Public services will come under further threat if the Scottish Government does not set out and deliver a clear and costed vision for public service reform, says Scotland’s spendingwatchdog Audit Scotland.
Spending pressures have become more acute in recent years and are forecast to grow. But ministers have continued to rely on short-term decisions to balance the books, rather than making fundamental changes to how services are delivered.
Public service reform is a key component of the Scottish Government’s approach to fiscal sustainability. But there is no evidence of large-scale change on the ground, while the Scottish Government:
has not yet fully established effective governance arrangements for a reform programme
does not know what additional funding is required to support reform
and has not provided enough leadership to help public sector bodies deliver change.
The Scottish Government has not been transparent enough with the Scottish Parliament or the public about the medium-term risks it is facing.
The medium-term financial strategy and financial plans for the NHS and infrastructure investment have all been delayed. The absence of these documents makes scrutiny of the current uncertain financial situation more difficult.
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.”
Scotland’s colleges need more clarity from ministers on what parts of their role to prioritise, as the sector’s financial challenges mount, according to Audit Scotland.
The public spending watchdog released their latest ‘Scotland’s Colleges’ report this morning.
Scottish Government funding for colleges reduced by £32.7 million in cash terms in 2024/25. Funding has reduced by 17 per cent in real terms since 2021/22. Cash balances held by colleges are also forecast to fall.
Colleges have used voluntary severance schemes to reduce their costs, with nearly 500 staff leaving colleges in 2022/23. Staffing makes up around 70 per cent of colleges’ costs and the sector expects further cuts in coming years.
The financial challenges and staffing reduction means colleges may not be able to offer the same learning experience to students as in the past. Meanwhile, the lack of reform of the post-school sector is causing continuing uncertainty for colleges.
Stephen Boyle, Auditor General for Scotland, said: “The college sector is facing huge challenges. But to plan effectively for the future, colleges need a much stronger steer from the Scottish Government on what parts of their role to prioritise.
“The Scottish Government also needs to respond quickly to the results of its consultations on post-school reforms to provide the college sector with more certainty.”
The Scottish Government needs to develop a clear national strategy for health and social care to address the pressures on services.
Significant changes are needed to ensure the financial sustainability of Scotland’s health service. Growing demand, operational challenges and increasing costs have added to the financial pressures the NHS was already facing. Its longer-term affordability is at risk without reform.
Activity in hospitals and other secondary care settings has increased in the last year, but it remains below pre-pandemic levels and is being outpaced by demand. This pressure is creating operational challenges throughout the whole system and impacting staff, patient experience and patient safety.
There are a range of strategies, plans and policies in place for the future delivery of healthcare, but no overall vision. The absence of a shared national vision, and a clear strategy to deliver it, makes it more difficult for NHS boards to plan for change.
Stephen Boyle, Auditor General for Scotland, said: “Without change, there is a risk Scotland’s NHS will take up an ever-growing chunk of the Scottish budget. And that means less money for other vital public services.
“To deliver effective reform the Scottish Government needs to lead on the development of a clear national strategy for health and social care.
“It should include investment in measures that address the causes of ill-health, reducing long-term demand on the NHS. And it should put patients at the centre of future services.”
Responding to the Auditor General’s report on the state of Health and Social Care in Scotland Dr JP Loughrey, Royal College of Emergency Medicine Vice President for Scotland, said: “We welcome this report which addresses many of our recent and ongoing concerns – particularly around a lack of long-term planning and poor Emergency Department performance.
“The Scottish government must do more to address capacity and demand pressures. Hospitals are dangerously overcrowded and do not have the space, staff, or resources to provide safe and timely care for the number of patients who need it.
“There needs to be long term strategies to maintain an adequate baseline in capacity and staffing, and deal with predictable surges in pressure.
“As we have seen time and time again across Scotland, there are simply not enough beds to meet demand and our hospitals are routinely almost fit to burst, with patients enduring long, undignified waits and demoralised staff forced to deliver treatment in inappropriate areas, such as corridors and car parks.
