How do you tackle a £5bn black hole in the country’s finances?

The first minister put public service reform at the fore of his Programme for Government earlier this month.

While he spoke of renewal, progress and shifting resource to frontline services, what he did not mention was that without action many of our existing structures are unsustainable.

Auditors have warned the government that it is facing an almost £5bn funding gap by the end of the decade.

So we asked a panel of experts, how would they tackle this black hole?

David Phillips, associate director at the Institute for Fiscal Studies

A focus on four Ps will be vital. First is productivity. Public service reform is about more than just reducing costs, but delivering more for the Scottish public from available funding must be at the heart of it. Boosting public sector productivity is about more than just back-office savings and efficiencies. It requires changes to how frontline services are delivered.

Second is prevention. Preventative services can help reduce costs and improve outcomes by tackling issues earlier.

Third is prioritisation. There simply won’t be enough to do everything the government wants to do. It will need to make cutbacks in some areas to deliver its priorities – or consider increases to devolved taxes.

Fourth is pay (and employment). Pay makes up well over half of the Scottish Government’s day-to-day budget and recent years have seen both pay and employment overshoot plans. Pay restraint and job cuts are never easy but could help fund service transformation and square a hugely challenging budget circle.

Geoff Mulgan, professor of collective intelligence, public policy and social innovation at UCL

Many governments are struggling with fiscal pressures and costly debt. Some of the answers aren’t new: cutting and trimming existing programmes, being sharp about which ones really deliver value, and finding new sources of tax revenue (from digital to land and wealth).

Doge (the US Department of Government Efficiency) was a terrible example of how to drive efficiency, but every government needs energetic teams focused not just on savings but also on simplification, since all bureaucracies tend to expand processes and roles. AI is not a magic wand, but much of what government does can be done much more efficiently – from service interactions to payments and policy design. However, that will require very different organisational models, closer to the ‘stacks’ which are common in communications and computing.

Significant reductions in headcount are very hard in prisons, schools and hospitals but very feasible in other parts of the government machine, and essential if governments aren’t to be trapped in cycles of debt and decline.

Ian Elliot, senior lecturer in public administration at the University of Glasgow

The five-year programme and corporate plan provide a good foundation as key elements of a strategic state. The key task is to connect that national strategy, including our national outcomes, to local delivery.

We need to start by listening to those who deliver and those who use our public services. Innovation, collaboration and prevention are already happening, but it can be tempting to launch new initiatives rather than learn from and build on what works. Caution is needed before pursuing restructuring or further centralisation as this can be disruptive, expensive and a distraction from improving services. We also know that bigger organisations are not necessarily better or more efficient. Instead, I would pursue further subsidiarity, delegation of responsibility and more proportional reporting and performance-management, while strengthening accountability for national outcomes.

Public service reform should empower public servants, move resources towards prevention, and stop work that does not advance Scotland’s priorities.

Oliver Escobar, chair in public policy and democratic innovation at the University of Edinburgh

First, stop thinking reform alone can plug a £5bn gap; that scale requires political choices about tax, spending and what public services should protect.

Scotland does not need another reform agenda; it needs to join up the ones it already has. Make [the Christie Commission] real: shift resources upstream, integrate services around people and places, and pool budgets so investment by one service saves another money.

Bring public health, community wealth building and the local governance review into the reform architecture: improving population health, strengthening local economies, and shifting power, budgets and decisions closer to communities. Use technology to cut administration, not human relationships.

Make the trade-offs democratically. Citizens, communities and frontline workers know where systems duplicate effort, fail people and create avoidable costs.

Share power over priorities, redesign services with those who use and deliver them, and decide openly what to prevent, stop and protect. That is democratic public service reform.

Stephen Boyd, Scotland director at IPPR

There is no ‘black hole’ in the public finances but rather a measurable gap between forecast spending and revenues. This can – must – be tackled through tax increases, spending cuts or, as politicians very much like to pretend, ‘efficiencies’. It seems the first minister believes the latter will be sufficient. He will be disappointed.

As the Christie Commission set out very clearly in 2011, there is much that can be done to improve and reorganise public services. The first minister’s problem is that such ‘reforms’ won’t deliver savings of the requisite scale over the course of this parliament.

If Scotland truly wishes to be a progressive 21st century social democracy, this is the moment to finally confront the inevitable trade-offs. Total tax revenues will have to increase, and we will all have to shoulder the burden. Public services at the level and quality demanded by the public cannot be sustained by consolidating a few quangos.

Anna Fowlie, chief executive of SCVO

Firstly, the Scottish public sector should get serious about investing in prevention. We waste money paying for failure (eg acute health and criminal justice services) when earlier investment of significantly less money would have prevented the expensive problems occurring in the first place.

Secondly, we should work collectively in communities rather than clinging to out-of-date, siloed institutions that aren’t delivering what people in the 21st century want or need.

Finally, national and local politicians should engage with the public around what actually works to change the discourse away from spurious point-scoring. If all the public hears is that numbers of nurses or police officers are more important than keeping people healthy and safe, more money gets poured into the wrong things.

Mainly, it comes down to eradicating poverty and inequality. We’ve known this for decades. Just get on with it.

Neil Findlay, former MSP and director of Unity Consulting

The public sector jobs cull is a dreadful idea and will be vigorously and robustly opposed by the entire Labour movement. What the government should be doing is addressing areas which suck money out of public services. Examples include the catastrophic amount of cash wasted on keeping people in hospital at a rate of over £4,000 a week when they should be at home; the huge backlog in the courts system; and the criminal wasted opportunity offered by public and community-owned renewables which have instead been exploited by the private sector.

These are areas where very significant amounts of public money could be saved or generated if there was the political will – sadly there doesn’t seem to be any and instead the Scottish Government are intent on a brutal Thatcherite jobs cull.

Sarah Davidson, chief executive of Carnegie UK

Pressure on Scotland’s finances might have forced public service reform to the top of the government’s agenda, but short-term cash savings can’t be the overriding rationale for changes to the devolved state.

Rather, ministers and officials must design reforms around what will improve the lives of people in Scotland. This is not only the right thing to do, but if done well could also put the country on the right fiscal track. That’s because population level improvements to wellbeing should mean fewer people in desperate need.

The Scottish Government should use the revamped National Performance Framework as the prism through which to consider reform, looking closely at how all public bodies contribute to long-term improvements to our wellbeing.

Structural changes to Scotland’s public sector landscape may be necessary, but they won’t be sufficient to achieve this and we shouldn’t pretend that they will yield either short-term savings or overnight impact.