Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, June 25, 2020

Official Report 585KB pdf

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Key Audit Themes

Agenda item 3 is on key audit themes. Auditor General, this is your final appearance before the committee. We want to provide you with an opportunity to reflect on your time in office and to talk about the key themes that keep arising in your audit reports, and about where there has been developments and where further progress is required.

As you know, over the past few years the committee has increasingly taken a strategic approach to its scrutiny. It published a report last year that drew together key audit themes and explicitly recognised that many of the issues that are highlighted in your audit reports are consequences of the pressures on public services. We look forward to hearing your views today.

I invite you to make an opening statement, after which I will open up the session to questions from members.

Thank you. I am very grateful for the opportunity to open out my scope in this way during my final appearance before the committee.

As I finish my term of office, the impact of the Covid-19 pandemic feels overwhelming. However—as you said—many of the issues that I have reported on over the past eight years are as important as ever, so I would like to step back and highlight three themes.

First of all, I say that Covid-19 has shown us many of the strengths of Scottish society. The responsiveness and resilience of our public services and the ways in which individuals and communities have supported each other show that we have a lot to be proud of.

However, there is also the risk of the pandemic obscuring some long-standing issues that will need to be addressed, as we move towards recovery and renewal. In particular, Covid-19 has highlighted deep-seated inequalities in Scottish society. Despite the commitments that have been made by all political parties since the establishment of the Parliament, Covid-19 has shown how the cards remain stacked against the poorest and most vulnerable people in society, and how those people suffer disproportionately during times of crisis.

The Scottish Government’s national performance framework is an ambitious attempt to join up policy making, and to focus on outcomes including reducing poverty, stimulating economic growth and tackling climate change. The framework was groundbreaking, but 13 years after it was launched it is still difficult to see how individual policies and budgets are designed to improve outcomes, or how trade-offs between, for example, tackling climate change and supporting the economy, are managed.

In order to make a greener, fairer and more prosperous Scotland a reality, the Government will need to be more focused in setting its policies and directing its resources, and that must be underpinned by better data. The committee has seen many examples of how lack of data—for example, on primary care and mental health services—gets in the way of shaping services to meet people’s needs.

We also need more parliamentary scrutiny of the Government’s plans, budgets and progress in tackling the long-standing challenges that we face, as a nation.

Secondly, one of the defining features of my term as AGS is the big increase in the Scottish Parliament’s financial powers. We now raise directly about 40 per cent of what we spend, with borrowing and reserve powers providing some short-term flexibility. However, the limits of the fiscal framework mean that it will be difficult for the Scottish Government to balance its spending against the available funding in this and future years. Maintaining that critical financial stability will require greater financial transparency.

I will highlight two priorities. The first is that there should be a set of consolidated public sector accounts that sets out what the Government owns and what it owes alongside what it raises and spends. That is essential to underpin good decisions and effective scrutiny.

The second thing is that transparency about the medium-term financial strategy is also critical. Before the pandemic, the strategy offered little information on the Government’s spending plans, and no consideration of how a £1 billion budget shortfall over the next three years would be addressed. The pandemic has made those pressures much more acute. We need to know what the budget is likely to look like in the years ahead, and how the Government intends to fund its priorities.

The new budget process has been slowly bedding in, but we are now at a pivotal moment. I want to stress that that is not only a technocratic issue. As we have said, Governments are protecting lives and livelihoods in ways that would have been unthinkable even six months ago. As we emerge from the pandemic, the Scottish Parliament will need to base its decisions on clear, comprehensive and reliable information about the spending choices that are available and what they are intended to achieve.

The third area that I want to focus on is renewal of the NHS and social care. Our NHS has been a rallying point during the pandemic, but the tremendous speed and scale of its response risks obscuring the fact that it is not sustainable in its current form.

Society has changed dramatically since the NHS was established; we live much longer, and we increasingly suffer from chronic diseases such as diabetes and dementia, which cannot be fixed during a hospital stay.

It does not make sense to keep pouring money into a system that was designed for a different era. Health boards increasingly struggle to break even. When I most recently reported, health accounted for 42 per cent of the Scottish budget—[Inaudible.] That cannot continue indefinitely without consequences for other public services, such as education. We have seen the unintended effects of looking at individual parts of the health and care system in isolation; now we need to look at the system as a whole, and we need to remove the barriers to change.

