Scotland’s Budget Report Preview #3: Paving the way for preventative budgeting

The Scottish Government’s Public Service Reform Strategy: Delivering for Scotland places prevention, and specifically preventative budgeting, at the centre of its vision for reforming how public services are designed and funded. The strategy explicitly recognises that existing budget structures are a barrier to prevention, stating:

“Current budgeting processes are a key barrier to shifting resources to preventative spend. We know that working within individual service or organisational spending limits does not allow the space to invest in prevention while managing existing need. We know that investment in one area often leads to demand reduction in another.”

The strategy commits to practical change rather than rhetorical endorsement of prevention. In particular, it states that the Scottish Government will:

“re-design our approach to identifying, tracking and monitoring preventative spend and set out how this will be utilised in future Budget processes”

and

“change how we budget, including allowing resources to move between portfolios, organisations and services, to support upstream investment”

This framing acknowledges that preventative action often sits outside the portfolio and organisational boundaries within which budgets are currently set. Preventative budgeting therefore implies a fundamental shift, not just in categorising spend, but in how decisions are made, trade‑offs are assessed, and success is measured.

This is the first Scottish Budget since the publication of the Public Service Reform Strategy in June 2025, and alongside the budget there will be a spending review, which shoudl provide a longer term view of how the Scottish Government will allocate the resources it has to different portfolios of its budget. Whilst we don’t expect a transformation of budget processes in line with the Public Service Reform Strategy quite yet, we’d expect to see some setting out of process and progress made so far.

This is unlikely to be a straightforward exercise, and navigating this transformation process will be need to be well thought through and strategic.

Importantly, if the aims of the strategy are to be met, preventative budgeting cannot be treated as a purely analytical exercise that categorises expenditure after budgets have already been set. Our experience of working on equality budgeting shows that significant time and resources are often devoted to producing analytical tools that retrospectively justify spending decisions, rather than shaping those decisions in the first place. Here we set out some of our thoughts on operationalising the Public Service Reform Strategy in these early stages.

What Do We Mean by Prevention?

Clarity on prevention is a prerequisite for meaningful preventative budgeting. The Christie Commission on the Future Delivery of Public Services in 2011 positioned prevention as one of four pillars of reform. The Commission argued that public services should prioritise “preventative measures to reduce demand and lessen inequalities” and shift resources away from “reactive responses to problems once they have become acute”. Prevention in the Christie sense is about intervening earlier, addressing root causes, and reducing the need for more intensive and costly public service interventions later on.

Public Health Scotland provides a more formal typology through its three levels of prevention:

• Primary prevention, action taken to prevent problems from arising in the first place by addressing the root causes of a problem
• Secondary prevention, early identification and intervention to stop emerging problems from becoming more serious
• Tertiary prevention, action to reduce the impact of problems that have already occurred, through careful management

This framework is well established in public health, and although it is not perfect (no definition is) it can easily be applied to other parts of public sector spend.

This Public Health Scotland definition is close to the definition used by the Future Generations Commissioner for Wales in their preventative budgeting work, as agreed with the Welsh Government which is used beyond health and across all types of public spend.  They also have a fourth category for the majority of residual spending which they label as ‘acute spending’: dealing with the impact of a harmful outcome but doing little, if anything, to reduce the chance of it happening in future.

Whilst there may be appetite amongst some stakeholders to gain consensus on a new definition to be used specifically for preventative budgeting in Scotland, the gains from doing so are unlikely to outweigh the time and resources required. Utilising the PHS definitions for primary, secondary and tertiary prevention is a good enough place to start.

Issues to be resolved to make preventative budgeting work for Scotland

Moving beyond definitions, there remain issues to be resolved. Two fundamental issues that we feel need to be addressed quickly to allow progress to be made are.

1. Being clear on what is being prevented
2. Dealing with the practicalities of the budget process

1. Being clear on what is being prevented

For some parts of the public sector, prevention outcomes are relatively clear. For example, for NHS boards (including Public Health Scotland), preventing poor health is easily understood as a core purpose. Reducing the incidence of preventable illness, narrowing health inequalities, and extending healthy life expectancy are explicit goals against which preventative activity can be assessed.

The challenge becomes much more complex when considering organisations that are working toward multiple outcomes – for example, the Scottish Government pursues multiple outcomes simultaneously which can overlap, interact, have different time horizons and can at times pull in different directions.

Take, for example, the government’s “number one priority” of eradicating child poverty, as proclaimed by the First Minister multiple times, including in a speech from January 2025. In this speech, the First Minister stated that eradicating poverty will prevent lower educational attainment and the ‘‘damage caused when a child is brought up hungry, or lives in a damp or draughty home’’. So any policy which has a tangible impact on reducing child poverty could be viewed as a primary preventative measure that will reduce a) poor educational outcomes and b) health issues caused by poor nutrition and poor housing.

