By Stephen Boyle, Auditor General for Scotland
BEFORE coronavirus changed life as we know it, the Scottish Government was facing some very real financial challenges.
They knew the NHS would continue to absorb more of the Scottish budget (41 per cent in 2019/20) without big changes to service delivery and faster integration of health and social care. Those problems largely remain.
Other knot-filled folders sat on ministers’ desks. They included ones marked police and local government funding; Brexit; and managing the volatility of new tax and social security powers. Most of those challenges remain.
These issues would have tested any government at any time. Now a pandemic – and the increased costs and uncertainties it has brought – must be managed alongside them.
Most of the Covid-19 spending in Scotland has been covered by huge levels of UK government borrowing to fund the health, social care and business response. That’s meant an extra £9.7 billion added on to a Scottish budget of over £40 billion for 2020/21.
Not all the pandemic pound has been allocated so far, but that’s not surprising. Some spend, like business grants, is demand-led and other pots, like the £100m for school attainment, are spread over more than one year.
But it’s getting harder to identify what is, and isn’t, Covid-19 spending, as our latest analysis found. That’s because of the volume of announcements (over 170 to date) and, increasingly, how the spending naturally links with wider economic development and government goals. That increases the need for transparency around spending.
The issues that we are seeing now – the impact on business, on young people because of disruption to education, on households and relationships because of economic disruption, and the broad mental health impact on the country – are all interconnected.
That makes directing public money more complex. And it’s why we need leaders working together. All the main players in the coronavirus response – the UK Government, Scottish Government, councils, health boards, enterprise boards – must keep collaborating and sharing knowledge to achieve the best outcomes and value for money.
Meanwhile, difficult decisions lie ahead to keep the country’s finances on a sustainable footing.
The longer the pandemic continues the more the financial consequences of disruptions to services, such as the courts backlog, increase. Furlough is also set to end at the end of April and unemployment forecast to rise.
The Scottish Fiscal Commission expects the economy to contract by 11 per cent, with a return to pre-pandemic levels by 2024. But the only thing we can be truly certain of is that forecasts will change.
That makes medium-term planning, that links spending to outcomes, vital. The Scottish Government must be clear about its priorities, about which services are essential to maintain, and where it can quickly alter spending to deal with budget fluctuations.
For our part, I will continue to report on the need for the Scottish Government to produce a consolidated public sector account to allow more transparency and scrutiny of spending decisions. And of course, the impact of Covid-19 spending will be a key focus of our financial and performance audit work for the foreseeable future.