11:45  

Progress with integration has been limited so far. We need to look again at the incentives in the system, and we need to reward people for working together rather than for the performances of their individual silos. We also urgently need to shape a culture that gives leaders the space to lead every day, rather than just when there is a crisis, and which puts trust and kindness at the centre.

I will close by touching on the role of the committee. In the Parliament’s first decade, its committees were seen as one of the successes of devolution, but that view was challenged by the commission on parliamentary reform, which found that they have not been as effective in holding the Government to account as the constitutional steering group hoped they would be. The commission made a number of recommendations for change, some of which have been taken forward.

However, I believe that there is also scope for the Public Audit and Post-legislative Scrutiny Committee to play a stronger role in scrutinising Government spending, and that Audit Scotland can help you. We were created alongside the Parliament to provide you with independent evidence to hold people to account for how they spend public money. As Auditor General, I am nominated by Parliament and can be dismissed only by a parliamentary vote. I am accountable for my budget to a commission that is chaired by Colin Beattie. The safeguards exist to protect our independence, and to enable us to produce reports that the committee can rely on.

That is a privileged position, and we take it seriously. We invest in the quality of our work, agree the factual content of reports and communicate our findings clearly, in a fair and balanced way. However, it sometimes feels as though the committee’s scrutiny is directed at our work rather than at the Government and other public bodies that are accountable for what we have found. That reflects the polarised political environment that we all work in, but it can limit the committee’s effectiveness.

When the committee takes evidence from accountable officers, you are sometimes hampered by not knowing how to interpret the evidence that you are given or how to probe the answers that you receive. Audit Scotland could help you to strengthen your scrutiny by acting as trusted advisors, rather than just being another set of witnesses—in line with well-established practices in Westminster, Cardiff and Belfast. The pandemic and a change in Auditor General offer you the chance to look again at your working practices, at a time when your scrutiny role has never been more important. I have no doubt that you will be in excellent hands when Stephen Boyle takes over on 1 July.

I have covered a lot of ground, but I hope that I leave you with some food for thought, as I step down after eight tremendously privileged years as the Scottish Parliament’s Auditor General. Delivering the changes that are needed will not be straightforward; it is much easier to score points than it is to engage in debate about what is important and what trade-offs are involved. All political parties recognise those challenges and all find it difficult to deal with them in office, so we need to address them together, as a Parliament and as a nation.

If I may, I will finish with a question. We all find ourselves at a watershed moment: how do we want to use it?

Thank you for that opening statement. There was much in it. I do not want to hog all the questions, so I will open questioning out to other members in a moment.

Many of the issues that you have raised are important for us as individual committee members, and for us collectively as a committee and a Parliament to reflect on—particularly as we head into the next parliamentary session—in terms of what they mean for the future of our country and public services.

I will touch on two things that you mentioned. The first is the NHS and social care. More is needed than just a debate: decisions need to be made about the future model of care and how we deliver it for people throughout the country. Outwith the politics, one of the things that hampers us structurally in our NHS and social care—and in almost every area that you audit—is that we have a people problem in terms of numbers, and in terms of adequate training and recruiting, nurturing and expanding our workforces. What are your reflections on the people challenges and how we can respond to them? Some of that is about immigration, training and redesign

As you said, there was a huge amount in what I said, but we have published reports, specifically in the NHS and social care, which highlight workforce challenges and potential solutions.

I will highlight a couple of things. First, there is a need for a vision of what health and social care should look like to meet the needs of Scotland’s people in the 21st century. The 2020 vision was set out 10 years ago; we are in 2020 now and it is widely acknowledged that not enough progress has been made towards a service that is delivered much closer to people’s homes, is much more centred on individuals’ needs and is about keeping people well in the face of chronic ill health rather than being about conditions and diseases that can be treated and cured so that people return to life as it was before.

In my most recent NHS overview report, I highlighted the need for a fresh vision that engages the people who work in health and care, people across Scotland, and politicians of all parties in thinking about the choices that we face and why we need to move away from what many of us still instinctively think of as being what the NHS should be. That has been reinforced by the pandemic, with all the fantastic work that has been going on in intensive care units, for example. That work matters, but most of what health services do most of the time is much less glamorous than that, but is just as important in giving people the chance to live full and long lives. I therefore think that the vision matters.

