Can Jack make his budget cuts add up?

"THERE are three kinds of lies," said Benjamin Disraeli: "Lies, damned lies and statistics." Tomorrow the great Tory leader’s axiom will be recalled afresh once again. At the Scottish Executive, a veritable blizzard of numbers and statistics is about to be unleashed.

At long last, it is efficiency day. New plans by First Minister Jack McConnell and his Finance Minister, Tom McCabe, to slash the cost of running Scottish government will be unveiled. The amount the Executive spends on procurement will be cut, administrative functions in departments and public sector bodies will be merged and red tape will be slashed. Such measures, officials claim, will make Scotland a "beacon of efficient government" and the envy of the rest of Europe.

As Scotland on Sunday reveals today, in what is a major U-turn for the Executive, the total savings will amount to £1.7bn in bureaucracy over the next three years, far more than it had previously considered. The cash taken from administration budgets will be redirected to boost front-line services such as hospitals, schools and transport projects.

By any standard, it should be a good day for the government. Ministers’ sudden conversion to save more than was predicted is bound to win over critics who have accused them of low ambition. McCabe and McConnell will hope to portray themselves as worthy guardians of the public’s purse. Yet, despite the Executive’s promises, doubts remain about the veracity and reliability of its figures.

At the Treasury in Whitehall last week, officials who usually do not concern themselves with events north of the Border were remarking drily about the Scottish Executive’s "toytown economics". Meanwhile, senior financial experts in Scotland, poring over the Executive’s figures, were shaking their heads in bewilderment. And at the finance department last week, tired civil servants were forced to burn the midnight oil in a desperate attempt to ensure that the review would be ready in time, giving the clear impression of a last-minute job. Ministers clearly believe their job is done. But questions still linger: will the sums really make sense?

Slashing the cost of Sir Humphrey has been at the top of the political agenda for nearly a year now, since Gordon Brown unveiled plans to reduce costs by £21.5bn over the next three years following a review by Sir Peter Gershon, in a move which will lead to 70,000 civil service job cuts throughout the UK. Brown’s radical measure, the consequence of growing concern about how he could meet spending commitments without raising taxes, hit a public nerve. The Tories were immediately galvanised into launching their own review of public finances, which will report in the New Year. Gradually, the tide of change washed up at the Scottish Executive.

It was slow in starting. Immediately after Brown’s declaration of war on the civil service in March, the then Finance Minister, Andy Kerr, declared brusquely that he would follow his own plans. There was no need for job cuts, said Kerr, for, as some Scottish Executive advisers noted, while Brown was having to act in order to balance his books, Scotland’s budget - set down in stone through the Barnett Formula - would always be assured.

The message was rammed home during the summer, when Kerr told union leaders at a private meeting that he would be amazed if the Executive enacted compulsory redundancies along the line of Brown’s plan. Instead, with critics clamouring for similar cost savings to be made up north, he declared he could square the circle. Yes, savings of £500m would be made from 2007-08, rising to £1bn in 2010. But there would still be no target for job cuts.

Since then, the confusion has spiralled. Kerr’s original pledge - to save £500m from 2007-08 - did not seem to measure up very well to Brown’s plan to cut costs starting from April 2005. But nonetheless, McConnell began to declare that, in fact, Scotland’s plans were even more ambitious than those in London.

In bullish mood in early September, he declared to the Financial Times: "I want us to go not just as far as Gershon, but I think in Scotland we can go further." Critics scratched their heads: for the figures appeared to show quite clearly that while Brown’s cumulative savings over the next three years amounted to 7.7% of total costs, former maths teacher McConnell’s were only 2.5%.

How could this be deemed to be tougher? Furthermore, the Scottish Executive’s plans envisaged savings going on until 2010 - well beyond the current budget period. Professor Arthur Midwinter, the eagle-eyed adviser to the Scottish Parliament’s finance committee, declared: "I personally take the view that it is presumptuous to make targets for a year which falls after the next parliament election in 2007 and for which no budget exists."

His colleague on the committee, former Enterprise Minister Wendy Alexander, asked for some answers, lodging 21 written questions in September in the hope of finding out what was going on. The only answer from Kerr was, in a statement to parliament later that month, that it was better than expected: the £500m savings for 2007 had now grown to £650m.

The back-of-an-envelope atmosphere surrounding the plans continued apace: Kerr was moved to health, the official launch of the detail of the review was delayed twice and new Finance Minister McCabe asked for time to read his brief. Last week, McConnell’s chief financial adviser, Dr Andrew Goudie, in an appearance before the parliament, summed up the confusion. Alexander, a constant thorn in the side of her former colleagues, wanted to know what the Executive’s equivalent sum was in relation to the UK’s £21.3bn savings. "I am not sure that I can give you a precise answer," Goudie replied. And what about the timescale, she added, referring to a recent parliamentary answer she had asked on the comparison between Scotland and the UK. "I am not familiar with that exact parliamentary question," Goudie blocked.

"It wasn’t a very comfortable session," said one member of the committee. "Wendy was obviously on to something. As for Goudie, it was pretty obvious that he knew that they are going to have a hard job explaining all this."

That will be left to McCabe today. Scotland on Sunday can reveal that the £650m savings for 2007 (which was originally £500m) has now been revised upwards again to £750m. And, for the first time, officials have confirmed that at least £950m will be saved in the two years before 2007. The finance department aims thus to save some £1.7bn in the same three years as Brown is aiming for his £21.3bn. According to some critics, this still falls slightly short of the proportionally equivalent sum which would have been cut under Gershon. But, on the face of it, McCabe has managed to prove the Executive is serious about its plans.

