By Steve Bargeton, political editor

FIRST MINISTER Jack McConnell yesterday ordered a sweeping efficiency drive across the Scottish Executive that will bring cost savings of £1 billion a year.

Government departments south of the border have been told to produce savings of 1.25%, but yesterday Mr McConnell said he will demand savings of 2% a year.

This means that by the end of the financial year 2007/08, Executive departments will be freeing up £500 million a year for front-line public services rising to £1 billion a year by the end of 2009/10.

Finance Minister Andy Kerr will announce the details of how the savings will be achieved in the forthcoming spending review.

Announcing the move as part of a revamped Scottish economic blueprint—the Framework for Economic Development (FEDS)—the First Minister pledged to get “maximum value for taxpayers’ money.”

“Nationally, the Government has produced targets that involve, for example, 1.25% each year in cash savings in government spending across the departments,” he said.

“We in Scotland will go further than that. In three years’ time, we will have targeted a minimum 2% cash saving in government spending in Scotland.

“And we will announce decisions rather than simply targets. We are determined to get maximum value for taxpayers’ money in Scotland.”

The new 32-page FEDS document sets out four goals—economic growth, regional development, closing the “opportunity gap,” and sustainable development in economic, social and environmental terms—but rules out using Holyrood’s powers to cut personal income tax in Scotland.

“The devolved Scottish government has determined that it will not make use of the powers to vary the basic rate of income tax at this time,” it said.

“While, in principle, a reduction in income tax might increase work incentives, there is no evidence to suggest that the Scottish economy is constrained in this regard.”

Mr McConnell said the document was important as it said “loud and clear” that the Executive was serious about delivering economic growth.

“Most of all, though, it says that we are determined to make Scotland a more productive place—a country with productive companies, productive people and a productive public sector,” said the First Minister.

But the document was immediately dismissed by the Scottish Tories.

“Don’t be fooled. There are no specifics, no jobs going to be cut and no hope that tax will be reduced. Government spending will not be cut unless Gordon Brown gives it less or business rates are slashed,” said Tory economy spokesman Murdo Fraser.

“That is where the money comes from which the Government spends so irresponsibly.”