More austerity is looming for hard-pressed Scots in the years ahead with the prospect of service cuts, mergers and increased charges for services, the public spending watchdog has warned.
Bodies such as councils and the NHS have shed 26,000 staff in recent years as swingeing spending cuts have taken their toll, resulting in a £1 billion fall in their pay bill, Audit Scotland says.
But the staff bill is still expected to rise by £433 million next year, prompting a stark warning that organisations must “think differently” about how they deliver services.
“Public sector finances will be under pressure for the foreseeable future, although this varies between sectors,” warns the report, entitled Scotland’s Public Sector Workforce.
“Given the challenges ahead, public bodies will need to make further workforce changes. Without service reform, these are unlikely to deliver the savings needed.”
More than 3,000 jobs will go next year in the public sector, but pay hikes, inflation costs and a £20m bill for the new living wage are likely to result in the £433m increase.
The report warns: “Boards and elected members may also need to prioritise services and identify if service cuts are necessary.”
Cutbacks so far have included a reduction in the frequency of grass cutting in Glasgow and shorter museum opening hours in Aberdeen, but these are “small-scale”, the spending watchdog says.
A hike in charges for services that councils provide, such as adult social care, burials, sports facilities and pest control, could also be on the way.
“Public bodies may need to consider increasing charges for some services and introducing charges for other services,” the watchdog adds.
Mergers are another cost-cutting alternative for councils, with the report pointing to the example of Clackmannanshire and Stirling councils, which have a “joint-working arrangement” for trading standards.
Scotland’s public sector workforce soared in the ten years after devolution to a peak of 400,000 across councils, the NHS and central government in 2009, according to the report prepared for the Accounts Commission. But this has fallen back to 347,300 in recent years as the impact of austerity began to bite.
More than a third of Scotland’s councils have undertaken compulsory redundancies, despite a flagship Scottish Government policy to avoid these.
Councillor Billy Hendry, Cosla’s human resources spokesman, said the report “reinforces the crucial work already being undertaken by councils in redesigning services in a period of major demographic change.”
He added: “We cannot be complacent, however, and we will consider carefully the recommendations of the Audit Scotland report and act on these where we feel they add value to our existing work in this area.”
Dr Brian Keighley, chairman of the British Medical Association in Scotland, said staff costs make up a “significant proportion” of the NHS budget.
“Those who work in the NHS can be an easy target for NHS boards to make financial savings,” he said.
“NHS staff have had to endure ‘pay restraint’, recruitment freezes and cuts to staffing numbers, and while this approach might deliver some savings in the short term, it will in the longer term cause damage to patient care.”
There is “an obstinate reluctance of the Scottish Government to consider significant service redesign”, he said.
“Without a realistic debate on this issue, the NHS will be under huge pressure to make sure it has sufficient staff to deliver services as they are now. Trying to get even more work out of existing staff is not a sustainable solution.”
A Scottish Government spokeswoman welcomed the report, insisting it “illustrates the progress Scotland’s public bodies have made in reshaping their workforce in the face of severe budgetary challenges resulting from the current constitutional arrangements within the UK.”
John Baillie, chair of the Accounts Commission, said: “Public bodies are already beginning to work together to share resources and find different ways to deliver services, but with public sector finances set to be under pressure for the foreseeable future they need to come up with new ways to do this.”
Public bodies have used a range of measures including pay restraint, redeploying staff and changing working patterns to manage staff numbers and costs.
Poorest areas ‘hit hardest’ by falling budgets
Scotland’s poorest areas are suffering deeper cuts to budgets – around £90 per head – compared with well-off neighbourhoods, charity chiefs have warned.
Cuts are also £47 per head greater in the west than in the east of Scotland, according to a report by the Joseph Rowntree Foundation (JRF).
Council spending is set to fall by 24 per cent in Scotland in real terms between 2008 and 2015. John Low, policy and research manager at JRF, said that illustrates how spending cuts are “playing out on the ground”.
He added: “As we approach the fourth austerity settlement for local government in December, it is clear the cuts are biting deep into the poorest and most deprived communities. Unless we can muster the national will to correct or mitigate the unacceptable divergence of resources between more and less affluent authorities, we are slowly but inexorably creating a more divided society.”
Areas such as the former Strathclyde region, Ayrshire, Argyll and Bute, Dumfries and Galloway, and Eilean Siar see greater cuts, whereas the former Borders region, Central, Lothian, Fife, Tayside, Grampian, Highland, Orkney and Shetland fare better, according to the report.
Councils are seeking to balance budgets by increasing income and reducing demands on services via measures such as developing businesses and attracting jobs.
The report by researchers at Glasgow University and Edinburgh’s Heriot-Watt University – Coping with Cuts? Local Government and Poorer Communities – analyses the national change and distribution of budget cuts across Scotland and England.
Co-author Glen Bramley said: “The extent of these cuts, sustained over a period of years and in the face of rising demands and costs, is unprecedented.
“We can say that the extent of the cuts is greater in the more deprived authorities, and that some important services relied on more by poorer people are being cut substantially.”
UK financial watchdog ‘doesn’t understand’ Scots economy
The UK government’s financial watchdog does not have a full understanding of Scotland’s economy, according to experts.
The Office for Budget Responsibility, established by the Tory-Lib Dem coalition to produce independent economic forecasts, lacks sufficient data to produce “sophisticated” predictions for Scotland, Holyrood’s finance committee heard yesterday.
A Scottish version of the OBR is “highly desirable” now that Scotland is getting more devolved tax and borrowing powers, and will be even more crucial if it becomes independent, according to Royal Society of Edinburgh fellow Jeremy Peat.
Glasgow University professor of macroeconomics Campbell Leith said a lot of work is required to allow the UK OBR, or any prospective Scottish fiscal body, to produce “solid” forecasts.
The Royal Society has noted concerns about whether UK OBR “fully captures the distinct circumstances and drivers in Scotland”.
Prof Peat said: “It’s evident that they don’t necessarily have the full understanding of all the niceties of the issues that are around. Inevitably, if the work they do is at a UK level, the work they do at a Scottish level may be part of a narrower element of their remit and, therefore, they may not necessarily capture all that should be captured.
“There are two types of forecasters: those who don’t know and those who don’t know that they don’t know; and it’s the latter type who are always the most dangerous.”
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