In addition, as the acting convener suggested, we need a focused programme of work that thinks through what that means for the professionals whom we need and how we train them, and how we retain people who already work in health and care. In normal times I talk throughout the year to a lot of doctors and nurses and other people who work in health and care services. All those people joined the NHS because they want to make a difference to people’s lives. However, they are often frustrated by the systems and culture in which they work, and by how they are held to account—for example, by the focus on waiting times to the exclusion of many other things.

Setting a culture that gives professionals room to do their jobs as they want to do them, with care and kindness for individuals, while holding them to account for the big-picture results that the system achieves, would go a long way towards addressing the workforce problems. That would also keep people in their jobs longer, so that the most could be made of their experience and expertise, and so that their experience and expertise are passed on to the next generation of professionals and care workers.

You have been in your role for eight years. I am not going to ask you to get involved—you are way too clever, smart and well trained for this—in the kind of political dispute that Willie Coffey, Liam Kerr and I might want to get into every now and then. However, you mentioned culture. This is a question about the wider political establishment and all political parties. Does the culture of polarisation in our politics hamper and undermine the approach to reforming our services in Scotland?

To be honest, I say that it does. More than once, after I have published a report on the NHS, for example, and have been in the BBC’s studio in Edinburgh to talk about it on the “Good Morning Scotland” programme, I have been in the Parliament’s garden lobby before the committee meets on a Thursday morning and an Opposition member has come up to me and said, “We completely agree with what you’re saying, but we can never say that in the chamber.”

I absolutely understand the pressures on political parties to make short-term points and to open up space between themselves and the Government, but people recognise that they would have to deal with the challenges themselves, were they in power, and that all that we are doing is pushing them further into the future and making the pressures more intense. I absolutely do not want to underplay the difficulties of an individual politician or party moving away from that. In a sense, complaining about politics feels like complaining about the weather: it is just the environment that we have to work in.

However, there is something really important, particularly at this time, about accepting that the challenges will not be addressed unless we find a way of talking together about the big choices that we face and the kind of society that we want to be in the future. The pandemic has opened up an awful lot of stress lines in society.

I am sure that you accept that both Opposition and Government members can do better on that.

I think that that is absolutely the case.

We might draw a lesson from Scotland’s political parties having rallied together in the face of the pandemic, particularly at the start, although it seems that we have returned, or are returning, to politics as usual. Could the spirit that we displayed as a country at the start of the pandemic be displayed in relation to public services as we go forward?

I very much hope that it could. We all know that the pandemic has imposed huge costs on people, families and communities across the country. The economic cost is, to a great extent, still to come. The situation will be even more tragic if we do not take some benefits from it.

The approach that the First Minister has taken to communicating what is happening in Scotland—the route out of lockdown and the choices that are being made within that—has been exemplary. There will be lessons to be learned, as we all recognise. We started off in the spirit that this was something that none of us has had to deal with in our lifetimes. The crisis demanded an instant response to things that were unprecedented. Some things will have been done wrong, as well as many things having been done right. Going into inquiries with that spirit, rather than talking about who is to blame could, in the conversation about what we learn from this situation, go a long way towards rebuilding.

I have a final question, before I hand over to Colin Beattie. At the Scottish Commission for Public Audit last week, I asked you about auditing of race disparity. For two years I have been asking the Government to do a race disparity audit, but it has been hesitant to do that, so far. Will Audit Scotland consider doing that, so that we take equality much more seriously, and so that we know what our base is on which to build a more progressive and equal Scotland.

I absolutely recognise the importance of equalities in the broad sense. One of the answers to the earlier question about our people problem for health, care and other public services is to ensure that everybody has the chance to thrive and to fulfil their potential, despite the disadvantages that they face.

As I said at the Scottish Commission for Public Audit, that is not a core area of our responsibility, but we do some work on it. All auditors have been asked to look at equalities arrangements this year, as part of our duties under equalities legislation. We will be asking the Government about that, as part of our wider pattern of work. If there is more work to be done, we would like to have a conversation about that with the committee and the Government. It might be something that comes through in section 22 reporting on Scottish Government accounts this year. That would provide the committee with a hook: you could ask the permanent secretary about it and get more clarity on the Government’s plans for providing baseline information that would let us track progress on its commitments in relation to our becoming a fairer country, as we emerge from the pandemic.

I know that Stephen Boyle will be happy to continue that conversation with the committee.

So, you have no objection in principle to doing a race disparity audit in Scotland.

