Implementing Atkinson in Scotland Sandy Stewart Office of Chief Economic Adviser 31 January 2006

History Interim Report – July 2004 Final Report – January 2005 Implementation Strategy for Scotland – April 05 Action Plans – updated quarterly Working teams set up in Scottish Executive. Established strong links with ONS.

Working Groups in Scotland GDP Health Education Social Protection Public Order and Safety

Relevance FEDS – emphasis on productivity Spending Review – emphasis on VFM Gershon – Efficient Government UK National Accounts – move to output Scottish GDP – Quality Improvements Allsopp – Drive to improve regional economic statistics

Actions Supply data to ONS for UK National Accounts. Replicate productivity analysis for Scotland. Ensure UK assumptions make sense for Scotland. Consider inclusion in Scottish GDP system. Consider policy relevance to improve our understanding.

Definitions Value Added = Outputs – Inputs Real Value Added = Real Outputs – Real Inputs Productivity = Real Outputs/Real Inputs Efficiency = positive change in Output/Input

Public Services in Scotland Public Services – 21% of GDP – Of which: – Health – 32% – Education – 30% – Social Protection (PSS) – 12% – Public Order and Safety – 10% – Other – 16%

Health GDP – number of employees (proxy input measure) Inputs – consider all input costs Outputs - cost-weighted activity index Considering value-weighted activity index Quality – adjustments – health improvement, York/NIESR study

Education GDP – Number of teachers (inputs) Move to pupil numbers adjusted by attendance Quality adjustments – based on attainment Considering adjusting output to real earnings growth Issues – extra curricular activities

Inputs to the Education System

Output Index for Education Using Different Quality Measures

Implied Productivity Index for Education Using Different Quality Measures

Emerging findings - Output Looked at different quality measures Prefer combined threshold rather than standard grades Need to justify increasing output by real earnings growth

Emerging findings – Implied Productivity All output measures produce a fall in Implied Productivity due to: – Substantial growth in Inputs to Education (e.g. 53,000 teachers commitment – Fall in pupil numbers limits output growth despite steady increase in quality.

Social Protection GDP – staff numbers (input proxy) Move to cost-weighted treatment. Financial data a problem due to complexities in service provision. Policy issues – Free Personal Care, Direct Payments, Supporting People.

Public Order and Safety GDP – employment based Cost-weighted activity indices for outputs Quality adjustments – recidivism, benefits of alternatives to custodial sentencing Costs of crime prevention Home Office modelling work

Scottish Issues Costs not uniform – providing services costly in rural and remote places. Demography Political differences Divergence