“We urge the government to move away from short-term firefighting towards long term fundamental change to #ResuscitateEmergencyCare in Scotland.”
Scotland’s councils are managing their money effectively, increasing reserves, with longer-term financial plans in place. Whilst no council was at immediate financial risk in 2022/23, there is no certainty this will continue, according to spending watchdog Accounts Commission’s latest financial report.
This makes an agreement between the Scottish Government and councils to secure a sustainable, longer-term funding arrangement to deliver local services all the more urgent.
Effective financial management within councils is crucial as budget gaps increase. Councils continue to rely on savings and reserves to balance budgets. Over half of councils used financial flexibilities in 2022/23. This helps with immediate budget pressures but defers costs to later years and fails to tackle underlying challenges to financial sustainability.
The Accounts Commission’s latest report assesses the financial position of Scotland’s councils during 2022/23 and the outlook for services beyond this.
While councils received more funding and income in cash terms in 2022/23, high inflation means this fell by nearly three per cent in real terms compared to the previous year.
A significant and increasing amount of funding continued to be either formally ringfenced or directed towards specific services and national policy objectives – reducing councils’ flexibility in using money to meet local needs.
Despite more core funding from the Scottish Government for 2023/24, there was a significant increase in councils’ total funding gap, due to pressures including increased demand for services, inflation and the cost-of-living.
Capital budgets were also significantly strained, risking knock-on impacts on the maintenance of key public buildings and infrastructure, for example schools, libraries and roads.
Councils recognise the risks ahead, but they need to innovate at pace and make difficult decisions about cuts to services to remain financially sustainable. Some councils have experienced opposition from within their communities when seeking to reduce services to balance budgets. This reinforces the need for frank consultation and engagement with communities when planning change.
Ronnie Hinds, Interim Chair of the Accounts Commission said: “There is intensifying pressures on council finances and services. Given the funding position for councils, there is increasing reliance on reserves and savings to deliver balanced budgets.
“This means councils are already making difficult decisions about future service delivery and the level of service they can afford. Having leadership and a workforce with the right skills will be crucial to deliver on this.
“Local government is the second largest area of Scottish Government spending, but despite rising demand for services, the proportion of funding to councils has reduced over the last decade.
“Urgent progress is needed to agree a funding framework between Scottish and Local Government. This will bring much-needed clarity and certainty of budgets for future years.”
The Accounts Commission’s Local Government in Scotland Financial bulletin for 2022/23 published today (Tuesday) reinforces COSLA’s warnings over the perilous state of Council finances over the last few years.
Commenting, COSLA’s Resources Spokesperson Councillor Katie Hagmann said: “The Accounts Commission’s Local Government in Scotland Financial bulletin for 2022/23, published today, reinforces what we have been saying about council finances and the really difficult and challenging decisions Councils have had to take in recent years.
“It is vitally important that these concerns, which have been consistently raised by COSLA, are now being backed up by hard facts and evidence presented by the Accounts Commission.
“There is widespread agreement from COSLA on the Accounts Commission’s key messages on the scale and financial challenge facing Scotland’s Councils, as well as the most pressing issues facing councils now.
“Some of these key messages, whilst extremely stark, come as no great surprise to those of us in Local Government:
In 2022/23 total revenue funding from all sources fell by £619 million (2.8 per cent) in real terms to £21.3 billion compared to 2021/22.
An increasing proportion of funding is ring-fenced or provided with the expectation it will be spent on specific services.
There is pressure on capital budgets, and this presents risks to the viability of local government capital programmes, many of which impact on key services (e.g., the construction and maintenance of schools, libraries, roads).
Councils are increasingly having to rely on savings and reserves as well as making increasingly difficult decisions to reduce or stop services to help balance budgets.
“Today’s Accounts Commission Bulletin is a true reflection of where we are now. Our reality right now is extremely challenging – years of real-terms cuts to council budgets have been coupled with increasing additional policy commitments and increased ring-fencing. With so much funding still directed, the ability to take local decisions on most of our Budget is almost impossible.
