainability delivery plan

Pillar 1: Ensuring public money is focused on delivering government objectives, underpinned by reform and prioritisation to maximise impact

Measures

• Increasing public value
• Efficiencies and productivity
• Service reform
• Prevention

Key Actions

• A multi-year resource spending review to better prioritise spending and increase value for money.
• Controlling the public sector paybill through managing pay growth and the devolved public sector workforce.
• Public sector efficiencies realised across all areas of government, including a focus on reducing the cost of corporate functions.
• Reform of public services addressing medium to long-term spending growth.
• Reduce demand-led spending through preventative measures that reduce public service demand.

Building on our 2023 aim to focus spending on our priorities, our approach is based on the following four key measures and is closely integrated with the recently published Public Service Reform Strategy^[12]. This approach recognises that improving the public finances requires a cross-public sector effort over the medium to longer term.

Pillar 1 measures and actions are as follows:

Increasing public value. Ensuring funding is fully focused on delivering the Scottish Government’s priorities and maximising the impact of available investment. Actions being taken forward are:

• Identifying and prioritising higher impact spending, with a specific focus on those areas of spend that meet Ministerial priorities, including achieving statutory targets on child poverty and climate emergency.
• Reviewing all spending lines across government and identifying savings options which allow outcomes to be delivered for less resources.
• Reviewing opportunities to target existing spending more effectively, to provide maximum support to those who need help most.
• Reviewing options for public bodies to more effectively raise revenue from government services.
• Improving the evidence base for the impact of existing spending and new spending proposals, to drive evidence-based investment/disinvestment decisions, supported by the Scottish Government’s Centre of Expertise in Appraisal and Evaluation.

Further information on the contribution expected from individual Scottish Government portfolios, and the policy measures to be taken to achieve savings, will be set out at the next Scottish Spending Review, which will be published alongside the 2026-27 Scottish Budget later this year.

Efficiencies and productivity. Focusing on business improvement and increased productivity to secure the same or better outputs for lower cost, driven through the Public Service Reform Strategy and aligned with a public sector workforce reduction target. The key actions that are expected to contribute to closing the projected resource gap over the medium term are as follows:

• Public sector efficiencies realised across all areas of government, including a focus on reducing costs of corporate functions, as well as looking across all areas of service delivery. The Public Service Reform Strategy’s Efficiencies pillar will release efficiency savings over the next five years by reducing the cost of corporate functions, including workstreams on data collection, digital skills and resource, shared services, scaling intelligent automation, expansion of national collaborative procurement, commercial value for money and shared estates, and reviewing the public service delivery landscape. In addition to savings on corporate costs, opportunities for improving efficiency and productivity, whilst maintaining or improving outcomes, will be sought across all areas of service delivery. Portfolio examples in Health and Social Care and Social Security are outlined further within this plan.
• Public sector workforce reduction target. Planning for a managed downward trajectory for the devolved public sector workforce in Scotland (0.5 per cent per annum on average over the next five years) as part of a shift in workforce plans and operating models because of service re-design, automation, process improvement, re-prioritisation, mergers, and shrinking corporate functions. Frontline services will remain protected as this is taken forward.
• Public sector pay. Ensuring the Public Sector Pay Policy continues to set the framework for fair and sustainable pay increases for staff, with a focus on multi-year pay metrics. Supporting co-ordination of the devolved public sector paybill across the devolved public sector through robust governance arrangements and development of a workforce management policy and control framework.

Recognising that releasing efficiencies often requires initial investment, we intend to continue with the Invest to Save fund beyond 2025-26. This will be considered further as part of the upcoming Scottish Spending Review.

Further detail on the actions being taken forward across our key areas of spending growth is set out below.

Efficiencies and productivity: a focus on workforce

A key component of the efficiencies and productivity measure relates to the public sector workforce, which now accounts for over half of the entire Scottish resource budget. It is important that we manage the size and shape of our public sector, and the impact of pay rises, in a way that reflects the value of our public services while ensuring we can sustain these costs into the future. We will do this in partnership with trade unions and public bodies.

Our workforce strategic position is:

• Planning for a managed downward trajectory for the devolved public sector workforce in Scotland (0.5 per cent on average reduction per annum over the next five years) as part of a shift in workforce plans and operating models because of service re-design, automation, process improvement, re-prioritisation, mergers and shrinking corporate functions. Frontline services will remain protected as this is taken forward.

In order to support this, we will focus on:

• Workforce planning. Consult, develop and implement good practice workforce planning guidance for public bodies to meet the needs of reformed services. This will include highlighting existing service demand, capability building and budget scenario planning, allowing for a more data-driven approach in the lead up to the Budget and Scottish Spending Review.
• Workforce Management Policy and Control framework. This will set the principles, parameters and metrics, governance and controls required to operationalise our approach to workforce management in public bodies, integrated with the Public Sector Pay Policy to underline the connection between these two drivers of public spending. It will also include public bodies planning the balance of recruitment with natural attrition to enable an overall reduction in staffing levels.
• Promoting best practice and guidance for existing severance policy. Many public bodies implement their own voluntary severance scheme in order to re-shape their workforce. We will provide public bodies with best practice principles of using such schemes.
• Redeployment. We will take forward, with public bodies, longer-term work to explore ways to optimise redeployment opportunities across the Scottish public sector.
• Improve transparency of workforce information. The publication of key workforce statistics and trends in line with Audit Scotland recommendations, with the Pay and Workforce factsheet (published at Annex D of the 2025 MTFS^[13]), the first step in this process.