It is not about an objection in principle; it is a matter of ensuring that we make best use of our skills and resources, and that we keep responsibility where it sits, which is with the Government and equalities bodies.

However, there are things that Audit Scotland and the Auditor General can do to help the committee to engage with the Government about its plans, to fill gaps where information is available to report back, and to highlight where information is not available, so that you can ask why it is not there and when the gaps will be filled.

Thank you for your insights, Auditor General. It is clear that there are a lot of challenges ahead for all of us.

I want to return to the theme of internal audit, which I have raised with you on quite a number of occasions. During your time in office, we have had many section 22 reports that have indicated that there have been financial problems or whatever in particular public sector bodies and that the internal auditors have carried out their duties absolutely perfectly and according to the contract but something has still slid through and gone wrong, and we have ended up with a section 22 report. Is internal audit as it has developed, particularly in recent years, fit for purpose?

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It is not possible to give you a one-word answer to that question. We see some public bodies in which internal audit is extremely effective and highly valued by those who are charged with governance and the audit committee, it plans its work well and carries it out well, and its recommendations are taken into account. Internal audit is effective in that sense. However, we also see some public bodies in which internal audit is not well-enough resourced or does not meet the internal audit standards in carrying out its work. Where that is the case, we report on it. There are cases in the middle in which internal audit does everything that is expected of it but, because it cannot look at every transaction or every system every year or because the people on the audit committee do not pay attention to its recommendations, problems still emerge.

The only assurance that I can give you is that external auditors look at that issue every year as part of their overall work on the internal control systems in organisations. We report where we see problems. The committee will recall that a feature of last year’s section 22 report on the Scottish Government audit was that progress had been made with internal audit, and we thought that there was scope for the audit committee to be more effective in asking for it.

No form of audit is a guarantee that nothing will go wrong. That has been the subject of a lot of debate over the past couple of years, with reviews from Kingman and the Competition and Markets Authority and, more recently, the Brydon review.

It is very important to continue the conversation about what external audit and internal audit do so that they are understood and given their place. However, at the end of the day, management is responsible for its systems of control and its financial reporting. We try to ensure that that responsibility stays where it belongs.

I fully accept that internal audit is only as good as the people who are involved in it and that a partnership between the internal audit team and the board, or whoever is doing the monitoring or receiving the report, is involved. However, do you think that, over the years, where internal audit has become contracted out to third parties and, not unnaturally, there is a fixed programme of boxes to tick, with apparently very little leeway—obviously, for contractual legal reasons and so on, people will not do more or less than those boxes say that they have to do—that is constraining internal audit? Is that a straitjacket that means that internal audit does not look as widely and does not have such a broad vision of the business that it is auditing?

That can be a risk. We see that, where internal auditors are appointed from one of the firms that specialise in that work, particularly when they are newly appointed and the audit committee is not particularly effective, the internal audit plan may not focus on the most important issues, and nobody might pick that up—neither the audit committee nor the internal auditors themselves.

Equally, I have seen strong examples of contracted-out internal audit. I pick out the example of the Scottish Police Authority, for which Scott-Moncrieff has been the internal auditor since the SPA put in place internal audit, which was later than it should have been put in place. It has done an outstanding job in getting a sense of not just what the internal controls look like but what the culture is in the SPA and Police Scotland, what that means for the risks that the organisation faces, and therefore what internal audit work it should be carrying out.

There is a risk, but the issue is not as straightforward as saying that having an in-house internal audit service is always better. We have seen some cases in which that is absolutely not the case, although there are some great in-house services around.

I have asked you in the past about how far you get involved in defining internal audit within the various organisations. Every public sector body is different, for example in the risks that each one faces. Is it possible to have a manual, so that internal audit and management would have guidelines that they could look at, without that bring too constrained? You would not want the manual to become a tick box, but it would give some guidance on the ideals of internal audit and the relationship with the body being audited.

There is already significant guidance out there, including the internal auditing standards that internal auditors are required to adhere to, and on which they are independently assessed every few years to demonstrate that they are meeting them. The Scottish Government also provides audit guidance for public bodies. Every year, as part of their work on the overall control system, external auditors will have a look at the quality of internal audit and decide how much of the work can be relied on.

In many ways, the answer comes back to something that this committee has repeatedly asked about, which is making sure that organisations have a good audit committee, with independent members who understand the business world and what the role of internal and external audit is, and who are asking the right questions. They should be asking why particular things are not on the plan, testing the priority of the different pieces of work that the internal auditors could do and making sure that their findings are taken seriously.