Councillor Hagmann concluded: “The picture painted by the Accounts Commission illustrates why COSLA is lobbying hard on the detrimental impact to communities of the Draft Scottish Government Budget, currently going through the Parliamentary process.
“The trends highlighted by the Bulletin are why Scotland’s Council Leaders are so disappointed and furthermore highlights the need to progress the ambitions of our joint Scottish Government and Local Government Verity House agreement. We must seek a solution to these long-term issues in order to protect the essential front-line service of our communities.
“COSLA’s President, Vice President and Political Group Leaders, from all parties have written to the Deputy First Minister requesting that a meaningful negotiation takes place, to protect those who rely on essential services, support our local economies and continue to progress our net zero national ambitions.”
The Scottish Government no longer expects to have enough money to deliver all its planned £26 billion investment in public sector infrastructure. says spending watchdog Audit Scotland.
Growing the economy and delivering high quality public services relies on infrastructure like roads, railways, hospitals and other buildings. But a combination of reduced capital budgets, higher costs and increased maintenance requirements have left ministers with difficult decisions to make on prioritising capital spending. This includes stopping or pausing planned projects.
The Scottish Government’s investment plan focuses on driving inclusive economic growth, enabling the transition to net-zero emissions, and building resilient and sustainable places. But it is not always clear how the Scottish Government is directing funding to these three infrastructure investment priorities, or how they will contribute to reducing greenhouse gases.
Better data on the condition, occupancy and cost of the wider public estate is needed to ensure buildings are used more efficiently as part of Scottish Government plans to reform public services.
Stephen Boyle, Auditor General for Scotland, said: “Scottish Government spending decisions on infrastructure will affect public services, and ministers need to be transparent about how they are made.
“Efficient use of the public estate in the future is key to reforming public services, but the Scottish Government needs better infrastructure data to inform its planning.”
Scotland’s councils must radically change how they operate – particularly how they collaborate with partners – if they are to improve and maintain services to their communities.
Councils worked well with their partners to address the impacts of Covid-19. They need to implement the lessons learned during the pandemic in order to now cope with reducing budgets, growing demographic and workforce pressures, and declining performance across some services.
The Scottish Government and COSLA urgently need to finalise the planned ‘New Deal’ settlement for local government, allowing for more long-term planning, flexibility and transparency in councils’ budgeting process.
Currently, an increasing proportion of funding is ringfenced for national priorities; this constrains councils from making decisions about how to best use money to address the local needs of their citizens and communities.
Councils must now rethink how they work together, and with local partners and communities, to provide financially sustainable services whilst tackling national issues such as climate change, child poverty and inequalities. Few councils provide services jointly or share support services across different councils.
Councils also need better data in order to ensure that they can demonstrate that their services are meeting their citizen’s needs.
Tim McKay, Acting Chair of the Accounts Commission said: “The New Deal for local government, agreed between the Scottish Government and COSLA, is long overdue. Putting this in place will give councils longer-term financial stability, supporting them to make decisions and make the fundamental changes that are urgently needed.
“Councils have gone beyond the point where making savings is enough. If the change needed doesn’t happen now, some services will continue to get worse or deeper cuts will be made. This will impact communities and individuals that are already at crisis point with the effects of inequality and persistently high poverty.
“Councils need to have open and honest conversations with their communities and staff about the future of council services.”
COSLA President Shona Morrison has said that Councils are already at the forefront of service provision and are probably the most transformative and collaborative part of the public sector in Scotland.
The COSLA President also called on other parts of the public sector to be as radical and transformative as Scottish Local Government and praised how well Scottish Local Government collaborates with partners in particular.
Commenting yesterday (Wednesday) in response to the Accounts Commission Overview Report, Councillor Morrison said: “As today’s report recognises, Councils worked well with their partners to address the impacts of Covid-19.
“The report also recognises the huge challenges Councils face due to budget constraints, increased cost pressures and demand, and increases in directed and ringfenced funding. As we have all seen, increasingly difficult choices are required about spending priorities and service provision given reducing budgets coupled with growing demographic and workforce pressures.”
