Swinney in biggest of annual underspends yet – but these look tactical, not accidental

[Updated text] The figure reported on 24th June 2015 on the budget exchange mechanism for the Scottish Government’s performance was an underspend of £192 Million for the year 2014-15. The actual figure has been a whopping 82% greater than that – £350 Million – as reported today, 2nd October 2015,  by the Auditor General, Caroline Gardner.

Finance Secretary, John Swinney underspent by £207m [0.7%] on the resource budget; and by £140M [a substantial 7.6%] on the capital budget.

It is also worth  noting that had two departments not overspent – Justice by £12 Million and Rural Affairs by £16 Million, the underspend for this year would have been £378 Million – a sneeze less than twice the £192 Million reported only at the end of June.

  • The crisis-mode education service has lost £72 Million.
  • The similarly crisis-mode health service has lost £14 Million.
  • The social justice budget has lost £51 Million.
  • And Scotland’s creaking infrastructure has lost a corking £221 Million.

Mr Swinney’s record on underspending is as follows:

Term 1: 2007-2011

  • 2007-08: £42 Million underspend
  • 2008-09: £42 Million underspend
  • 2009-10: £136 Million underspend
  • 2010-11: £12 Million underspend.

Total underspend for first [4 year] term of office: £232 Million [annual average of £58 Million]

Term 2: 2011-201

  • 2011-12: £179 Million underspend
  • 2012-13: £179 Million underspend
  • 2013-14: £145 Million underspend
  • 2014-15: £350 Million underspend

Total underspend for 4 of his second and 5 year term of office: £863 Million [annual average of £213 Million – a 316% increase on his first term’s annual average underspend.]

In her report of the management of the 2014-15 budget, the Auditor General identified three areas of significant risk:

  • One is a cost increase of 74% at current estimates on a troubled IT project being developed to implementing the new EU Common Agricultural Policy[CAP].Ms Gardner noted that there will be ‘significant financial consequences’ if this situation impacts on payments to farmers.
  • Another is the possibility that the Office for National Statistics, having ruled to reclassify Aberdeen Western Peripheral Route as a public sector responsibility [meaning that it will be costed to the government budget], may also so reclassify two more non-profit projects – Dumfries and Galloway Royal Infirmary; and Edinburgh Royal Hospital for Sick Children. The Auditor General points out that these unforeseen new claims on the Scottisih budget could negatively affect future capital budgets and the number of such projects actioned in future.
  • The third risk situation is  the European Commission’s ongoing suspension of £45 million of payments to Scotland from the European Structural Fund. This article we published in late 2014 may be the source of the problem – which the Scottish Government dismisses as ‘a technical issue’.

Mr Swinney underspent by £42 Million in his first year as Finance Secretary, 2007-08. While he had a relatively mighty blip in his third year of that term, he was back to a very capable safe underspend of £12 Million in its last year, 2010-11.

If he was at that early stage, capable of financial management to underspend as modestly as he did in three of his first four years, the massive percentage jump in underspending in this, his second term, is curious.

Although For Argyll sess these underspends as politically tactical, the Finance Secretary may be overwhelmed by the increasing complexity of managing government budgets. He has had trouble with two small devolved taxes he has been given [Aggregates and Land Fill]; and the Land and Buildings Transactions Tax with which he replaced Stamp Duty looks, on initial performance, unlikely to achieve its tax take targets.

His insights into the reality of the fiscal management of an independent Scotland were painfully sharpened by the interrogations of indyef 1; and by the later analysis of the catastrophic budgetary  impact [by David Phillips of the respected Institute of Fiscal Studies] of the Full Fiscal Autonomy which Mr Swinney had noisily been demanding for some time.

Mr Swinney has been unable to challenge Mr Philips’ figures; and has noticeably eradicated Full Fiscal Autonomy from his vocabulary.

The Scottish Government initially had the facility to carry forward any unspent budget to future years – through a process known as ‘end-year flexibility’. This facility was abolished as part of the 2010 United Kingdom spending review. However what is knows as the ‘budget exchange mechanism’ for the devolved administrations allows the Scottish Government limited flexibility to carry forward, from one financial year to the next, a cash underspend of up to 0.6 per cent of its resource DEL budget and 1.5 per cent of its capital DEL budget.

