Value of government loans declines significantly

The Scottish Government has substantially reduced the value of £140 million-worth of loans and guarantees to private companies, says the public spending watchdog.

The 2018/19 audit of the government's consolidated accounts were unqualified and show that the overall budget of £36,915 million was underspent by £778 million.

Loans totalling £45m to Ferguson Marine Engineering Limited (FMEL) were reduced in value to nil at the end of the financial year due to the shipyard's financial difficulties. The government also reduced:

• an equity stake of £37.4 million in engineering firm Bi-Fab to £2 million to reflect expected losses
• a £39.9 million loan to Prestwick Airport to £6.9m
• a £21.4 million fee for providing financial guarantees to Lochaber Aluminium Smelter to nil to reflect new accounting standards

Improvements have been made to the government's governance arrangements in the last year. However, a commitment to publishing a consolidated account covering the whole of Scotland's public sector has not been fulfilled. And the government's second medium-term financial strategy lacks indicative spending plans and priorities.

The audit also noted the 2018/19 Social Security Scotland accounts were qualified by the auditor, specifically in relation to Carer's Allowance. This is related, in part, to the benefits agency's ongoing reliance on the Department of Work and Pensions to deliver payments and is explored in further detail in the Auditor General's separate report.

Caroline Gardner, Auditor General for Scotland, said:

"The Scottish Government's financial reporting has taken a step backwards at a time when the uncertainty surrounding EU withdrawal will pose unprecedented challenges for the management of public finances.  Parliament needs better information to be able to better scrutinise ministers' financial decision-making and to ensure value for money is achieved from a limited budget pot."

"There is a lot more work to be done to manage Social Security Scotland's current reliance on the DWP. More complex and costly benefits are due to be delivered by the agency over the next few years, which increases the potential impact of error and fraud. The agency needs to think about what arrangements will be needed to manage that scenario."