Auditing historic change in Scotland’s public finances

On 1st April, the Scottish Parliament gained control of income tax rates and bands, higher borrowing limits, and the management of the Crown Estate in Scotland – and there are more new powers to come.

The Scotland Act 2016 is fundamentally changing management of the public finances and, once fully implemented, half of what is spent in Scotland will be raised here and the budget will be subject to greater uncertainty and volatility than ever before. With more control over public finances and new opportunities and risks, it’s clear that we’re entering new territory.

The scale of change needed to implement and manage the new financial powers is significant and it’s important that the Parliament and the public can see what progress is being made. As the public spending watchdog, Audit Scotland has carried out extensive work in this area.

On Thursday, I’ll join the Auditor General, Caroline Gardner, and colleagues to present the findings of our latest report on managing new financial powers to Holyrood’s Public Audit and Post-legislative Scrutiny Committee. We looked at how the Scottish Government, Revenue Scotland and the Scottish Fiscal Commission are introducing and managing the range of powers devolved through the 2012 and 2016 Scotland Acts.

We found that the Scottish Government is well-organised to deliver new tax and spending powers. It has updated its structures for overseeing the new powers and has good programme management processes in place. Revenue Scotland is also making good progress in preparing for further devolved taxes, and the transition of the Scottish Fiscal Commission to a statutory body is being managed effectively.

The new powers will substantially change the type and volume of work the Scottish Government will do. We found that the Scottish Government is identifying the staff and skills it needs, but recruiting enough people with the required skills may prove difficult. We recommend that the Scottish Government build a clearer picture of potential future costs, to help plan how it will fund implementation of the new powers within its budget.

In this changing environment, a more strategic approach to public financial management and reporting is needed. This includes a medium-term financial strategy based on clear policies and principles. The Scottish Government is taking steps to provide a more comprehensive picture of the public finances, as it’s important that the Parliament and public have the information they need to understand and scrutinise the government’s financial decisions.

MSPs will have the chance to discuss these findings in detail with us this week, and the session can be watched live on Parliament TV.

We’ll continue to report on the progress of public bodies in implementing and managing the new financial powers. If you’re interested in our work in this area, our new e-hub on financial devolution has a range of reports, exhibits, briefings and other useful tools.

About the author

MarkTaylorMark Taylor is an Assistant Director in Audit Scotland. He is responsible for overseeing Audit Scotland’s work relating to financial devolution and constitutional change.

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