From our calculations, we believe that Mr Swinney’s annual second term underspends have stayed below that level in each instance. This means that he has wasted no allocated funds but has effectively been able to engage in strategic measured stockpiling for political advantage – but since 2011, only to be drawn down from the amount underspent the year before. We do not have the detail to calculate further and so cannot know whether the full underspends in each year since 2011 have been called down to spend in the following year.

Our conclusion that the underspends are deliberate is supported by remarks from Mr Swinney himself.

In his budget address to the Scottish Parliament on 19th June 2013, Mr Swinney said: ‘In 2011-12, we carried forward £179 million fiscal DEL [Departmental Expenditure Limits] in the budget exchange mechanism for use in 2012-13. This year, we will carry forward the same amount—£179 million—to be utilised in 2013-14. In our budget for 2013-14, we had factored into our plans a carry-forward from 2012-13 of £158 million, which was made up of £150 million resource [revenue] DEL and £8 million capital DEL. We have delivered that plan. Accordingly, I am pleased to inform Parliament that the balance of the fiscal DEL underspend—£21 million in capital DEL—will be carried forward in full to augment existing spending plans in 2013-14.’

The Finance Secretary also announced in June 2015 that his markedly hefty underspend has been carried over and will  be spent in this financial year – 2015-16 – which coincidentally takes us right up to the Scottish Election in May 2016. [Ed: The following three paragraphs are immediate additions.]

The difficulty with what is either a calculated underspend from the start of each year or the unintended but not unwelcomed consequence of a high degree of caution in budgetary management, is  not, however, good management of Scotland’s frontline pubilc services – which are in a poor way.

Education, health and infrastructure are in serious need of strategic spending. The DEL resource [revenue] and DEL capital grants allocated to Scotland each year are, as with both the revenue and capital grants to all of the devolved administrations, not hypothecated. This mean that they are not made up of amounts ringfenced for spending on specific services – like education and health. So money unspent form the internal allocations to education and health in one year which may be drawn down in one further year only – does not mean that all or any of the drawn down underspends last year will be spent on education and health this year.

Mr Swinney has given no guarantee that he will draw down the underspends and spend them to their individual limits on these crisis ridden services alone in the following year.  It is quite possible that education and health have been starved of vital funding with the underspends on their budgets paying for the giveaways slathered in modest amounts across the country to creating the feelgood bubble to buy votes for the SNP in mission critical elections and referenda.

Local Labour MSP and Shadow Finance Secretary, Jackie Baillie, points out that, in 2008, Mr Swinney boasted that the days of hundreds of millions in underspends were over.

His performance in the past four years gives the lie to that boast. In fact, at that time, Mr Swinney castigated previous administrations for underspends of £135 and £139 – each of which he has exceeded in each of the past four years, exceeded too in 2009-10 and surpassing himself in major measure last year.

Specific note: For Argyll is puzzled by the Finance Secretary’s reason, given to the Auditor General, for the £12 Million overspend in the Justice department. That is said to have been down to an increase in police and fire pension payments. [Is that increase due in part to an unexpected volume of early retirements from the service?] The puzzle is that such payments in other departments in Scotland – like Health, Eduation and Local Government – are traditionally covered not from resource DEL but from AME – Annually Managed Expenditure. This is the demand-led spending on things like social costs that are forecastable but cannot be predictable. Its amounts are not annually controllable to any precise degree but depend on how may people retire – or die – in a given year; and how many are in or out of work in a given year etc.

It is noticeable in the Scottish Government’s annual budgeting that no AME spend has been allocated to the Justice Department where it is allocated to Education, Health and Local Government.

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Related Articles & Comments

  • It’s nice to know a Cowal tunnel(and a whole lot of other things) could be comfortably encompassed by Mr Swinney’s non-austerity Austerity. It’s not only Labour who are revealed to be wearing no clothes.