You will recall that, when we were reporting on NHS Tayside, internal audit had tried to blow the whistle about the transaction with the endowment fund, and that nobody wanted to hear that. In the end, successful internal audit comes more from culture than from the existence of standards and guidance.

There is a question about whether internal audit is a passive or a proactive function. You might think, “It’s audit; therefore it’s passive,” but it should not be. How do you get internal audit units to understand that they must be proactive and have that vision and that, if they find an issue, they should not be bound by box ticking?

Most of them already understand that. The best of them, at some personal cost, will step beyond the box ticking and beyond what they are subliminally being told is wanted by their organisation.

This committee plays an important role in reinforcing that internal audit must be independent and that that is the value that it brings. It is testing and challenging the received wisdom in an organisation and providing evidence that what people say should be happening is happening in practice.

We will continue to report to the committee when we see internal audit that is not as effective as it should be. Internal audit is a key part of the system of governance and internal control. It is hard to say that it is the part that is most responsible when things go wrong. The whole system must work well. We have seen internal audit play its part in that, as well as seeing people not living up to the expected standards.

Thank you, Auditor General. You can relax now. You will not get hassled about internal audit again.

Thank you. I hope that you get the chance to talk to the conference next year as planned.

I have a different key theme, but one that I am sure you will expect. Your reports have often looked at severance payments, particularly at those that have been made to departing senior individuals. The committee has raised concerns—and some would say that you have also done so in your reports—that those payments may sometimes seem somewhat inflated and may not represent value for the public pound.

Nothing ever seems to change. Do you have any sense that we will make headway in ensuring that public money is spent at a level that the public will feel is appropriate?

That is an important question. I have told the committee before that severance payments can have an important role. You can make long-term savings and reshape organisations to improve things for the public by making a one-off severance payment to someone and therefore being able to delete a post or to recruit people to lower-paid roles that are more suited to what must be done. There is a place for severance payments.

Equally, especially with senior people, the amounts that are involved can be significant and look very much so when you compare them to the salaries of the people we have all come to recognise as being key workers over the past three months. It is critical that people have confidence that decisions are being made well, that the people making those decisions are accountable and that the intended benefits are being achieved.

It is probably worth reminding the committee that, when I report to you, it tends to be because things have gone wrong. Every year, severance payments are made around the country that are absolutely above board in the way that I have described, and there is a good deal of transparency around them now; they are included in the auditor sections of the annual reports that public bodies publish. Transparency around the money involved and the people who receive such payments is much greater than it was.

The committee has had an impact here. Because of the attention that you have paid to this issue over the years, the Scottish Government has taken a role in approving and signing off settlements above a certain level. There is also a UK-wide cap on the amount that can be paid on redundancy or early retirement. That is all an improvement in ensuring that there is transparency and value for money around such payments, and the committee can be proud of the impact that it has had.

Equally, while I have been in the job, I have reported on some unacceptable severance payments where the decision making was just not good enough and the checks and balances did not operate. That is the sort of thing that undermines public trust and confidence in public bodies and makes it more difficult to manage the workforce in the ways that we should want it to be managed looking ahead.

Thank you for that. It is a reassuring answer, if I may say so. It is also a fair answer given that I asked whether we are going to make any headway on the issue, and what I am hearing is that we are making headway and there have been some improvements.

I wonder whether I can tie this back to something that Anas Sarwar said at the outset of the meeting that has been playing on my mind. He asked about people challenges. The committee has looked at the pool of talent at the top end and, although I do not mean this pejoratively, it seems to be fairly narrow. We have seen several reports that have said that not that many people can take on such difficult and responsible roles. If there is a narrow number of people who can do a particular role, and if we are having to buy in talent, when it comes to the other end and their employment is severed, will there have to be, by definition, a larger payment because the talent was brought in for a larger fee? Does that make sense?

It does, and my starting point is to say that it is complicated. For example, I have recently reported on the difficulties that health boards are having with finding the right people to act as chief execs. Those are big, challenging jobs and they are exposed publicly, dealing with difficult changes that need to be made in politically fraught circumstances.

It is only fair to point out that we pay our NHS managers quite a lot less than NHS managers are paid south of the border. That adds to the difficulty of recruiting people who have worked in England and are bringing a different sort of experience with them. It also means that severance payments are lower than they would otherwise be, because the base that we are starting from is also lower.

