Devolution benefits 'face the axe' to plug £3.8bn hole in public finances

FREE personal care for the elderly heads a list of benefits introduced under devolution which should be cut or "fundamentally reviewed" to help plug a £3.8 billion black hole in public finances, a new report has warned.

Scotland's auditor general Robert Black listed a series of benefits – introduced north of the Border in the past decade – as possible casualties of a forecast 7-13 per cent reduction in the Scottish budget by 2013.

He also highlighted concessionary bus passes, the council tax freeze, abolishing prescription charges and free eye tests – all policies that have come to define devolution – as potentially under threat.

The report, released today, has also raised doubts about the Scottish Government's financial management and policies, expressing concerns that there is a shortage of civil servants with financial qualifications.

In addition, Mr Black said that the current target of 2 per cent annual efficiency savings was insufficient and said further real cuts will need to be made.

Significantly, the report queried some of the Scottish Government's forecasts on income, including £2bn from business rates when firms are going bust, and £687 million from other sources estimated before the economic downturn.

He warned that pensions and staff costs would continue to rise and that it would be difficult to find savings from them, pointing out that the Scottish Government has promised not to make any compulsory redundancies.

"The Scottish Government faces significant challenges in balancing the budget while also delivering on its commitments and meeting increasing demands for public services," Mr Black said. "All of this needs to be done with less money, in real terms, in future years."

He added: "Most of the public sector needs to get much better at measuring and improving its productivity, but all too often we find that the basic information is not there."

With future spending he highlighted the cost of some of the high-profile free-for-all services – dubbed by commentators as tartan frills.

He pointed out that free personal care for the elderly was set to cost £562m by 2010-11; abolishing prescription charges would save £57m by 2011-12; the council tax freeze was worth £70m a year and meant extra income could not be raised; free eye care would cost £91m by 2011-12; and concessionary fares would be worth £189.4m by 2010-11.

Liberal Democrat finance spokesman Jeremy Purvis described the report as a "barely concealed attack" on the lack of strategic direction in the Scottish Government's budget.

Conservative finance spokesman Derek Brownlee added:

"The SNP government needs to wake up to reality and Alex Salmond in particular must stop misleading the public by claiming the SNP can prevent spending cuts."

Labour targeted separate nationalist projects not highlighted by the auditor general, demanding the SNP drop expensive "vanity projects" such as the Referendum Bill and the Scottish Futures Trust.

Finance spokesman Andy Kerr said: "The SNP is wasting resources on their own narrow nationalist priorities; a National Conversation that nobody is listening to and preparing for a referendum the Scottish Parliament does not support."

SNP finance secretary John Swinney admitted there were difficult choices ahead, but claimed the report proved the case for Scotland to be independent.

"Given that the latest Government Expenditure and Revenue Scotland analysis shows Scotland in budget surplus – with a surplus of some £2.3bn in the past three years – it reinforces the need for Scotland to be responsible for our own tax and spending decisions through fiscal autonomy and independence," he said.

The Convention of Scottish Local Authorities is currently in negotiations with unions to get council staff to accept a pay freeze.

On the at-risk list

FREE PERSONAL CARE

One of the biggest flagship policies of devolution, introduced in 2002 to provide free care for the elderly. Questions remain about funding it properly and the cost is set to rise further, with the over-75 population in Scotland increasing by 84 per cent by 2033.

ABOLISHING PRESCRIPTION CHARGES

One of the major policies of the current SNP government, with prescription charges slowly being reduced to nothing. This means that prescriptions which were only free to those who could not afford them will be extended to everybody.

COUNCIL TAX FREEZE

The most-quoted achievement of the current SNP government came out of the concordat struck with Scottish councils in 2007.

FREE EYE TESTS

Free eye examinations were introduced in 2006 by the last Labour-Liberal Democrat Scottish Executive. In the first year it saw the number of eye tests increase by 53 per cent to 1.5 million.

CONCESSIONARY FARES

Introduced in April 2006 by the last Labour-Liberal Democrat Scottish Executive, they provide free bus travel throughout Scotland for older and disabled people. The SNP added military veterans to the scheme.