By Keith Aitken in Edinburgh | 2 December 2014
Scotland needs better tools for monitoring the public finances to go with its new devolved powers, the auditor general for Scotland has told Public Finance.
In an exclusive interview, Caroline Gardner said that Scotland’s politicians and people face increasingly acute choices under the fiscal reforms in the 2012 Scotland Act, the further changes in prospect from Lord Smith of Kelvin’s Commission on enhanced devolution and an accelerating subsidiarity agenda that includes the Community Empowerment Bill currently before Holyrood.
Speaking prior to publication of the Smith Commission report, she called on the Scottish Government to follow Whitehall’s lead and issue an annual balance sheet, bringing together information from across the whole of the public finances. A similar proposal was made in CIPFA’s evidence to the commission.
‘At the moment we don’t have a balance sheet for Scotland,’ Gardner said. But for all the UK, the Whole of Government Accounts give a ‘rounded picture’ of what the government raises and what it spends it on, what it owns and what it owes.
‘Although they’re not perfect, they do give a really clear insight into some of the trends that we’re seeing and some of the risks that have to be managed and, increasingly, the choices that are being made about investment, borrowing, capital investment, those sorts of things,’ she added.
‘We don’t yet have that in Scotland, and you can argue that it didn’t matter too much in the years when Scotland was only spending the money that came from Westminster. But as we’re making choices about raising taxes, different forms of investment, the increasing use of revenue-financed investment to build our infrastructure, that picture becomes increasingly important to all of us.’
Such data would be of wide usefulness, she said. ‘First of all, it’s for government itself: to understand the overall picture, the long-term commitments that have been made, and the changes that are happening over time. It’s for the parliament, in making decisions about the budget and the choices that that will increasingly entail over the years ahead.
‘But, much more importantly, it’s for all of us as citizens and taxpayers, in helping us to find a way into that debate about what our taxes are used for, how they’re stimulating the economy of Scotland, and how all of that is supporting the sort of society we want to live in.
‘All of that’s important now with the Scotland Act changes, but with more financial devolution – potentially, with responsibility for some welfare benefits coming to Scotland – I think that picture is increasingly at the heart of the choices we will need to make as a society.’
The improved fiscal perspective might help liberate decision-making from politically driven short-termism, Gardner said.
‘There are clearly some very strong factors that you’ll never get away from in politics, and that’s the way the world is. But I think having that long-term picture, seeing how it evolves, being able to see the impact of long-term commitments that are made for borrowing, for non-profit distribution, revenue-financed investment and things like the impact of the ageing population can help.’
Audit Scotland has piloted techniques for auditing new forms of policymaking including Community Planning Partnerships, but Gardner said further thought is needed on how to audit the more localised decision-making promised under community empowerment.
‘Widening the debate about how public money is used will help with that,’ she said.
‘But it also will bring challenges for us to make sure that we can provide the assurance and the foresight that’s needed, without doing it in a disproportionate way that costs more for audit than we’re spending on the public services.’