The reaction among those who have been closely studying the Executive’s plans over the past few months was one of genuine surprise last night. The moves will be welcomed - but there remain deep question-marks about how ministers got there.

One insider said: "Of course, it’s welcome. For a government that puts such a stress on being cross cutting, their performance has been abysmal."

The source added: "You have Andrew Goudie saying one thing, Jack McConnell saying another and now the Finance Minister is coming up with something completely different. It is a bit bizarre."

Even Executive officials were having trouble explaining it. Confronted by a statement by Kerr in June in which the former Finance Minister explicitly stated that savings would begin "from" 2007, one replied: "It depends what you mean by the word ‘from’."

One thing clear is that McCabe’s announcement represents a major U-turn of government policy. Well-placed sources within the Executive say that there was no doubt that up until very recently, the plans to cut costs only related to the years after 2007. Under McCabe, it now appears that civil servants will be forced to cut their cloth much sooner.

"There have been substantial changes," said one insider. "It would be fair to say that this has been an active process. It has evolved."

Speaking to Scotland on Sunday last night, McCabe insisted his figures would stand up to scrutiny.

"I am determined to only release figures which we can properly justify," he said. "We need to demonstrate that from the expense we incur we are prepared to make efficiencies. It is important within the whole of the UK because Scotland does get a lot of resources and it would be wrong if we took it for granted."

Down south, Gershon’s plans will be independently audited to ensure that they are followed. McCabe said that, here, Audit Scotland would take a similar role. Meanwhile, McCabe is also to produce a lengthy technical document within the next two months which will demonstrate how the savings in individual departments will be made. This too is designed to deflect claims that the Executive is failing to match the tight stricture of the Gershon review, which even details how many jobs should be cut in individual departments.

It is on this question that McCabe remains less than frank, however. Scotland will still hold back from ordering job cuts, though the Finance Minister predicts that it is highly likely that some posts will go.

He said: "We are not going to set an arbitrary job cuts target, but we will need to be honest with people. We expect in the public sector for there to be less people working in back-office jobs and more people in front-line services. We have a presumption against compulsory redundancies. We will do all we can but if we are squeezing these functions then there may be less people working in the public sector as a result."

That, observers note, is inevitable. "If the process in England is generating 70,000 job losses, to claim that this can be done without any job losses in Scotland is just unbelievable," said one Labour source. "If we are going to match this then there will simply have to be job cuts."

The question over whether McCabe’s sums will indeed add up will only be answered once his report is published in full tomorrow. The number-crunchers will be waiting to see whether the Executive can actually be believed.

Hanging over the affair are the lessons of what it reveals about the way of working in Jack McConnell’s government. Tomorrow may offer some light, but for six months, party colleagues and financial experts have been left is a state of complete confusion.

As a result, their doubts still linger. Asked about McConnell’s figures, one source at the Treasury said: "It just seems a bit unconvincing. They [Brown’s officials] aren’t sure where he [McConnell] got his figures from."

Midwinter added: "The Executive have not yet produced any convincing numbers to show that they are tougher than England or a convincing explanation as to why they think their figures are tougher. The issue now is whether the First Minister will clear this up."

The voters, the unions and the Treasury are watching.

U-turn if you want to

EURO 2008

JACK McConnell first displayed uncertainty just a few weeks into his tenure as First Minister. He had been deeply sceptical over plans by his predecessor, Henry McLeish, to bid to host the Euro 2008 football championships. McConnell allowed it to be known that he was against the bid on the basis that it would be a waste of public money - and then decided that he was in favour of a joint bid with Ireland. The effort flopped amid claims that he was lukewarm, despite his public protestations of support. Cynis also suggested that the Irish link-up had been a ruse to wreck a bid McConnell never wanted to make in the first place.

D-DAY

MCCONNELL found himself at the centre of a storm when he opted for a golfing dinner at St Andrews instead of the 60th anniversary commemorations of D-Day. The First Minister eventually decided to go to Normandy, but his decision to do so, and the accompanying apology, was seen as grudging and petulant. He blamed the media, veterans, advisors and indeed anyone else but himself for his plight. By some distance the lowest episode since McConnell came to power

SMOKING

MCCONNELL had been a fervent sceptic of proposals to have smoking banned in pubs and restaurants, claiming that it would damage the party in Labour heartlands, a view shared by close Labour ally John Reid. The First Minister has since buckled to pressure from the Liberal Democrats and party colleague Tom McCabe, left, and has now become an enthusiastic backer of a smoking ban. He claims to have seen the light during a visit to Dublin to see the Irish smoking ban in practice.

ROADS

AS finance minister McConnell was part of a cabinet which halted major new road developments in favour of trying to move traffic off the roads and encourage green options and public transport. Since becoming First Minister he has changed policy and begun the biggest road-building programme in many years, much to the fury of the enviromental lobby and several Labour and Lib-Dem colleagues

BUSINESS RATES

AFTER many years in a cabinet which argued that Scots were not being penalised by high business rates, some of them as finance minister, McConnell’s Executive last year agreed to a freeze on increases in business rates to allow hard-pressed Scottish businesses some respite from the costs of government.