My concern comes from a perspective that is slightly different from that of your question. In areas such as digital information systems and technology, it is extremely hard to get the skills that are needed to put in place systems such as the common agricultural policy future system for agricultural payments or the social security system, and often people have to be paid as consultants on high daily or monthly rates for an extended period of time. At the end of that, there is no liability for redundancy payments, but we have paid a lot of money for skills and experience that, to a large extent, just go out of the Scottish public sector again. We should consider whether we are prepared to pay more for some roles so that we bring people in and keep them and can then develop and spread their skills more widely across the workforce.

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I absolutely recognise that, for all the time that I have been in this role, we have been dealing with the consequences of a policy of austerity that was put in place by the UK Government in the wake of the financial crisis. It is not my job to comment on that, but it has meant significant pay restraint in Scotland, particularly at the higher levels, for people who earn more than £80,000 a year, who have seen very small increases since 2014. That makes it more difficult to recruit and, as people move into the later stages of their career, it makes their choices about whether to stay or go more difficult.

Mr Neil asked about the effect of pension taxation changes on all that. That is a complex mixture of issues, and they are part of the issues that the convener raised about the workforce earlier. We need to step back and see those in the round rather than look at one individual facet.

I want to take you back some years to the times in the committee when you would produce your reports and members would usually ask, “What happens next?” or, “What do we do now?” Will you give us a flavour of the journey that we have made from that point to this point and the work that you have done for us, which we have tried our best to follow up? Over the years since those questions were asked, have we moved to a better place? Is the public sector beginning to embrace the principles and recommendations and the importance of audit?

That is absolutely the right question to ask. Everybody who works for Audit Scotland does so because they want to improve the use of public money and the public services that it funds. We take seriously the need not just to identify what is happening, what is working and what is not but to identify recommendations for improvement. We see ourselves as one key part of the system, along with the committee, which takes our findings, takes evidence from the Government and other accountable people and ensures that the recommendations are committed to and progress is reported on.

There have been some areas where real progress has been made. For example, the section 22 reports on the Scottish Government’s consolidated accounts—that regular checking on the way in which money is spent, the governance arrangements that are in place and significant measures such as interventions in private companies—has helped progress to happen, and to happen publicly, in those areas.

The committee’s work on your key audit themes, in which you set out your interest in things such as good governance, internal audit and digital technology, has helped us to focus accountable officers’ attention on the things that matter.

As I said in my comments a while ago, Audit Scotland could support you even further in that through things such as pre-meetings to help you to think about the questions that you want to ask us and witnesses on the record to explore the issues further. The committee could also consider how, during meetings, we can help you to identify the right follow-up questions or where answers that you have heard might be a bit shaky. All those things happen in Westminster, Cardiff and Belfast. We are keen to look at ways to work with the committee to make its impact as thorough and forward looking as it can be, based on the work that we do for you.

We have pushed many public bodies towards embracing quality management systems, standards and processes more than was perhaps the case in the past. I am thinking specifically about information technology projects, which, I am sad to say, appear in front of us regularly. There are systems in place and there is documentation and guidance and so on. Are public bodies getting the message and beginning to embrace the recognised international standards, which help them to do their job much better?

I am absolutely confident that people are getting the message. Looking at the changes that the Government has made in its digital support teams, both for Government projects and in large public bodies, I think that it has beefed up the quality of standards and people. It would like to do more if it were able to recruit the right people—that goes back to the conversation that I had with Mr Kerr—and we can see that in examples such as Social Security Scotland, where it is making good progress on producing a big, complex and critically important system.

That said, with some IT systems, my team and I sit down and look at it and think, “How could they have let that happen?”, and we wonder how they could not see that it was a significant risk to the business as well as to the cost of the system to not have put in place the skills, governance arrangements and assurance that was needed. We are seeing progress, but I cannot put my hand on my heart and say that we will never see another Auditor General’s report about a failed IT system in future; as much as I would like to be able to do that.

One of the legacies of your predecessor, Robert Black, was to warn us about the NHS and the need to reshape it from top to bottom. I hope that we are in the process of doing that.

What is your message to us as you leave us on what you would suggest is the biggest issue that we face?

The issue of the NHS is not resolved, as we have spoken about this morning. It has coped brilliantly with this immediate crisis, but there is a risk that that hides the underlying stresses and strains that I have been reporting on for eight years. I do not want to lose sight of that.

