Thank you, convener. The Scottish Government’s annual consolidated accounts are a critical component of its accountability to Parliament and the public. The current challenging and increasingly complex financial environment and the uncertainty from the European Union withdrawal highlight the importance of comprehensive, clear and consistent financial reporting to support this committee and the wider Parliament in their scrutiny roles.
The consolidated accounts cover around 84 per cent of the spending approved by Parliament in 2018-19—the elements that the Government is directly responsible for. The accounts show the amounts that the Government spent against each main budget heading and the reasons for any significant differences. They also show the assets, liabilities and other financial commitments of the Scottish Government carried 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.
I would like to highlight three areas from my report. The first area is financial management. The Scottish Government managed its budget for 2018-19 within the overall limits set by Parliament and budget management during the year was effective in managing aggregate spending, borrowing and tax receipts within that limit. The accounts show that total net expenditure during 2018-19 was £36.137 billion—£778 million less than the budget.
My report highlights the status of Government loans and guarantees to private companies such as Ferguson Marine Engineering Ltd, Burntisland Fabrications Ltd and Prestwick airport, where the valuations of financial support have declined significantly. The Scottish Government has not yet implemented my recommendation from last year to develop a framework to clearly outline its approach to providing that sort of financial support to private companies. Such a framework should provide clear information on financial capacity, risk tolerance and the expected outcomes in order to provide Parliament and the public with better information about the Government’s objectives in entering such agreements.
The second area to highlight is financial reporting. Last year, I welcomed the Government’s publication of its first medium-term financial strategy. The Government published its second strategy in May this year. The new strategy includes principles and policies on reserves and borrowing powers, which is welcome, but it does not reflect some basic components of the medium-term financial plan that were included in 2018. In addition, the Government has still not fulfilled its commitment to this committee to publish a consolidated account covering the whole devolved public sector in Scotland. That would fill an important gap, providing information about the impact of past decisions on future budgets, the scale of assets and liabilities and potential risks to financial sustainability.
Finally, the performance report included in the consolidated accounts complies with the principles of the Government reporting requirements and the accounts direction. However, as in previous years, it provides only very limited performance information on the Government’s own progress towards its overall aims and objectives, with users of the accounts being directed to the national performance framework. There is a need for the Government to prepare a performance report that clearly links to the financial resources outlined in the consolidated accounts.
As ever, we will do our best to answer the committee’s questions.