Audit Scotland concerns over Scottish Government's use of short-term measures to balance books

“Fundamental change” is needed to ensure public services remain affordable, Scotland’s national audit body has warned.

Audit Scotland has issued a report laying out concerns around the Scottish Government’s use of short-term measures to balance the books in each financial year.

It pointed to the use of £460 million in one-off ScotWind revenues to help pay for public sector pay awards this year, saying ministers do not know how this higher spending will be funded in future.

The auditors urged the Government to set out a clearer vision for public service reform when an update is issued in September 2025.

Earlier this month, Holyrood’s Finance Committee said it was “deeply concerned” about the Government’s lack of a strategic approach to its finances.

Audit Scotland reported on the severity of the challenge facing the public sector in November 2022, issuing similar warnings the following year.

Its latest report covers the Government’s fiscal sustainability.

Stephen Boyle, auditor general for Scotland, said: “People do not fully understand the medium-term risks public services are facing because of a lack of transparency from the Scottish Government.

“The reality is that we need a fundamental change to how public money is spent to ensure services can meet demand and remain affordable beyond the short-term.

“To turn that into action on the ground, the Scottish Government must set out a clearer vision of what its plans for reform will achieve, including delivery milestones and the likely impact of reform on services and people.”

Finance secretary Shona Robison is due to publish her Budget for the upcoming financial year on December 4.

The UK Government has said its Budget outlined last month will lead to an additional £1.5 billion this financial year and an extra £3.4 billion next year for the Scottish Government through the Barnett formula.

However, the full implications of this will not be revealed until Ms Robison delivers her own fiscal plan.

Pay is the single biggest cost for the Scottish Government, and there is a forecast budget gap of around £1.9 billion in 2027/28.

Responding to the report, Scottish Liberal Democrat leader Alex Cole-Hamilton said: “When it comes to the SNP’s approach to the public purse, short-term is the watchword.

“Ministers don’t have any plan for public services.

“Instead, they have undermined them by making one expensive blunder after another, from the ferries scandal to selling off the seabed on the cheap.

“This report emphasises we need a step change to how public money is spent.

“That starts with a government that can get the basics right – that can invest in our public services and grow our economy for generations to come.”

Public finance minister Ivan McKee said: “This Government has delivered a balanced budget since 2007 while taking forward a range of actions to improve the overall sustainability of the public finances.

“As Audit Scotland recognises, UK Government choices on spending significantly affect how we plan and while the autumn Budget goes some way to increasing our funding position, it does not give us certainty about future funding.

“We welcome this report’s recommendations, many of which are aligned with our programme of public service reform. This programme will ensure that public services are high-quality, effective and fiscally sustainable, prioritising prevention and reducing future demand.

“We remain committed to doing all we can to ensure the public finances remain on a sustainable trajectory, and through decisions we have made on income tax policy, we expect to raise an additional £1.5 billion in 2024-25, compared to if we had matched UK Government policy.

“While this report covers a period in time from March to June this year, there has been significant work on reform since, including capturing data on spending by public bodies that will provide crucial information as we map efforts to ensure investment on behalf of the people of Scotland is used efficiently and sustainably.”