Beyond that, I will pull out two things that are slightly unfair. They are both a bit abstract, but they affect everything that the Government does. I am a fan of the national performance framework; it is absolutely right that it shows what the Government is spending and the number of doctors or nurses we want to have, and also that it shows what effect we want those things to have on the people of Scotland and their health and wellbeing, equalities and all the other things, such as people’s ability to thrive.

However, we are not seeing a real follow-through between the outcomes and the way in which the Government then spends its budgets, sets its policies or reports its progress. That will be critical in helping us to tackle the problems that the Covid-19 pandemic has exposed like never before in Scotland, and much more widely.

The second is that the new financial powers that we have are significant. They are not the powers that would come with independence, and it is not my job to comment on that, but they are significant and bring opportunities as well as risks. I do not think that Parliament is well sighted enough on those opportunities and risks. It will not be well sighted on those until we have a genuine medium-term financial strategy that sets out what the finances will look like—with all the uncertainties involved—over a five year period, and what the Government intends to do on spending. If we also had a genuine public sector set of accounts that pulled together all the assets and liabilities as well as the income and expenditure, those things would let the Parliament as whole make decisions that we could be confident in about the longer term, which would allow the committee to focus on what is being achieved with the money that is spent.

Thank you so much for that and for everything that you have done for us in the past eight years or so, Caroline.

Auditor General, you have been in your post for eight years, but I have known you for only the past two or three. Is the Auditor General now the same as the one who was appointed in 2012?

As a person, I am eight years older and wiser, and perhaps a tad more cynical than I was then.

The role has changed significantly. That is mainly because of the changes in the Scottish Government’s financial powers. When I started in the role, the Government received about £30 billion per year from Westminster and decided how to spend it. Now, it raises 40 per cent of what is spent in Scotland either directly through Scottish taxation or through its own decisions on income tax, and it has to deal with the long-term sustainability issues. It has to get the revenues that it raises and the amount that it spends right as well as ensuring that it achieves the desired impact. That is the biggest difference that I would highlight in the role. Different things are required of me and of Audit Scotland to support Parliament in managing those powers.

Perhaps I was being a bit cheeky, but I was thinking less about the role and more about the person. Cynicism is a very useful thing for an auditor.

Is an eight-year term the right amount of time? It might not be in our gift to change it, but would a six-year term be better or do you think that you are only getting going and could do much more if you had another two years?

Members might know that, when the post of Auditor General was established back in 2000, the position was that the postholder had to retire at 65—there was an age limit rather than a term limit. During the first decade of the Parliament, it became clear that that was not compliant with age discrimination legislation, and it ran the risk that somebody could be in post for 20 years without there being any change of perspective, which posed a risk to independence.

The Public Services Reform (Scotland) Act 2010 brought in a term limit of eight years. There was a fair amount of debate in Parliament and with the then Auditor General about whether it should be two five-year terms, a 10-year term or something in between. My view is that a period of eight or 10 years is about right. I think that a renewable term would be a bad idea, because there would be real pressure to not upset the Government and the majority party in Parliament in order to secure a second term of appointment, which would be fatal for the Auditor General’s independence.

A period of eight years feels about right to me. There are still things that I would like to do, but it has been good for me and the organisation to have a clear end point in sight. My counterpart in Westminster has a 10-year term. I am not sure that there is much between an eight-year term and a 10-year term. That is the sort of area that we should be in here in Scotland, and we are.

That is good to hear. I agree with the comments about the committee; perhaps it could do more. I suppose that, at the moment, we are a little bit reactive. It would be helpful if we could instigate investigations of our own, but that might be a bigger discussion.

Thank you for your answers and your candid approach.

Mr Neil was going to ask a question about that very subject but, sadly, technology issues have meant that—[Inaudible.]—so I will ask that question on his behalf. Mr Neil would like to hear the Auditor General’s views on the committee’s remit. At the moment, the committee can only respond to reports from the Auditor General. As Mr Bowman does, Mr Neil believes that that is restrictive. What do you think about that, Auditor General? Should the committee be able to initiate its own inquiries?

The thing that distinguishes the Public Audit and Post-legislative Scrutiny Committee from all the other committees in Parliament is that it has an Auditor General and, in Audit Scotland, an organisation that can carry out that work for it. We have the resources, the expertise and the powers of access to people, documents and explanations to really get beneath the skin of a question that the committee is interested in and that the public are interested in and to provide the committee with an evidence-based, factual account of what is currently happening and where there is room for improvement that it can rely on, take evidence on and use to form its own conclusions.

