A review of Scotland's public sector has recommended sweeping changes to the way taxpayers' money is spent.

It coincided with a promise by John Swinney, the new SNP Finance Secretary, to deliver a slimmer government and more spending power at local level.

The independent inquiry, carried out by experienced government officials, has suggested some highly controversial changes, with £818m in savings and a further £430m potential in further efficiencies. They are thought to represent around 4% of Scottish Executive spending.

The Howat Report was controversially suppressed by Labour and LibDem ministers in the months before the election but was published yesterday by the new SNP administration.

For universities, it suggests a move to a three-year basic degree, from Scotland's traditional four-year model.

The review argues for one centre providing shared services for Scotland's 13 university campuses, as well as one for further education colleges.

It recommends the abolition of Learning and Teaching Scotland, official adviser to the executive on the school curriculum, while saying school closures should be a high priority. It says £57m in bus company subsidies could be withdrawn, with the reckoning that would lead to a 17% increase to fares. Road maintenance could be cut by more than half, saving £67m annually.

Health boards could save £50m on the NHS drugs bill each year, while senior consultants should lose the £20m of bonus pay which was found to be distributed by "buggin's turn" and without scrutiny.

The review found the Cities Growth Fund, set up four years ago and worth £42m each year, should be wound up, as it is not having the intended impact. Legal aid could be cut by 10% or £17m, and police, fire and ambulance training should be in one centre. Many budgets were found to be capable of 7% efficiency savings. The review team also recommends Scottish Water should be taken out of direct ministerial control and turned into a mutual company, saving the executive £182m in capital allocations each year.

That was the only one out of scores of recommendations that was firmly rejected by Mr Swinney yesterday, as the Finance and Sustainable Growth Secretary set out his guidelines for spending more than £30bn of public money over each of the next four years. He announced the budget process is likely to run at least a month behind schedule be-cause it will not be clear until mid-October how much the Treasury will release in Scotland's block grant over the next three years.

The normal budget process would require the Finance Minister to bring the budget before the Finance Committee by mid-September.

Mr Swinney said all of Howat, except for the Scottish Water recommendation, would be considered as part of the budget review.

There was pressure from Labour during a Holyrood debate to open up the budget process to more scrutiny and opposition amendments, reflecting the SNP's lack of a parliamentary majority.

Mr Swinney said: "The report highlights that Scotland has a crowded public sector landscape.

"This is causing duplication and a lack of focus. In recent years, an organisational spaghetti of partnership and networks has grown, alongside a hugely complex system of performance monitoring and funding."

He promised a simpler, smaller government would help "declutter this landscape".

He also promised there would be no compulsory redundancies resulting from executive policies.

Read the report here