Meeting of the Commission

Meeting date: Wednesday, December 21, 2016

Official Report 529KB pdf

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Spring Budget Revision 2016-17

Good afternoon and welcome to the second meeting of the Scottish Commission for Public Audit in session 5.

We are very tight for time today. I ask all members and witnesses to keep questions and answers concise and to the point. Please also make sure that mobile phones and other electronic devices are turned to silent.

The first agenda item is Audit Scotland’s spring budget revision for 2016-17. Members have a copy of the proposed revision. I welcome to the meeting Ian Leitch, chair of the board of Audit Scotland; Caroline Gardner, the Auditor General; Diane McGiffen, the chief operating officer; and Russell Frith, assistant Auditor General.

I invite the Auditor General to make a brief introductory statement.

As in previous years, our spring budget revision request relates to pension adjustments. We have requested budget cover of £1.041 million to meet a non-cash pension charge that will arise as a result of accounting adjustments in 2016-17.

The charge is driven by the continuing impact of low discount rates used to value pension liabilities. Those low rates increase the future pension liability forecasts and, in turn, the estimates for the in-year pension service costs that we are required to account for. It is worth emphasising that those movements are notional and do not lead to cash movements.

As we have explained to the commission before, we are not able to plan for those changes in advance, because of the timing of the information that we receive from our actuaries. We get the information once a year and received this information in April 2016, well after our last budget proposal was received by the commission.

As you can see from the information in our submission, the amounts involved are very variable and unpredictable. The Scottish Government has therefore asked us to deal with them through the spring budget annually managed expenditure process, which is why it is before the commission today.

I am sorry that this is a complicated adjustment; Russell Frith and I will do our best to answer any questions commission members may have.

Have you held preliminary discussions with the Scottish Government to confirm that the previously agreed arrangements with HM Treasury remain in place? Have you advised the Scottish Government of the amount of Audit Scotland’s requirements?

The answer is yes to both.

Do members have any questions about the spring revision?

My question is not specifically on the spring revision, but about the Lothian pension fund in general.

The Auditor General will be aware that pension funds are divesting from fossil fuels and that there are global efforts to decarbonise investments. I believe that about 5 per cent of the Lothian pension fund is invested in fossil fuels. Is Audit Scotland open to reform to better inform pension members of where their pensions are invested? More transparency about that would be helpful.

In broad terms, I am in favour of more transparency on public finances, including pension arrangements. There has been a gradual movement to greater transparency about the investments of the local government schemes, which are the only ones that are funded and therefore invested.

We would be happy to give more information outside the meeting on how that is developing, if that would be useful.

That would be very helpful.

If no other member has a question, is there anything that the Auditor General would like to add?

We are content, if the commission members have no further questions.

Are members content to agree by correspondence a letter to the Finance and Constitution Committee, summing up our views on Audit Scotland’s spring budget revision?

Members indicated agreement.