Nation (re)building: Can Ivan McKee make public service reform work?

A new Scotland is promised: a slimmed-down state, agile, and with a focus on preventing social ills, not curing them after they arise.

Public service reform (PSR) will be the “defining task of this parliament”, according to the cabinet secretary tasked with its delivery. “We are not making marginal changes,” promised Ivan McKee. The state is to be “reimagined as an enabler”, he said, with the whole system “rewired” to cut waste and drive efficiency and those savings redirected towards frontline delivery. “No one who uses or works in public services would say that they are as streamlined or seamless as they should be,” he told the chamber.

That McKee is the man given this responsibility is hardly surprising. This former businessman, who has held four previous ministerial positions over a decade-long parliamentary career, has been banging the PSR drum for years, and as public finance minister in the last session led work on a reform strategy which now forms the basis of the new tranche of work. “Government should be tighter and leaner,” McKee told Holyrood in 2024. “The public sector needs to be as big as it needs to be to deliver great public services, but no bigger,” he went on. “Where we can do things better with less resources, that’s absolutely where we’re going.”

With a looming black hole running into the billions of pounds, there’s little time to waste. The Scottish Fiscal Commission has said the gap could extend to £4.7bn by 2029-30, making the day-to-day budget a painful £2.6bn short of commitments and the capital budget £2.1bn shy.

McKee has taken the job in a cabinet which itself has been reformed and slimmed-down. John Swinney has gone from 11 cabinet secretaries to eight and given McKee support in the form of Hannah Mary Goodlad. The first-time MSP was appointed public finance minister after a career in oil and is one of the most highly-rated of the SNP’s new intake, despite that lack of parliamentary experience.

And while their task is undoubtedly practical, it is also highly political and will require careful stewardship if the workforce and the public are to buy into the changes. “We’re rewiring the plane while it’s in flight,” McKee told The Times. “We’re trying not to crash it and trying not to run out of fuel, but it’s essential.

Everyone and their dog knows what public sector reform means. It is manager-speak for cuts

“It needs to be done. This isn’t something we’re just about to launch, this is stuff that’s been going on for a wee while in various guises. But we’re scaling up and accelerating it.”

Indeed, McKee is impatient for change and as someone with a successful track record in business can get frustrated at how long the wheels of government and decision-making can take. He will need to work across every portfolio looking for backing for his plans,  and the fact that he is something of an SNP outsider with no obvious long-standing allegiances could be to his advantage as he makes sweeping and sometimes difficult decisions. 

The SNP has arguably been the party of the ‘big state’ – an expanded landscape of bodies which have in some cases taken on functions recently fulfilled by Westminster only, and in others have been originated to deliver on commitments to the public. 

The party’s tenure has included not only the most generous pay settlements in the UK – the bill extends to £27bn and accounts for more than half of the Scottish Government’s resource budget – but also the set-up of Social Security Scotland and The Promise Scotland, for example, and the number of public sector bodies now surpasses 130. 

There are so many, in fact, that in the last parliamentary term a committee urged against the creation of any more commissioners to oversee public services, calling the practice neither “effective nor sustainable”.

Public sector employment levels have also increased across the rest of the UK since 2013, thanks in no small part to NHS expansions. Here, overall headcount hit around 551,500 at the end of 2025 and the government has signalled that 11,000 posts will go as part of its reforms. 

Compulsory redundancies will be avoided, it has said, and the 6.5 per cent annual staff turnover rate is presented as an opportunity to save on salaries.

We have already shown what is possible

Reform’s not just about headcount, McKee has said, but about systems, procurement and estates. But it’s certainly easier if you can take the workforce with you, not least those belonging to trade unions. Partnership working is the goal, McKee told parliament. But there was outcry when Deputy First Minister Jenny Gilruth showed a little too much enthusiasm on Radio Scotland. 

Asked about the necessary savings, Gilruth presented it as a “really exciting” opportunity for service redesign – wording that didn’t go down well with STUC leader Roz Foyer. “Everyone and their dog knows what public sector reform means. It is manager-speak for cuts,” she wrote in a column for The Herald. “These cuts aren’t a secret. Under the guise of reform, the SNP plans to cut the public sector workforce by 0.5 per cent in this parliament. The IFS [Institute for Fiscal Studies] estimates this would amount to cutting 18,000 public sector jobs over the next five years. By any standard, this is austerity wrapped up in a yellow rosette.”

That’s an accusation McKee is at pains to reject. He wants to maintain and even increase frontline services in education, health and justice, he said.

The government has said that reducing poverty by 25 per cent by 2030 would cut expenditure on public services by £2.9bn – which, if achieved, would also help to deliver on Swinney’s mission to tackle child poverty.

Rather than headcount cuts, McKee wants to focus on other steps he says will create big change: closing offices, reducing duplication and sharing services like payroll and HR, or even merging some public bodies. These processes have already started, with NHS Education for Scotland and NHS National Services Scotland joining up into Public Services Delivery Scotland in April.

