"In a stark warning to MSPs, Audit Scotland says the ring-fencing of specific areas – which is promised by most parties in the election – is a “missed opportunity” to reform services and will only worsen the depth of cuts elsewhere.
Its warning, in written evidence to the Finance Committee at Holyrood, is echoed by the leading independent experts in the field.
The Chartered Institute of Public Finance and Accountancy says “radical thinking” is vital as public spending is slashed in the wake of the banking crisis, with some services “almost certainly being restricted or even withdrawn”.
The body suggests the Government may have to focus on delivering “guaranteed minimum core” services, with charges for additional “options”.
According to the latest estimates, Scotland is facing real-terms cuts of 3%-4% each year until 2013-14, against average real terms increases of 5% a year in the first decade of devolution.
Around a third of Scotland’s £34 billion budget goes on health and another third on council services, including around £4.5bn on education. Wage costs account for 50% of the spending, so deep cuts will inevitably mean job losses.
Chancellor Alistair Darling has warned that the measures needed to cut the UK’s £1 trillion national debt will be “tougher and deeper” than under Margaret Thatcher in the 1980s.
However, in the election campaign, parties are promising to exempt swathes of public spending. Only the Liberal Democrats’ Treasury spokesman, Vince Cable, has said no area is sacrosanct.
Labour says it will “protect frontline spending on childcare, schools, the NHS and policing”, while the Conservatives have promised to ring-fence spending on overseas aid and the NHS.
The SNP is campaigning to “protect frontline services”, but is coy on detail.
Audit Scotland says public bodies “have difficult decisions to make” and “future reductions in public spending will be very challenging”, with the least painful efficiency savings already made.
Asked by MSPs if any area should be ring-fenced, the watchdog said: “Excluding any specific sector, policy area or services from the requirement to deliver services more efficiently represents a missed opportunity and could significantly increase the pressure for other spending areas to find savings.”
Audit Scotland also stressed that efficiencies alone cannot cover the cuts required, and said a sense of “urgency and realism” was required.
In a separate committee report, the Centre for Public Policy for Regions (CPPR) at Glasgow University has warned that the coming years will be difficult for Scottish politics.
“A Parliament that has not been used to real terms cuts in budgets, but rather to relatively large year-on-year increases, now faces one of the most sever fiscal contractions in modern history. Furthermore, this downturn in funding prospects will be long-lasting.”
It says strong leadership is needed “to make the unpalatable seem inevitable” and reduce the risk of “social unrest”."
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