Audit Scotland Report - Covid-19: Financial Impact

27th August 2020

Public spending must adapt to Covid-19

Covid-19 will have significant consequences for public spending in Scotland now and well into the future.

1 The public health crisis caused by Covid-19 has had a significant and profound effect on every aspect of Scottish society. At the heart of this are the personal tragedies of the thousands of people who have died or lost loved ones.

2. The pandemic has had wide consequences for public health in Scotland, including the impact on both physical and mental wellbeing. For many, this means dealing with increased financial uncertainty alongside health concerns. Public services have been drastically affected, requiring immediate changes to the way

that services are provided to people in Scotland. For the economy, the lockdown has disrupted businesses and household incomes, leading to an economic downturn of a scale not seen in recent times.

3. The impact on the public finances is unprecedented. The crisis has required the Scottish and UK governments to respond quickly, providing substantial additional funding for public services and support for individuals, businesses and the economy.

4. The pandemic is not over, and it is unclear how the impact of the virus will develop over time. It is likely that further financial measures will be needed and that the effects on individuals, public services and the economy will last many years into the future.

5. For the Scottish Government the challenges of managing public finances within this environment are significant and varied. The levels of spending required to meet future demands for services and necessary government interventions is unclear, as are the levels of funding and revenues available to support it.

6. The fast-changing nature of government spending and funding related to the pandemic makes keeping track of how money is being spent a complex and difficult task. Alongside this, the financial and performance risks that the Scottish Government must manage are also developing quickly.

7. This briefing brings together our analysis of the latest position of how public money is being spent and funded in Scotland, before considering the key financial and performance risks facing the Scottish Government. It has three sections:

• Part 1 highlights the fiscal response to Covid-19 to the end of July 2020, setting out the tax and spending commitments made by the Scottish Government and how these have been funded, as well as summarising the UK Government policies that apply in Scotland.

• Part 2 sets out the emerging financial and performance risks that the Scottish Government is facing as a result of Covid-19 and its economic consequences.

• Part 3 considers what this means for Audit Scotland's work in providing assurance and aiding scrutiny of the Scottish Government's response during the current crisis.

8. Public audit has a key role in providing scrutiny of how well public money is being spent to support people in Scotland. Audit Scotland will continue to audit public finances and the performance of services throughout the pandemic. More information is provided in Covid-19: How public audit in Scotland is responding.

Read the full report HERE