Scotland’s auditor general has found that the Scottish government produced a sound financial report for 2016/17 and managed its budget effectively, but has underlined the need for further improvements as new financial powers are introduced
According to the third annual report on the consolidated accounts, the Scottish government managed its overall 2016/17 budget of £33.96bn well, reporting a small underspend of £85m against this.
For the second year, the Scottish budget included new tax and borrowing powers. In 2016/17 £633m was raised by the land and buildings transactions tax (LBTT) and Scottish landfill tax (SLfT), £38m less than forecast. The Scottish government managed this shortfall through underspends in its overall budget.
The 2016/17 budget also included £4.9bn from the Scottish Rate of Income Tax based on a forecast by the Office for Budget Responsibility. This amount was removed from the block grant and added back to reflect forecast tax income collected by HMRC from Scottish taxpayers.
The report highlights the outcomes following closure of the European structural funds 2007-13 programmes which provide financial assistance in areas such as transport links and business growth.
The 2016/17 accounts show that the Scottish government needs to repay £31m to the European Commission representing grant payments received over and above expenditure declared to the Commission. Project sponsors were also overpaid £16m as a result of errors and subsequent application of penalties. The auditor general says it is unclear whether the Scottish government will fully recover these debts.
Areas for improvement singled out in the report include publishing a consolidated account for the whole public sector to outline total assets, liabilities, borrowing and investments; introducing a medium-term financial strategy to outline high-level financial plans for the next five years; and finalising policies and principles for using the new borrowing and reserves powers.
Caroline Gardner, auditor general, said: ‘The arrival of substantial new financial powers and potential changes arising from Brexit mean it is critical that it continues to strengthen its approach to public financial management and reporting. I hope my recommendations will support that vital work moving forward.’
The 2016/17 audit of the Scottish Government Consolidated Accounts is here.
Report by Pat Sweet