Efficiencies and productivity: a focus on Social Security Scotland

Social Security Scotland continually seeks to identify and implement improvements to how benefits are processed and delivered. This approach will help clients easily access the benefits they are entitled to and, importantly, drive efficiency savings.

Improving communications to clients at every stage of their application journey also helps to improve the client experience and reduce processing times. Operational delivery improvements will focus on improving performance and productivity alongside the delivery of internal savings and efficiencies, such as the continued automation of some payments.

Reflecting on an independent assessment of core digital services, Social Security Scotland will continue to invest in critical digital services and platforms to support safe and efficient delivery of benefits to clients. They will develop a strategy by Autumn 2025 for a new Client Payment Platform as the first step in the development of a multi-year business case for future investment in a payment platform. This will develop critical national infrastructure with potential to be used by other public bodies.

While fraud and error represent a low proportion of overall benefit expenditure, to ensure we use public money correctly and fairly, Social Security Scotland will continue to pursue initiatives which increase its ability to tackle fraud and error where it does occur, including the recovery of overpayments. Fraud is often carried out by sophisticated and dynamic criminal actors. To keep pace with these advancements, we will invest in systems and improvements in technology to identify fraudulent activity and recover funds. Social Security Scotland will implement a range of improvements and ensure readiness to implement new legislative powers to measure the monetary value of fraud and error.

Efficiencies and service renewal: a focus on Health and Social Care

Delivery of efficiency and improvement has been a key focus for the Health and Social Care Portfolio and reflects the commitment to ensure use of core resources is optimised and best value is delivered across NHS Scotland. The key elements of our approach to efficiencies and service renewal include:

• A commitment to delivery of 3 per cent recurring savings against core funding for NHS Boards, supported by a targeted and continuous programme of efficiency and productivity improvement, informed by data analytics, benchmarking, principles of value-based health care and national adoption of best practice. For example:
  • NHS Boards and Health and Social Care Partnerships are delivering a comprehensive set of actions aimed at ensuring value for money is delivered in relation to use of medicines;
  • The Centre for Sustainable Delivery is supporting the rapid rollout of new techniques, innovations and clinically safe, fast and efficient pathways for the benefit of Scotland’s patients;
  • A National Procurement service is negotiating contracts on behalf of NHS Scotland and driving value from our supply chains; and
  • All NHS Boards are managing and delivering a nationally agreed programme of improvement opportunities.
• In addition to a focus on enhancing efficiency and productivity, we are applying a Once for Scotland^[14] approach – an ethos of national consistency in policy and practice that ensures services are designed and delivered in a unified, streamlined way across the country. Aligned to this commitment, the delivery of NHS Board corporate service functions and national board functions will change through an ambitious business transformation programme, which will create new opportunities for optimisation and innovation. Our Service Renewal Framework^[15] details the formation of NHS Delivery to create a national centre of excellence in areas such as digital delivery, education and training, and the provision of national services.
• The Service Renewal Framework will also help us seize the opportunities presented by the rise of innovation, digital, and treatment advances, helping to shape a health and social care system that is efficient, high quality, and good value for money. To support service renewal, NHS Boards and staff will be empowered to work in more collaborative, flexible ways across territorial and organisational boundaries and to reduce duplication, variation, and maximise value across people, finances, and infrastructure. Improving our digital capabilities and embracing Artificial Intelligence (AI) and data-driven tools, will help drive reform of our services, improving efficiency and unlock productivity gains – freeing up resources for frontline care and enabling smarter, more responsive services across Scotland. The Service Renewal Framework adopts a “national by default, local by exception” approach to digital initiatives, ensuring consistency and value. We must respond to the challenging financial environment and achieve sustainability for the health and social care system and our approach as set out above will ensure that we can make the change necessary and continue to deliver services that are accessible, available when required and deliver best outcomes for the people of Scotland.

