Scotland 'has been too slow in preparing for spending cuts'

18 Nov 10
A Public Finance dinner debate brought together the great and the good in Scottish local government to discuss finances in advance of the SNP's budget plans. David Scott reports

By David Scott

18 November 2010

A Public Finance dinner debate brought together the great and the good in Scottish local government to discuss finances in advance of the SNP’s budget plans. David Scott reports

Scotland has not done enough to address the public spending crisis and must act more quickly, according to local government finance directors and chief executives.

They gave their verdict on the public sector’s handling of the preparations for budget cuts at a Public Finance debate in Glasgow on November 11. It was held just days before the Scottish National Party government announced plans that will require a £1.3bn reduction in its budget next year.

An audience vote taken at the end of the debate showed that a decisive 75% believe that Scotland has not sufficiently addressed the financial crisis and needs to prepare more quickly for the cuts. The vote was 26 for and 8 against.

Finance Secretary John Swinney decided earlier this year to delay making any cuts until 2011/12. In a report in June, the influential Scottish Parliament finance committee described public sector leaders’ efforts to prepare for forthcoming budget cuts as ‘patchy and lacking in urgency’.

Finance directors were unwilling to comment publicly on the outcome of the vote but pointed out that while the priority was to immediately deal with the cuts, the Scottish Government needed to take a longer-term view of the future shape of public services.

Speaking after the debate, Don Peebles, policy and technical manager at CIPFA Scotland, said local government had taken steps towards addressing the cuts.

But, he added: ‘The responses from panel members and the conclusion of directors and chief executive officers support the view that the pace of reform to date has been slower than was necessary and now has to be accelerated to enable Scotland to prepare for the cuts.’

The debate, sponsored by Threadneedle Investment Services and chaired by PF editor Mike Thatcher, was attended by members of the CIPFA Scotland directors of finance section and the Society of Local Authority Chief Executives and Senior Managers.

It featured a panel of four experts: Bob Black, auditor general for Scotland; Robert Wilson, one of the ‘three wise men’ who carried out an independent budget review on behalf of the Scottish Government; Paula Speirs, director of local public services for consultancy Ernst & Young; and Ronnie Hinds, chief executive of Fife Council and vice-chair of Solace in Scotland.

Black said there had been no change since Audit Scotland told the Holyrood finance committee that a ‘sense of urgency and realism’ was needed.

There was a need to distinguish two phases of the approach to spending cuts, he said. The first was a short-term imperative to get costs down and budgets to balance. Some really tough decisions were already being made.

‘But somehow we need to give a sense of urgency and realism to the longer-term debate,’ he added. Issues such as the future design of public services had to be considered.

Wilson said that ‘the financial crisis is here and the time for action is now’, irrespective of whether the public sector had dealt with the problem quickly enough. ‘I believe the reality of the situation is not about presenting it in a negative way, or pointing the finger… the issue is we are where we are and we need to act very quickly in terms of addressing some of these issues,’ he added.

Hinds emphasised the need for a strategic view. He warned: ‘While speed is of the essence because of budgets, the damage we could do by acting very quickly and precipitately is quite significant and would be with us for a long time. There is a responsibility on myself and others in this room to try to take a strategic view.’

Speirs stressed the danger of focusing on cuts and said it should be a time for innovation and looking at service redesign.

Sandra Black, chair of CIPFA Scotland’s directors of finance section, asked whether the panel felt that, following the election, there would be a chance for more cross-party working on finding solutions, or whether that was being too idealistic.  

Bob Black said he found, after talking to leading politicians, that there was ‘very limited scope for manoeuvre between now and the [Holyrood] election’. But he felt there was a measure of hope that there might be a willingness to address ‘redesign’ issues once the election was over.

Speirs stressed that the opportunities for change must not be missed so that the politicians could ‘hit the ground running’ after the election.

Panel members were non-committal on whether there should be a rethink about the provision of ‘universal’ services such as free personal care and bus passes for elderly people, as suggested by the independent review panel.

Wilson said he hoped the politicians might take a ‘lot of tough, difficult, tactical decisions in the short term’ and there would be ‘some common ground across the vast portfolio of options’ for some cross-party talks after the election.

Hinds argued that experience showed there was unlikely to be cross-party consensus. But he did not find this ‘problematic’ as he believed the democratic process worked ‘tolerably well’.

Plans by the SNP and Labour to reform the NHS and merge Scotland’s police and fire services led to suggestions that there was a case for longer-term restructuring of public services, provided the costs did not outweigh the benefits. Wilson asked: ‘Do we really need [in Scotland] 32 local authorities, 14 main service delivery health boards and eight police authorities to deliver the type of service we’re looking for?’

The panel was also asked whether there was scope for the modernisation of Audit Scotland at a time when the Audit Commission in England is being abolished.

Defending the Scottish system, Bob Black emphasised the strengths of the Scottish Public Audit Model, the arrangements for quality assurance and the fully independent role of Scottish auditors.
Glasgow City Council finance director Lynn Brown said the issue was not so much about the function of Audit Scotland but the role of those individual inspectorates that do not appreciate the competing priorities and choices that councils face.

Black announced that Audit Scotland was planning to reduce audit fees by an average of almost 20% in real terms over four years, starting with the 2010/11 audits.

The panel also discussed whether the Local Government Pension Scheme should change in line with Lord Hutton’s recommendation that it should move from a final salary to a career average basis.

There was general agreement that fairness and affordability were paramount and that ‘career average’ was likely to be the chosen option. Speirs believed there should be a common set of principles about pensions across the public sector. 

Edinburgh City finance director Donald McGougan sought views on what might happen given the scale of pension liabilities, particularly in view of the state of public finances and unfunded areas such as the police force. ‘Does anyone on the panel have any doubts about the ability of finance directors to sign off accounts as a going concern?’ he asked. Only Black replied. ‘I don’t know the answer, but I recognise the issue,’ he said.

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