    Hot debate. What do you think? Thumb up 15 Thumb down 3

    db October 3, 2015 1:27 am Reply
    • While we’re on the subject of fiscal probity, consider how close the £18m cuts ABC have identified is the remaining CHORD spend; given how badly the CHORD activities have been managed a moratorium could be deemed prudent and the saving can avoid all the service cuts and job losses. Why have we been paying for these jobs and services for so long if they are so easily dispensed with?

      Like or Dislike: Thumb up 3 Thumb down 3

      db October 3, 2015 5:00 pm Reply
      • There’s a serious argument in this.

        Like or Dislike: Thumb up 2 Thumb down 3

        newsroom October 4, 2015 12:23 am Reply
  • Why do the SNP supporters condone the uncessessary suffering imposed on the sick by this government with its £14 m underspend? We desperately need a new psychiatric hospital in Argyll and Bute but the tight budget seems to be hampering progress. Other health services are causing concern. What is wrong with the First Minister and her gang? Why don’t their supporters care?

    Like or Dislike: Thumb up 8 Thumb down 3

    Lowry October 4, 2015 7:09 pm Reply
    • Forargyll’s regular unionists would have had a fit if John Swinney had spent ten pence over his allocated budget.
      Go on beat your chests in phoney anger.
      We all know John Swinney is doing a great job under exceptionally difficult
      financial circumstances.
      Every penny underspent will be re-allocated for the greater good of all.
      But there now, didn’t we know that already.
      Will Alistair Carmichael survive the parliamentary term ?

      Like or Dislike: Thumb up 2 Thumb down 9

      Keitho October 4, 2015 8:14 pm Reply
      • keitho, read the article – reallocated when?

        As for Carmichael – I’m amazed you have the audacity to mention him given the serious issues you have in your own stable with Michelle Thompson – Carmichael’s behaviour pales into incomplete insignificance compared to Michelle Thompson – and I’m not even talking about any criminality that may have occurred.

        So the real question, since you raise it – will Michelle Thompson survive the term? Preying on the weak and vulnerable? Actiing in a way that were the shoes on the other foot, the SNP would have a field day.

        I think we all know the answer and would rather have 55 Alistair Carmicheal’s than one Michelle Thompson

        Like or Dislike: Thumb up 8 Thumb down 3

        JB October 4, 2015 8:50 pm Reply
        • JB, I hope Michelle Thompson hangs around for a few weeks, the damage she’s doing is untold but it is well reported that Mr & Mrs Average are disgusted.

          Like or Dislike: Thumb up 4 Thumb down 2

          Richard October 4, 2015 9:43 pm Reply
          • John Swinney’s great job is being ignored by Richard and JB
            The unionists protest too much.
            Carmichael is toast. The last Libdem, good riddance to the buffoon.
            The big question ……..
            Does Michelle Thompson have more properties than Richard……..?

            Like or Dislike: Thumb up 3 Thumb down 6

            Keitho October 4, 2015 10:16 pm
          • Mr and Mrs ?! Ah the concept of today’s families!

            Richard haven’t you been known for a few wee property deals in your time? Sold each one at a loss I believe! Aye right.

            Carmichael involved a foreign government in telling lies about them and the First Minister. Authorised the lying memo to Londons Torygrapgh not even to the Hootsmon — because he wished to achieve several things for his boss – Cameron! Cameron attacks labour in England Tories lib dems attack SNP in Scotland. The labour anti snp bile group latched on not realising they were being shafted by the libs Tories.

            Like or Dislike: Thumb up 1 Thumb down 5

            No Cheese Here October 6, 2015 9:46 am
          • NCH or is it MacLachlan, I am not an overpaid champagne swilling Scottish MP.