Having said that, over the years in which I have been in this role, I have on occasion heard committee members express frustration that there are issues that they would like to explore that are not covered in the annual audit work or are not on the planned audit programme. The best that I can offer in my last few days in the role is to say that I am sure that my successor, Stephen Boyle, will be very happy to engage with the committee on that to look at how members’ voices can play into deciding the programme of work that he carries out while not compromising his independence to follow the public money and the issues that he thinks are important without fear or favour or undue political interference.

It is a fine balance, but I think that we all know the interest that the committee has in being able to use its powers on issues that are of particular interest to it, and I am sure that Audit Scotland could help it to do that, and that it could use all the resources, expertise and access that it has to help it to do that well.

That feeds into the point that you made at the start about how we can work much more closely together. The committee needs to think about that and to have that discussion with your successor.

I hand over to Neil Bibby.

Thank you for all your years of service, Auditor General.

The convener talked about retaining skills in the health and care sector, and Liam Kerr talked about severance payments. As you will know, public sector bodies have lost a lot of experienced personnel over a number years through voluntary redundancy and early retirement.

Leaving aside the financial impact—the public sector is obviously going through a very challenging time with Covid and is likely to be under financial pressure, which will perhaps result in an urge to implement similar schemes in the future—is there sufficient depth of knowledge and experience in Scotland’s public sector to deal with the challenges that we face as we move forward? To what extent are we at risk of losing experience and knowledge in public sector bodies across Scotland?

12:30  

There absolutely is a risk. We have talked about the NHS in particular this morning; it is probably the biggest and most challenging part of my area of responsibility. We have seen a high turnover of chairs, chief executives and other senior people, partly because of the pressures of those roles and partly because of the extent to which, when something goes wrong, we all—understandably—look for an individual to blame rather than thinking about the system in which the individual is working and the limits that that places on what they can do.

We absolutely need to fund public services well enough so that they can afford to have the number and calibre of people who are required to plan, deliver and transform those services to meet the needs of Scotland in the 21st century. Equally, as I said in my opening remarks, we need a culture that is about learning from mistakes, sharing good practice and giving leaders the space to lead rather than making people so fearful and defensive that they stick to the letter of what is required of them, with results that are not in anybody’s best interests.

That is a really difficult balance to strike, in particular when funds are tight and the political environment is highly contested, but it seems to me that, over the years in which I have been in my role, there have been some real costs in terms of losing expertise and commitment.

I thank you for your evidence this morning, Auditor General. I will read out a tweet from our convener, Jenny Marra, who is currently on maternity leave. She notes that the Auditor General is having her last evidence session with the committee as her tenure comes to an end. She goes on to say:

“Disappointed not to be chairing today’s session. The professionalism of Caroline Gardner cannot be overstated. Thank you for your exemplary service to public life. Enjoy your new chapter.”

I know that we would all want to echo that.

On a personal level, I thank you, Auditor General, for your candour and advice, for your listening ear and for always being at the other end of a phone whenever there are any issues to discuss, or when we require any suggestions or intelligence.

It is hard to believe that this is the final occasion on which you will address the committee. You have given eight years of dedicated service to this committee, and I take the opportunity, on the committee’s behalf, to pay tribute to your work over that period. I thank you for all the efforts that you have made through your reports and your evidence, and for all your efforts and achievements in helping to improve Scotland’s public services. You have managed to achieve a balance between—rightly—calling out and robustly challenging organisations that are failing in their responsibilities and in spending public money, and continuing to highlight the bigger picture and the significant pressures that our public services continue to face at this critical time.

You have managed—as you have done again today—to steer away from occasional political pressures by rephrasing your response as a position with which we can all agree. Thank you for being able to walk that fine line in these testing and divisive political times. Thank you for the support that you have given to this committee in its scrutiny, for your invaluable guidance and expertise. Thank you also for responding to the committee’s interests and focus while respecting our independence in deciding which route to pursue.

On behalf of all members of the committee and anyone who has worked with you over the past eight years, I thank you for your service. We all wish you and your family all the very best for the future, and we are sure that you will be successful in whatever you choose to do next.

I now close the public part of the meeting, and we move into private session.

12:34 Meeting continued in private until 12:52.