Councillor Morrison added: “In addition, we are working with the Scottish Government on a ‘New Deal’ for Local Government, which will enable more long-term planning, more transparency in the budget setting process and a reduction in ring fenced funding for national priorities which constrains councils from making decisions about how to best use money to address the needs of their local communities.”
She concluded: “Only on Monday of this week, in our response to the Finance and Public Administration Committee’s call for views on public service reform, we highlighted the significant efficiencies and reforms that councils across Scotland have already made in response to successive real-terms cuts to core funding for over a decade.
“We also welcomed the Scottish Government’s renewed commitment to work collaboratively with Local Government to deliver on shared priorities, including tackling child poverty and achieving a just transition to net zero.
“Today’s report from the Accounts Commission and our response to the Finance and Public Administration Committee deliver exactly the same message. Councils are uniquely placed to be the key partner in the Scottish Government’s public service reform programme and should be further empowered to better support local service delivery.”
Scotland’s Integration Joint Boards (IJBs) face considerable financial challenges and immense pressures on their workforce, says public spending watchdog Audit Scotland.
IJBs have reached the point where significant transformation will be needed to ensure the long-term capacity, financial sustainability and quality of services individuals receive.
IJBs plan and commission many community-based health and care services. Demand for these services is increasing, in part due to demographic change and support for people with increasingly complex care needs.
The number of care hours for those aged over 65 reached nearly 25 million in 2021/22. The proportion of care services reporting vacancies increased by 11 per cent to 47 per cent, with a 30 per cent turnover of staff each year.
Most IJBs underspent on providing services in 2021/22. This was largely because of difficulties in recruiting staff, which led to unplanned vacancies, and pandemic-related reductions in service provision. The reductions in service provision were likely to have contributed to an increase in unmet health and social care needs.
In 2021/22 IJBs returned significant surpluses, with reserves doubling to over £1.3 billion. This was mainly due to additional funding received late in the year for specific policy commitments, including Covid-19. The Scottish Government are currently exploring options to recover around two-thirds of the unspent Covid-19 money held in reserves.
Across Scotland, IJBs have a combined projected funding gap of £124 million for 2022/23.
To be financially sustainable in the longer-term, IJBs must reduce their reliance on reserves. All IJBs must put in place detailed plans that clearly show how they will achieve the needed ongoing savings on a recurring basis and support urgently needed service transformation.
William Moyes, Chair of the Accounts Commission said: “Change is needed now – it cannot wait for a National Care Service. Action is needed to tackle funding pressures, which are under increasing stress from rising demand and cost pressures.
“The workforce challenges are considerable, with mounting unmet need.
“We need to see services focus on prevention, with appropriate funding in place to transform the way services are delivered and to improve lives. “
Local government organisation COSLA agrees.
COSLA Health & Social Care Spokesperson, Councillor Paul Kelly, said: “Today’s report from Audit Scotland is concerning and highlights the enormous pressure our health and social care infrastructure is under.
“People across Scotland rely on vital health & social care services every day, and it is critical that there is meaningful investment in the system which ensures their long-term capacity.
“We must ensure focus remains on front-line service improvement and sustainability, rather than the bureaucratic structural change presented through the National Care Service Bill.”
The Scottish Government needs to be clearer about how long it will take the NHS to recover from the Covid-19 pandemic and to reform services, says public spending watchdog Audit Scotland.
The government’s NHS recovery plan aims to reduce the healthcare backlog and change how services are delivered. But the plan does not contain the detailed actions that would allow progress to be accurately measured. It also lacks robust modelling to understand demand and capacity. The backlog has continued to increase in the 18 months since the plan was published as the NHS deals with a range of pressures.
Workforce capacity remains the biggest risk to the recovery of NHS services. Health boards are continuing to find it hard to recruit the doctors, nurses and other health professionals needed to make sure NHS services are sustainable in the long-term. Key recruitment targets, such as recruiting 800 GPs by 2027, are unlikely to be met. The NHS workforce remains under severe pressure and there are concerns over staffing levels, wellbeing, and retention.