            Like or Dislike: Thumb up 3 Thumb down 2

            Richard October 6, 2015 10:50 am
        • JB
          Alexander Morrison Carmichael (Alastair) has been a Libdem MP since 2001. He has been secretary of state for Scotland 2013 to 2015.
          He was also a deputy procurator fiscal involved in prosecuting all kinds of demeanours. He has been in a relatively small party where he has managed to swing his way to the top. Deputy leader of the Scottish branch office of the Libdems.
          Michelle Thompson, business woman and at the top table of business for YES campaign group has been an SNP MP for 5 months.
          With 56 MP’s elected in a landslide it comes with its own challenges and some, yes maybe more than one can slip through the vetting process.
          Michelle Thompson to this point has not been seen to do anything illegal and media reports indicate she is not under investigation by the law authorities.
          Her business practices appear to be what is being flagged up to discredit her and this is being used to try and discredit the SNP.
          Let us wait and see how this one runs.
          If the practices and if law infringement is established I have no doubt the upper management of the SNP will not be slow to take the necessary action to resolve the situation.
          Compare this to an established senior MP Alastair Carmichael as stated earlier having to apologise for his lies implicating the French Government in a act of stupid buffoonery.
          To further underline the demise of the Liberals, he has been supported by such worthies as Nick Clegg, Pants down Paddy Ashdown and even Menzies Campbell. I try not to mention the irrelevant Willie Rennie.
          I would have expected him to be disciplined within his own party before moving on was possible.
          JB to say you would rather have 55 Alistair Carmichaels than one Michele Thompson is just your choice, I disagree with that sentiment.
          If anyone from any party is guilty of misdemeanours the full responsible action has to be taken. Party affiliation does not come into it.
          Lord Watson being appointed by Jeremy Corbyn to his shadow cabinet is an insult to clean, hardworking MP’s who deserve to be further up the pecking order than him. It is a real head scratcher that one.
          Interesting times ahead.

          Like or Dislike: Thumb up 2 Thumb down 5

          Keitho October 5, 2015 2:23 pm Reply
  • I actually think they key message coming out of the recent news about the SG budget and spending is being missed. The level of budget underspend, whilst significant in value, is small as an percentage and people should take care not to aggregate the revenue underspend and capital underspend. Capital money is not available for revenue purposes and the two need to be looked at separately. When looking at capital underspend you need to consider whether it is ‘underspend’ or ‘slippage’ – i.e. have capital projects been delivered for less than budgeted (which surely we would all be OK with) or have projects slipped in terms of timescale for delivery and the budgets been re-profiled into future years (not such a good news story).
    However for me the bigger message in the report is the fact that there is no clear picture of the financial position of the Scottish public sector as a while. Across the UK we have Whole of Government Accounts, which, although something of an anathema to most of us (in terms of getting our heads around them) do at least start to paint a picture of the financial positon of the nation. Such a thing doesn’t exist for Scotland. There is no clear picture of the Scottish public sector’s assets or liabilities including huge long term liabilities relating to pensions and huge capital investments in buildings (with the associated financing of the borrowing needing serviced).
    Any government (be it SNP or any other combination of parties) conducting long term financial planning without a proper view of the financial state of the country is doing so with one and a half eyes closed.
    As for pushing further for independence, one of the YES campaigns biggest weaknesses was their grasp of the potential future finances of an independent Scotland, or at the very least their ability to be able to sell the projection to people in a way that was considered honest and robust. Without a clear picture of the current financial position of the devolved country, including good estimates/projections of future liabilities (contingent or actual) then projected future financial strengths and economic stability are nothing more than unreliable sales pitch guesstimates.

    As for Carmichael vs Thompson – both are up to their necks in it. One lied to the electorate, the other took advantage of vulnerable people for her own personal gain. The idea of defending one because they are not as bad as the other is a little like arguing over GBH or serious assault. Both sides of the argument need to grow up and accept there is wrongdoing in both camps and that wrongdoing in one doesn’t lessen the wrongdoing in the other.

    Like or Dislike: Thumb up 6 Thumb down 1

    Integrity? October 5, 2015 8:58 am Reply
  • As a “unionist” I’m disgusted at the underspend of the SNP whilst the sick suffer from ailing health services.

    The SNP should spend the money they have for health on health – not deny vulnerable people efficient services.

    What amazes me is that if any other party had done the same, SNP supporters would be shouting from the rooftops about the poor and sick suffering more than necessary. Now it’s the SNP causing the suffering they simply accept it as if it’s ok. Little do they seem to realise that their own party is causing distress to their own family and friends who need modern services yet are being prevented from doing so by the withholding of funds.