But there are different ways of tackling poverty, some of which themselves prevent child poverty from occurring in the first place (for example, secure employment, higher wages, cheaper housing costs) and others, such as social security, which address so called ‘failure-demand’ because parents do not have secure employment, high enough wages, or cheap enough housing to maintain an adequate standard of living.

So is social security a preventative policy?  If your outcome is improving educational outcomes or reducing health inequalities, then social security would go in the primary prevention box. If your outcome is reducing child poverty, then, arguably, at best it’s tertiary prevention, but could justifiably be argued as acute spending (i.e. if you took that spend away, as happened during austerity, then poverty will rise).

Some will disagree with this assessment and argue that because social security keeps some children out of poverty entirely, it is upstream enough to count as primary prevention. But there are also potential tensions between outcomes. For example, some social security interventions may reduce incentives to enter employment in the short to medium term. Is social security then somehow preventing prevention?

As is hopefully apparent, there is a lot of room for subjectivity in assessing what is preventative spend. Subjectivity, however, does not provide a sound basis for objective analysis of the budget, nor for agreeing what a systematic shift towards prevention spend looks like.

2. Dealing with the practicalities of the budget process

If we have consensus on what counts as prevention against what outcome, significant technical barriers remain.

The most detailed level of budget data published in Scotland (known as Level 4) is far too aggregated to support meaningful analysis of spend. A key reason for this is that the Scottish Government is rarely the delivery body for policy so multiple policy actions are rolled up into level 4 allocations for others (local government, other public bodies as well as charities and the private sector) to then deliver. This makes it extremely difficult to identify from published budget information what is actually being spent on prevention, let alone to assess effectiveness.

Audited outturn expenditure for delivery bodies will for the most part exist but is not collated and published. We demonstrated this issues in work funded by JRF earlier this year on tracking child poverty spend: lack of transparency on outturn spend on policy commitments meant that it was not possible to track how much has been spent on policies designed to meet the child poverty targets.

We will need to see commitment to increase the amount of information published by government to evidence assessments of what spend is preventative, and why.

The organisation of the budget by portfolio and organisational boundaries poses problems as preventative action cuts across these boundaries. For example, looking at the health portfolio alone will not capture the bulk of spending that prevents poor health outcomes, much of which sits in portfolios covering housing, social security, education and communities. As well as the necessary budgets sitting outwith the health portfolio, lines of accountability also need to bridge organisational and portfolio boundaries if they are to be effective. These imposed organisational boundaries could be the biggest barrier to allowing spend to move between portfolios, organisations and services as envisaged by the Public Service Reform Strategy. Incentives to protect spend, which often ultimately means people’s jobs, is understandably embedded in how public sector leaders operate.

Solutions?

We expect that the Scottish Government will already be grappling with these issues, and there are many ways that could be trialled to change how the budget process integrates with a shift to prevention.

Government will need to be robust and transparent in its analysis of prevention and be clear what is and is not prevention. Starting with incremental analysis of changes in the budget year-on-year, rather than trying to categorise the entirety of existing spend may be a good way of starting this process to build consensus and trust in the process with stakeholders over time.

The work on preventative budgeting is coming at a similar time to the promised refresh of the National Performance Framework, and this may provide an opportunity to realise the potential of this national strategy to align activity, and budgets, to something coherent with prevention at its core.

Whatever is done, it will need commitment from across public sector leaders to change how policy is developed. Without shared definitions of outcomes that link to policy, preventative budgeting risks becoming an exercise in categorising spend to tell the story that the government wants to tell, rather than changing policy choices.

Indeed, this has largely been our experience, for the most part, of Scottish Government efforts on equality budgeting (although we are hopeful that new approaches put in place for the 2026/27 budget round will lead to some tangible progress– watch this space!).

As well as the ‘good news’ on new policy that is preventative, we also need to see the other side – including transparency on preventative policies where funding has been cut or held constant (i.e. cut in real terms).

Conclusion

Meeting the aims of the Public Service Reform strategy will not be straightforward, but it is definitely possible.

However, preventative budgeting will only be meaningful if the different parts of the system fit together. A clear and operational outcomes framework, more granular budget data, and processes that acknowledge and overcome resistance to change are all required. Without this coherence, preventative budgeting risks becoming another bolt‑on, that produces impressive figures but little real change.

Getting this right matters. Prevention is not just a technical budgeting exercise. It is about reshaping how government understands problems, prioritises action, and invests public resources to improve long‑term outcomes for people and communities across Scotland, as well as playing a key role in ensuring fiscal sustainability. We’ll be keeping a close eye on developments here as plans progress, in this budget and beyond.