Service reform. Changing the way we deliver services to secure the same or better outcomes for lower cost in the longer term, enabled and driven through the Public Service Reform Strategy and reform programmes already in train. The following are key reform programmes and actions underway across the Scottish Government that we expect to have a positive impact on the public finances in the medium to longer term:

• Health and Social Care service reform . Driven through the recently published Health and Social Care Service Renewal Framework and NHS Scotland Operational Improvement plan, with reform coming from clear prioritisation, innovation, reforms of models of care, systems and structures, and how we improve performance.
• Social Security Disability Benefits. Social security statistics^[16] show a lower rate of adult disability benefit awards being ended or decreased at review than previously forecast. While Adult Disability Payment is a new benefit and will take some time to fully settle, and therefore a difference would be expected, we will assess whether the current award review process is working as intended and if any changes may be required. This will aim to ensure the review process continues to meet the eight principles contained in the Social Security (Scotland) Act 2018^[17] including that the system is to be efficient and deliver value for money, whilst maintaining our commitments to supporting disabled people, treating clients with dignity, fairness and respect, and maximising benefit take-up.
• Justice reform. Driven through the Vision for Justice Delivery Plan^[18], our vision is for a just, safe resilient Scotland, with reform expected to positively impact on fiscal sustainability coming from actions that use a full range of solutions to reduce the need for, and pressure on, justice services. This includes actions to reduce demand across the justice system including on policing (e.g. for those in mental health distress) and to reduce the demand on, and increase efficiency in, the court system (e.g. through the rollout of the Digital Evidence Sharing Capability System).
• Education and skills reform. Our Education Reform programme^[19] and our Post-School Education and Skills Reform programme^[20] will simplify the education and skills public body landscape, reduce duplication of services, implement digital transformation, and strengthen national support and skills planning, to better support learners to navigate the system, enhancing their learning experience and creating a system more responsive to Scotland’s needs.
• Joined up models of service delivery. Changing our model of service delivery, particularly for people with the greatest disadvantage or most complex circumstances, to integrate support, and empower the frontline to bring together all the resources people and families need to thrive. This model of service delivery also reduces duplication and cost in the system. This will be further enabled by actions under Pillar 2 of Public Service Reform Strategy, to simplify the policy landscape, improve data sharing, and better integrate services locally.

Prevention. Investing in the most impactful preventative spend to reduce service demand in the medium to long term. The Public Service Reform Strategy sets out the actions we will take to unblock systematic barriers to prevention. The following are key strategies and actions underway across the Scottish Government that we expect to have a positive impact on the public finances in the medium to longer term:

• The Population Health Framework^[21], published on 17 June, sets out our long-term (10-year) approach to primary prevention. Building on the positive and innovative actions we are already taking across areas, including tobacco, alcohol, diet and healthy weight and physical activity to improve population health and reduce health inequalities, the Framework focuses on improving social and economic determinants; improving places and communities; creating environments that support healthier living; delivering more equitable health and care services; and creating a more prevention focused system.
• ‘Best Start, Bright Futures’^[22], the Scottish Government’s second Tackling Child Poverty Delivery Plan, sets out how we will continue to drive forward cross-government action to tackle child poverty; improve outcomes for families and support every child to reach their full potential; help to break the cycle of poverty and reduce demand on public services such as the NHS and criminal justice system in the long term. This includes through:
  • Fairer Futures Partnerships;
  • Employability Programmes, including No One Left Behind;
  • Investment in social security, including our five family payments;
  • Keeping the Promise Programme;
  • Getting it Right for Everyone;
  • Bairns Hoose;
  • Scottish Attainment Challenge.
• The Early Child Development Transformational Change Programme^[23] provides an overarching structure and framework, based on the principles of quality improvement, to improve early child development. It seeks to provide stronger oversight to ensure better integration of policies and a focus on using current evidence and data to identify and address gaps in both policy and implementation for the pre-birth to three period.
• Tackling poverty more generally, through completing the Social Security Programme, at which point Social Security Scotland will deliver the Carer Support Payment; Pension Age Disability Payment; Pension Age Winter Heating Payments; Carer Additional Person Payment; and Scottish Adult Disability Living Allowance.
• Taking early action to prevent young people entering the criminal justice system through the Cashback for Communities initiative. Prevent reoffending and support rehabilitation through shifting the balance between custody and justice in the community, which is often more effective in supporting rehabilitation, and supporting people in custody to prepare for successful release back into their communities.
• Introducing legal duties to prevent homelessness. Delivering homelessness prevention pilots; helping partners prepare for new legislation and supporting successful implementation; investing in discretionary housing payments to help people remain in their homes, and increasing the supply of affordable housing, all of which help to reduce pressure on other public services, including the NHS, Local Government and the Justice System.

Actions set out under the Pillar 1 efficiency and reform measures are expected to generate significant cashable savings within the five-year MTFS period, as follows:

• A Workforce reduction target of an average 0.5 per cent reduction per annum over five years, protecting frontline services, with savings growing from £0.1 billion to £0.7 billion per annum over the five years;
• Wider public sector efficiencies and productivity, reform, and revenue raising, with savings growing from £0.6 billion to £1.5 billion per annum over the five years;
• Increasing public value, to be set out in the Scottish Spending Review, with a savings target of between £0.3 billion and £0.7 billion per annum over the five years.

Additional savings will be realised beyond the five-year MTFS period through the ongoing impact of reform and prevention measures. Savings from prevention activity have the potential to be significant, as is highlighted in the Public Service Reform Strategy and Population Health Framework, meaning these actions will further support fiscal sustainability in the longer term. The Scottish Exchequer will support these programmes to understand the preventative impact and will continue to track and monitor the impact on the public finances.