The Scottish Government is moving ahead with the innovation and reform essential to NHS sustainability. But it is too early to gauge the impact of this work. In the meantime, every NHS board is facing significant financial challenges which could limit how much they can invest in recovery. And the Scottish Government also needs to make information on how long people will have to wait for treatment clear and meaningful.
Stephen Boyle, Auditor General for Scotland, said: “NHS staff remain under severe pressure and the Scottish Government is facing tough choices.
“Money is tight but investment is needed in recovery. That means ministers have to prioritise which NHS aims can realistically be delivered. And they need to be more transparent about the progress they’re making.
“The Scottish Government has set out the big challenges facing the NHS. But it also needs to clearly explain to the public what those challenges mean for the level of service they can expect, including waiting times.”
Councils across Scotland faced significant financial challenges during 2021/22 and are now entering the most difficult budget setting context seen for many years. Increasingly difficult choices about spending priorities will need to be made.
The Accounts Commission, the independent body that holds councils to account, said that even with additional Covid-19 funding during 2021-22, councils had to make significant savings last year to balance their budgets.
Many councils have also used reserves to bridge funding gaps and fund vital services. This is expected to be the case in 2022/23. The £570 million of additional funding for 2023/24, announced in the December budget, will help councils address upcoming cost challenges, but further change and reform across all councils is required to ensure longer-term financial sustainability.
When compared to the 2013/14 Scottish Government revenue funding position to local government, 2021-22 represented the first real-terms increase in six years (excluding one-off Covid-19 money). But an increasing amount of council funding is either formally ringfenced or provided on the expectation it will be spent on specific services and national policy objectives. This supports the delivery of key Scottish Government policies yet removes local discretion and flexibility over how these funds can be used by councils.
William Moyes, Chair of the Accounts Commission, said: “It’s clear the financial situation of councils is increasingly fragile. Councils are having to deal with the effects of inflation, the increasingly desperate cost of living impacts and rising demand for services, whilst at the same time delivering vital day to day services to their communities.
“To be financially sustainable, councils must deliver savings and reduce reliance on non-recurring reserves to fill budget gaps.
“If they are to find a safe path through the difficult times ahead, councils need to focus more on service reform, alongside meaningful engagement with their communities, about what services can be provided given the financial pressures they are facing.”
Longer-term joint planning is needed to address child poverty in Scotland, which has increased since targets were set in 2017, according to a new Audit Scotland report.
The Scottish Government’s policies and spending remain more focused on helping children out of poverty rather than long-term measures to prevent it. Over a quarter of children in Scotland – 260,000 – were living in poverty before the Covid-19 pandemic. And the current cost-of-living crisis risks making the situation worse.
Covid-19’s impact on data collection means child poverty statistics are only available up to 2019/20, the half-way point in the Scottish Government’s first child poverty plan. But even with the data it would not be possible to assess the plan’s success. This is because the Scottish Government did not set out what impact the 2018-22 plan was expected to have on levels of child poverty.
The government’s second child poverty delivery plan takes a more joined-up approach to tackling child poverty, spanning central and local government and their partners. But detailed joint planning is now needed to ensure policy actions are delivered and progress measured. Policy development also needs to meaningfully involve the views of children and families with experience of poverty.
Stephen Boyle, Auditor General for Scotland, said:“Poverty affects every aspect of a child’s wellbeing and life chances and has wider implications for society.
“The Scottish Government needs to work with its partners to quickly set out the detail of how the second child poverty plan will be delivered, monitored and evaluated.
“Government policy takes time to have an impact on child poverty and so it is essential ministers also act now to set out options for reaching their long-term targets in 2030.”
William Moyes, Chair of the Accounts Commission, said:“Councils have a key role to play in tackling child poverty through measures such as housing, education, childcare and employability. But there is limited information available across councils about what they are doing and its impact.
“Better collection and sharing of information about councils’ child poverty work will help support learning and improvement across Scotland.”
