Contents
- Attendance
- Decision on Taking Business in Private
- Spring Budget Revision 2018-19
- Budget Proposal for 2019-20
Spring Budget Revision 2018-19
Item 2 is consideration of Audit Scotland’s spring budget revision for 2018-19, which members have a copy of in their meeting papers.
I welcome our witnesses from Audit Scotland. Ian Leitch, chair of the Audit Scotland board, is accompanied by Caroline Gardner, the Auditor General for Scotland; Diane McGiffen, chief operating officer; and Stuart Dennis, corporate finance manager. I invite Ian Leitch and the Auditor General to make short introductory remarks. Do you have any introductory remarks to make, Ian?
Not on this subject, chair. You know my views on this rather mysterious subject.
Auditor General, do you have any introductory remarks?
Yes, thank you, chair.
As in previous years, the spring budget revision requests budget cover for the non-cash pension charge that will arise as a result of accounting adjustments in 2018-19. As members know, those adjustments are notional and do not generate cash movements. We are not able to plan for them in advance due to the timing of the information that we receive from our actuaries, and the Scottish Government has advised us to deal with them through the spring budget revision process. The amount involved this year is £2.918 million.
We will do our best to answer any questions that the commission has.
Thank you. The obvious question is: what preliminary discussions have you had with the Scottish Government to confirm that the previously agreed arrangements with Her Majesty’s Treasury with respect to the pension adjustment remain in place, and have you advised it of the amount of Audit Scotland’s requirement?
The answer to both questions is yes. We have had the usual discussions with the Scottish Government. It is aware of the amount involved, and it supports the submission that we are making to the commission today.
No other members have questions or comments. I have one small additional question. Paragraph 19 on page 4 of your paper states:
“The expectation of continuing low interest rates in the next few years may require similar large accounting charge adjustments in 2019/20 and beyond.”
That is a little bit alarming really, but that has been the pattern for the past few years. I know very little about those things but, logically, one would think that, once you have plugged the gap, it will not keep reappearing.
You have gone to the heart of why this is a complex matter. The accounting adjustments that we have to make are not about covering a deficit in a pension fund; they are to do with the accounting adjustments that are needed to cover the accounting entries that relate to the pension scheme. Stuart Dennis can talk you through the accounting entries if you would like to know more about them. This is not a funded scheme in which we are looking to plug the deficit; that is handled separately in the contributions that we make. This is about the accounting entries that are required to reflect the movements around the pension scheme as a whole. I will hand over to Stuart Dennis to explain the issue to members.
There are three elements to the figure each year. There is the projected current service cost—that is, the cost in-year for the benefits that the staff get by the end of March each year—and, on top of that, there is the interest income on plan assets and the interest cost on defined benefits. Therefore, multiple things influence the figure. That is offset by the contributions that we make as an employer as part of the different valuation that Caroline Gardner mentioned in eventually plugging the gap at a future date. This is really about the in-year cost that we have.
Thank you very much.