Scotland’s Auditor General has found that the Scottish Government produced a sound financial report for 2016-17 and managed its budget effectively — but she underlined the need for further improvements as new financial powers are introduced.
In her annual review of the Scottish Government’s Consolidated Accounts, Auditor General Caroline Gardner said the Scottish Government managed its overall 2016-17 budget of £33.96 billion well, reporting a small underspend of £85 million against this.
The Scottish Government said the £85 million — 0.3% of the budget — was the lowest underspend since devolution in 1999.
Gardner said that for the second year, the Scottish budget included new tax and borrowing powers, with £633 million raised by the Land and Buildings Transactions Tax and Scottish Landfill Tax in 2016-17 –£38 million less than forecast.
The Scottish Government managed this shortfall through underspends in its overall budget.
“Governance arrangements changed during the year and the Scottish Government is reviewing their effectiveness,” said the Auditor General’s report.
“Success depends on the culture and behaviours of those involved to ensure robust scrutiny, challenge and transparency.
“The Auditor General has recommended a number of areas that the Scottish Government can improve, to help the Parliament and the public in their scrutiny of public finances.”
These include publishing a consolidated account for the whole public sector to outline total assets, liabilities, borrowing and investments; introducing a medium-term financial strategy to outline high-level financial plans for the next five years; and finalising policies and principles for using the new borrowing and reserves powers.
Caroline Gardner, Auditor General, said: “The Scottish Government’s consolidated accounts are a key component of its accountability to the Parliament and the public.
“The arrival of substantial new financial powers and potential changes arising from Brexit mean it is critical that it continues to strengthen its approach to public financial management and reporting.
“I hope my recommendations will support that vital work moving forward.”
Other significant audit matters in the report include the financial impact and management of the continued risks associated with the Common Agricultural Policy Futures Programme, established to implement reforms and deliver financial aid to farmers and rural businesses.
They also included “the outcomes following closure of the European Structural Funds 2007-13 programmes which provide financial assistance in areas such as transport links and business growth.”
The report concluded: “The 2016-17 accounts show that the Scottish Government needs to repay £31 million to the European Commission representing grant payments received over and above expenditure declared to the EC.
“Project sponsors were also overpaid £16 million as a result of errors and subsequent application of penalties. It’s unclear whether the Scottish Government will fully recover these debts.”
Finance Secretary Derek Mackay said: “These accounts show the Scottish Government has once again demonstrated we have control over our public finances and I welcome the Auditor General’s report.
“We will continue to work with the Scottish Parliament and key stakeholders as we take forward the implementation of new powers and the associated financial management frameworks.
“Under the current devolution settlement, the Scottish Government is not permitted to overspend its budget.
“As a consequence, we have consistently adopted a position of controlling expenditure to ensure we live within the budget caps that apply, while maximising spending on public services.
“Our competent management of the public purse has once again been demonstrated in a time of considerable economic turbulence and substantial pressure on Scotland’s public finances, as a result of continuing UK Government austerity.”