“We have already shown what is possible,” he declared in the chamber, heralding a £300m saving over two years on procurement and a projected £50m saving through the closure of buildings, 13 of which have already shut. More than 140 processes have been automated, he said, resulting in £15m of costs avoided. Digital platforms like ScotPayments and the coming mygov.scot app will make life easier for those running and using core services.

Will this government resist the urge to centralise and direct from the top?

But there’s scepticism from critics about how much the increased use of AI and automation can achieve, and on whether quality of output can be protected.

McKee has said the rest of the cabinet is “100 per on board with this important agenda and the first minister has his weight behind it”. Indeed, in a speech to Prosper (formerly the Scottish Council for Development and Industry) in June, Swinney said the shift would be outcomes-focused. “Instead of starting from the needs of the system, we must more clearly and fully start from the needs of the citizen, of the business, of the community,” he told the trade body.

Even so, it’s hard not to wonder whether, as the face of change, McKee will function as a flak magnet for a minority government which, 15 years after the Christie Report laid out a blueprint for public service reform, is finally going to take those tough decisions.

“Undoubtedly Ivan McKee has a very big challenge in front of him,” said Dr Ian C Elliott, a senior at the University of Glasgow’s Centre for Public Policy. “But he is now one of the most experienced members of the Scottish Parliament, with considerable experience from previously being minister for business and minister for public finance that will serve him well in his new role.

“Perhaps the biggest challenge for Mr McKee will be in building consensus across the wider public sector on what this change should look like.” 

McKee has “stressed the need to empower staff, service users and communities”, Elliott said. “But as previous governments have found, it is one thing to empower others but another thing altogether when they use that empowerment to do things that you hadn’t expected or don’t necessarily agree with. Will this government resist the urge to centralise and direct from the top? Once again, implementation will be key.”

Even the information commissioner has said that he is astonished at the number of public bodies

As well as working with unions and outside bodies, McKee will also have to deal with cross-chamber colleagues. Labour has given the brief to returning finance spokesperson Michael Marra, the Lib Dems have handed it to newcomer David Green, the Tories have made Murdo Fraser their man. For Reform UK, which stood on a manifesto advocating the scrappage of all quangos, leader Malcolm Offord will shadow McKee, and for the Scottish Green Party, Lorna Slater will do the same. 

As a minister, Slater was responsible for the handling of the Deposit Return Scheme (DRS), which was passed by MSPs despite industry opposition and ultimately shelved under Humza Yousaf after Westminster refused the UK Internal Market Act exemption required to enable trading changes. Circularity Scotland, the non-profit company set up to operate the DRS, collapsed with the loss of £9m of public money and debts of £83m. And so Slater’s appointment, over all others, has raised eyebrows across the aisles. 

However, she was part of that cross-party review into the public services landscape, as was Fraser, and so knows the territory well.

And while the Greens are broadly supportive, as they tend to be, of the Scottish Government’s plan here, that support is not without caveat. The party wants more conditionality over wages and climate actions to be attached to public sector procurement, grants and economic development funding and would prefer more infrastructure and services – buses and ports, for example – to be in public hands. 

While there may not yet be consensus on the exact shape reform should take, there is a least agreement that change is necessary. “Even the information commissioner has said that he is astonished at the number of public bodies in Scotland and that he keeps finding new ones that he did not know about,” Tory spokesperson Fraser told a recent debate on the matter.

“Whatever the value of their work, each one of those independent bodies needs to have its own board, chief executive, finance director, human resources functions, audit and reporting. When we produced our manifesto just a few weeks ago, we identified that, in the field of economy alone, there were more than 100 different organisations offering business advice. Therefore, we need a simplification and rationalisation of the landscape, and considerable savings could be made if we went down that route.”

There is clearly a sense of urgency and considerable appetite across the parliament

The general agreement may provide the basis for collaboration and consensus, but even without the fine detail we’re waiting for, it’s not hard to see several areas prime for disagreement. Take redundancies, for example – Fraser wants the Scottish Government to “reconsider its policy on no compulsory” losses, he said, “because relying solely on voluntary severance means that the public sector could be left employing people whose jobs have effectively disappeared and cannot be redeployed elsewhere into valuable roles”.

Then there’s Lib Dem concern about the impacts of centralisation, something party spokesman Green has said has often been the end result of SNP reforms. “The centralisation of the police led to the closure of the Inverness control room and the loss of local operators with detailed knowledge of our communities,” he said. “The one-size-fits-all approach taken in the Scottish Fire and Rescue Service has left stations in north west Sutherland, in effect, unavailable for years.”

Still, Elliott believes there is grounds for optimism. “There is real potential for public service reform in this session,” he said. “In the lead up to the last election all political parties recognised the need for public service reform with particular emphasis on preventative policies.

“The previous government’s Public Service Reform Strategy, which was led by [McKee] set out the need for change and some examples that could be built upon.

“There is clearly a sense of urgency,” he said, “and considerable appetite across the parliament for some form of change.”