Worst-case scenario forfinances maybe realised

Scotland’s budget will fall by about £3.3 billion over a four-year period as the current programme of cuts begins to bite, and a report by Audit Scotland today warns that the country’s finances are facing a “worst-case scenario”.

The commitment to no compulsory redundancies in central government and the health sector are among the factors which have left some public bodies fearing they may struggle to implement the cuts required, the report warns.

It adds: “There is a risk that savings needed may not be realised during the year.

“There is also a risk that unforeseen pressures will emerge during the year, which may reduce further the ability to generate savings.”

Audit Scotland has concluded that Scotland’s public bodies need to make significant savings this year – but there is a risk they will not achieve this due to cost pressures being greater than expected or unforeseen events.

Two years ago, the watchdog highlighted analysis by the Centre for Public Policy for Regions (CPPR) looking at three possible budget scenarios, ranging from a 5 per cent real-term reduction at best, to an 11 per cent reduction at worst.

The report adds: “It is now clear that the scale of the budget reductions facing Scotland over the next few years is close to the CPPR’s worst-case scenario.”

Meanwhile, budgets will continue to drop. The planned 2014/15 budget of £25.9bn will be 11 per cent, or £3.3bn, smaller than in 2010/11.

Pay restraint and reducing workforces are the most common approaches being taken by public bodies to cut costs over the next few years.

Accounts Commission for Scotland chairman John Baillie said: “Local authorities have already done substantial work to address the very challenging financial outlook and they face very difficult decisions in prioritising services and allocating money.

“It is crucial that they continue to focus on the outcomes they intend to achieve, and not just on short-term decisions driven by the need to reduce costs.”