Many thanks, convener. Good morning, committee. I am presenting this report on the 2021-22 audit of the Scottish Government under section 22 of the Public Finance and Accountability (Scotland) Act 2000.
The Scottish Government’s annual consolidated accounts are a critical component of its accountability to the Parliament and the public. The consolidated accounts cover over 90 per cent of the budget that was approved by the Parliament for that year. The accounts show what the Government spent against each main budget heading and the reasons for any significant differences or variances. They also show the assets, liabilities and other financial commitments that it is carrying forward to future years. My independent opinion on the consolidated accounts is unqualified. That means that I am confident that they provide a true and fair view of the Government’s finances and that they meet legal and accounting requirements.
There are three areas from my report that I would like to highlight. The first is on budget performance. Net spending for the year was £49.2 billion, which was £2 billion less than budget and an underspend of about 4 per cent. Spending levels remained significantly higher than in pre-pandemic financial years, with around £5.8 billion of the 2021-22 expenditure relating to the Covid-19 response.
The second area is financial sustainability. The Scottish Government is facing intense challenges in managing its finances, as tougher economic conditions, such as higher inflation and increased interest rates, emerge. Public sector pay issues remain unresolved in several key sectors. The demand for health and social care services remains unsustainable and the number of people accessing social security benefits is significant. Those are just some of the areas that will add further financial pressures in the current year and beyond.
I welcome the Government’s increased focus on financial sustainability and the longer-term focus on managing its finances. Therefore, it will be important for the Government to ensure that its policy choices and spending commitments are fully costed in forthcoming budgets and that its approach to using reserves is more transparent, particularly where there are funding implications for the wider public sector.
The third area is financial reporting. Last year, the Scottish Government committed to a revised timetable for the development of a devolved public sector account on a two-stage basis. However, progress on finalising the stage 1 draft account remains slow. The need for a comprehensive assessment of the state of Scotland’s public finances has never been greater, and I am, therefore, asking the Scottish Government to move more swiftly to fulfil its commitments in delivering this important account.
As ever, my colleagues and I will do our best to answer the committee’s questions. Thank you.