    Like or Dislike: Thumb up 7 Thumb down 3

    Lowry October 5, 2015 9:03 am Reply
    • Lowry
      I don’t disagree that certain SNP supporters would be tossing toys out of the pram, gathering them up again, just to be able to toss them again, if other parties had budget underspends in these key areas. However that doesn’t necessarily mean it is the correct way to view it. All we really have are headline figures in key service areas, there is no detailed analysis of why there was an underspend and how that money is going to be reinvested going forward. Annual budgets are, after all, just based on a calendar year with a year end date set by statute. What is more important than striving to come in bang on budget is that money is spent wisely and efficiently. If it so happens that, say £100m, is not spent in 2014/15 but is available in 2015/16 with there being good reason why it wasn’t spent in 2014/15 (and it is spent well in 2015/16) then personally, I can’t be overly concerned by that. If there was a massive budget underspend then I think there should be more questions – whilst this is an underspend it isn’t massive in terms of the overall budget and it isn’t ‘lost’ money.
      I just think there are far bigger issues out there to be dealt with and considered than this underspend. The state of Police Scotland being a prime example.

      Like or Dislike: Thumb up 4 Thumb down 2

      Integrity? October 5, 2015 9:25 am Reply
      • I think it simply shows that the SNP government is receiving plenty of money from Westminster – so much so, it can afford to save a few bob because it doesn’t know how to spend it.

        Like or Dislike: Thumb up 3 Thumb down 2

        Lowry October 6, 2015 9:17 am Reply
  • This site is dying on its honkers!
    I think I’ll give it a rest for a while!!

    Like or Dislike: Thumb up 4 Thumb down 1

    Hugh Jazz October 5, 2015 6:53 pm Reply
    • Well that’s good news on a wet Monday – Bye – Bye !

      Like or Dislike: Thumb up 3 Thumb down 3

      Malcolm Kirk October 5, 2015 7:32 pm Reply
      • Remember the new nice Malky x x x

        Like or Dislike: Thumb up 1 Thumb down 3

        Keitho October 5, 2015 8:37 pm Reply
      • Kirkby,you are one of the most obnoxious ,self serving ,microbes that inhabit these pages.
        It is no wonder that Argyll and Bute is on its knees with the ridiculous mid 17th Century,colonial mindset that you espouse !!
        You don’t give yourself enough credit on how you close down debate and rational thinking.
        I have decided to go campaigning again,door to door.
        We shall have our Freedom from the Draconian mindset soon.Maybe as early as 2019.
        You carry on .You are the best advert I have!!!!

        Like or Dislike: Thumb up 4 Thumb down 3

        Hugh Jazz October 5, 2015 10:48 pm Reply
        • Virtually everything I post on ForArgyll is done with a sense of humour simply to extract predictable low quality comments from SNP supporters, and it never fails. You see Jazz you can’t even be honest enough to stick with your own promises – you were going to give it ( and us ) a ‘rest for a while’. Typical ! !

          Like or Dislike: Thumb up 5 Thumb down 3

          Malcolm Kirk October 6, 2015 7:00 am Reply
          • The new nice Malky has also developed a nice sense of humour.
            I knew you could do it Malcolm. A wee bit more to go for sainthood though.
            How many refugees could you take in and help ?

            Like or Dislike: Thumb up 1 Thumb down 3

            Keitho October 6, 2015 11:56 am
  • Poor Richard isn’t an overswilling champagne drinker! Obviously even the Tories wouldn’t let him near their conference!!

    Never answered my statement over his property dealings. Sell for a profit or sell for a loss?

    Like or Dislike: Thumb up 1 Thumb down 3

    No Cheese Here October 6, 2015 3:44 pm Reply
    • NCH or Machmaolain? you didn’t answer!

      Like or Dislike: Thumb up 3 Thumb down 0

      Richard October 6, 2015 7:02 pm Reply
  • Well Richard claims,
    .
    ” I am not an overpaid champagne swilling Scottish MP. ”
    .
    Never reckoned you were an MP. The salary doesn’t fit into what I perceive of you.

    Like or Dislike: Thumb up 0 Thumb down 0

    Keitho October 6, 2015 10:19 pm Reply

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