New MSPs will need digital ambitions

Daily Business / October 20, 2025

Holyrood’s next intake must look to small nations like Estonia and Denmark to solve Scotland’s inefficient public services, writes IAN RITCHIE

AS POLITICIANS CAMPAIGN for the right to govern at Holyrood next year a key question they face will be how cost-effectively public services are being delivered by the devolved government. The answer, unfortunately, is quite poorly. Cuts and even higher taxes may be the preferred response, but one solution to improving both the quality and efficiency of these services may be found overseas. Specifically, in greater adoption of digitisation.

By rewiring their connection with citizens, other small nations are providing better services and greater value for money that sets an example for Scotland to follow.

Consider the challenge. Public spending in Scotland has always been higher per head than the UK average to allow for Scotland’s needs as a sparser population for its geographic size.

Funding via the block grant from the UK Government, devolved taxes and limited borrowing powers means that the Scottish government spends £14,000 per head, compared with £12.500 in the rest of the UK. But even this extra spend has not turned out to be enough to provide better performing services.

Scotland’s onshore GDP (which excludes volatile oil and gas revenues) in 2023 was £190 billion and its public spending was £99 billion, meaning that 52% of GDP was public spending, compared with 44% for the UK.

And the Scottish government employs more people – 22% of Scots work for the state compared to 17% in the whole UK. The average pay for a public sector employee in Scotland sits at around £1,500 more than the UK’s average.

As a result of all this the Scottish deficit is currently running at over 9%, much higher that the 3-4% of the UK as a whole.

And it will only get much worse. The Scottish government has decided to top up areas of support that have been cut in England, including child and disability benefits. There is also the inevitable rise in future in the costs for free university tuition fees and free elderly care.

As a nation Scotland is currently spending much more than it can afford, and it can’t continue this way. Whoever governs after the May election will need to make significant cuts to balance Scotland’s books.

One solution would be to dramatically reform the way government works, and Scotland could do worse than seek to copy Estonia, a small northern European country of 1.3 million, which in 1991 regained its independence after the collapse of the Soviet Union.

Estonia, has embraced technology to revolutionise public services, positioning itself as one of the world’s most advanced digital societies. One of their key innovations is the X-Road, a data exchange platform that enables various public and private sector databases, allowing information to be shared instantly and securely.

Every Estonian citizen is issued a digital ID card, which serves as a gateway to online services. This secure digital identity allows individuals to sign documents, vote online, pay taxes, and access healthcare from anywhere in the world.

In fact, anybody, including Scots, can sign up as a ‘digital native’ of Estonia.

It allows online voting in elections and has digitised all public services. Its citizens register births and marriages, file taxes, and apply for all permits electronically, making government services more accessible, transparent, and cost-effective.

Public services are efficient, corruption is reduced through transparency, and businesses benefit from streamlined regulations. And the bottom line is that Estonia has digitised 99% of public services, saving 2% of GDP annually, amounting in 2023 to €754 million.

Of course, Estonia had the shock of the collapsing Soviet Union which required the country to build a new method of governance. But this didn’t apply to Denmark.

Denmark is probably more comparable to Scotland, as a stable democratic northern European country of 5.9 million people. That said, as home to corporate giants such as Maersk, Novo Nordisk, Carlsberg and Lego, the Danes are 50% wealthier than Scotland, with GDP a third higher at about £300 billion.

Productivity gains in Denmark from digital infrastructure are estimated at £1.5 billion, or 2,000 Danish Kroner per citizen. Denmark ranks number one globally in the UN E-Government Survey, thanks to its integrated digital portals and citizen engagement platforms.

Scotland’s current digital strategy aims to save only £1 billion over five years through reforms, including digitising 25% of government correspondence by 2030, which alone could save £100 million annually, all of which doesn’t seem ambitious enough.

We are still lumbered with huge frustrations in our everyday transactions with health services, dealings with the Inland Revenue, or negotiating with our planning authorities.

If Scotland were to match Estonia’s or Denmark’s level of digital maturity, it could potentially unlock £1.2 billion in annual savings by fully embracing a digital-first model, assuming it achieves the same level of integration and efficiency as Estonia or Denmark. This could save £6 billion over five years and make a huge dent in Scotland’s deficit.

This would require bold investment in infrastructure, cross-sector collaboration, and citizen-centric design.

Which of Scotland’s political leaders will be willing to take this on?