By Richard Johnstone | 25 August 2011
Public sector bodies in Scotland may struggle to make the required savings to
their budget this year, risking the future delivery of effective public services,
auditors are warning.
An Audit Scotland report published today, Scotland’s public finances – addressing the challenges, finds that Scotland’s public sector budget in 2011/12 will be £27.5bn. This is a drop of 6% or £1.7bn in real terms on 2010/11’s budget.
The spending watchdog finds that although most public bodies have budgeted for this, they may need to make significant additional in-year savings, due to factors including increasing costs associated with Scotland’s ageing population and the public sector’s maintenance backlog, which they may struggle to meet.
The report warns that public bodies may be unable to make these savings through efficiency savings and without cuts to services.
The report adds: ‘Given efficiency targets have been in place for seven years now, there is a risk that further efficiency savings may be harder to find without making fundamental changes to the way public services are organised and delivered.’
Audit Scotland also find that few of the people working in the Scottish public sector today have experienced budget cuts of the current levels. This is identified as a ‘major test for managers, non-executive directors and elected members’.
Among the key risks faced in meeting the funding challenge is the growing demand for health and social care services as Scotland’s population ages. Demand for further and higher education places in Scotland – which is free to Scottish students – is also rising.
Spending on new capital assets will also increase pressure on future budgets, the report notes. Spending on construction of the Forth Replacement Crossing will increase from £30m to around £196m, peaking between 2013/14 and 2015/16.
Although the Scottish government has emphasised capital investment as key to generating economic growth, Audit Scotland warns that, as the Scottish capital budget is set to fall by £1.2bn (36%) between 2010/11 and 2014/15, it faces ‘difficult decisions’ about its investment programme.
Scotland’s auditor general Bob Black said that the public sector ‘needs to reduce costs but there is also an opportunity to reform the way public services are delivered’.
‘Strong leadership and governance in Scotland’s public bodies are vital to deal successfully with the most difficult financial conditions since devolution,’ he said.
‘Public bodies should overhaul the way they plan by looking at long-term sustainability, setting clear priorities and intended outcomes and then setting their budgets based on these.’
Responding to the report, Scottish Finance Secretary John Swinney said that the Scottish Government’s Spending Review, to be published in September, would ensure that spending is targeted as effectively as possible:
He added: ‘This Audit Scotland report is a useful reminder of the extremely challenging period ahead for whole of the public sector in light of Westminster cuts. It is imperative that every public body gets maximum value and delivers efficient and effective public services in constrained financial circumstances.’
The president of the Convention of Scottish Local Authorities, Pat Watters, said that local government has ‘led from the front in the public sector to plan and budget for deep spending cuts’.
He said: ‘Our budgets are reducing at a time when demand for our services is increasing; this has led to difficult and painful decisions in every one of Scotland’s 32 councils.’
