More work needed in managing change in public finances: Audit Scotland

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The Scottish Government is well-organised to deliver game-changing new tax and spending powers, according to Audit Scotland.

However, more work is needed to build a clearer picture of what the changes will cost and how staffing challenges will be addressed in the next stage of financial devolution.

An estimated £22 billion will be raised in Scotland by 2020 - five times more than the £4 billion raised prior to the 2012 and 2016 Scotland Acts. Establishing new social security arrangements is an exceptionally complex task and by 2021 the Scottish Government expects to process as many transactions in a week as it now does in a year.

Audit Scotland’s latest report on financial devolution says the Scottish Government has updated its structures for overseeing the new powers and has good programme management processes in place.

Implementing and managing the new financial powers will have major staffing implications for the Scottish Government. It’s identifying the staff and skills it needs, but recruiting enough people with the required abilities may prove difficult.

At the end of 2015/16, £18.5 million had been spent to implement new powers and costs will increase significantly over the next four years, as new social security responsibilities come online. The Scottish Government needs a clearer picture of potential future costs and to plan how it will fund these.

A more strategic approach to public financial management and reporting is needed, including a medium-term financial strategy based on clear policies and principles. There’s also an urgent need for the Scottish Government to finalise and publish its approach to borrowing and reserves.

The Scottish Government is taking steps to provide a more comprehensive picture of public finances, but more work is required to make sure the parliament and the public have the information they need to understand and scrutinise financial decisions.

Caroline Gardner, Auditor General for Scotland, said: “Implementing and managing the new financial powers will transform the work of the Scottish Government on an historic scale.

“It’s made some good progress by getting the foundations in place for managing the new powers but the major funding and staffing implications of the next stage of financial devolution must be planned for and managed in an open and transparent way.”

The report also reviews Revenue Scotland’s progress in implementing devolved taxes; the setting-up of the Scottish Fiscal Commission; and progress in planning to deliver the new social security powers, for which 2017 is a critical year.