Tracking spending on COVID-19 has not been easy
Throughout the course of the pandemic, it has proved hugely challenging to keep track of the additional money received by the Scottish Government to support its response to COVID-19 and how it is being spent. SPICe has published several blogs on COVID-19 spending, and Audit Scotland has published a number of reports and has another one due out in May 2022. All of these have highlighted the challenges in tracking COVID-19 funds. Due to the complexity of this issue, this is a longer blog than normal, so we’ve added a contents popout below to help with navigation:
Challenging times for managing public finances
To a certain extent, the challenges in tracking COVID-19 spending are unsurprising, given the pace with which events (and budgets) developed and the unprecedented nature of the challenges being faced by policy makers. However, where public money is involved, providing transparent information to support effective scrutiny is always important, however challenging the circumstances. Yet, even two years after the outbreak of the pandemic, we are still struggling to find comprehensive information from the Scottish Government on the financing of its response to the pandemic. This information gap has been highlighted by both the Public Audit Committee and Finance and Public Administration Committee, as well as by SPICe and Audit Scotland.
The Scottish Government has received additional money for its COVID-19 response via Barnett consequentials, whenever the UK government has spent money on its own COVID-19 response in areas that are devolved to the Scottish Government. Devolved areas of responsibility include health and local government, two of the main areas that have been impacted by additional COVID-19 spending (although, in the case of local government, much of the additional financing was for the provision of business grants, rather than money for local government services).
The Scottish Government has allocated additional funds through its in-year budget revisions and through the annual budget setting process. However, it is challenging and sometimes simply not possible to disentangle the COVID-19 spending from other spending in these documents, making it hard to get an overall picture of all pandemic-related spending.
Transparency has improved…
A useful and welcome step forward in this respect came with the publication of the 2020-21 Consolidated Accounts and the 2021-22 Spring Budget Revision. The Consolidated Accounts included information on COVID-19 spend that took place in 2020‑21 (see p50-51). Meanwhile, to support the Finance and Public Administration Committee’s scrutiny of the 2021-22 Spring Budget Revision, the Scottish Government provided a Guide to the Spring Budget Revision. This had some helpful information on the amounts received in relation to COVID-19 by the Scottish Government via Barnett consequentials and the amounts spent, both in 2020-21 and for the first nine months of 2021-22. Until now, this information was not brought together and published by the Scottish Government, so this provides helpful clarification.
…but it is still not enough for meaningful scrutiny
Despite the welcome progress, there remain some challenges and the additional information raises almost as many questions as it answers. For starters, the information for the two financial years is set out under different headings, as portfolio structures changed between 2020-21 and 2021-22. For the analysis below, some assumptions have had to be made about allocations to the new portfolio headings.
Also, the level of detail is still lacking in some areas. The 2020-21 data gives a reasonably detailed breakdown of most areas of spend e.g. within health portfolio area, spending on PPE and the Louisa Jordan hospital are separately identified. However, for 2021-22, the same level of detail is not provided and there is – for example – simply an overall figure of £862 million for health and social care, which does not allow for any meaningful scrutiny of how these significant sums of money have been used.
More detailed information may come further down the line in the consolidated accounts for 2021-22, but these won’t be available until much later in the year. It would be helpful to have this information sooner in order to support scrutiny that is already underway (for example, by the COVID-19 Recovery Committee) and inform policy decision-making (for example, the potential costs for Scotland if it chooses a different route out of COVID-19 than the rest of the UK, such as a different testing regime).
What does the published information tell us?
According to the analysis set out by the Scottish Government, the Scottish Government has received a total of £14.6 billion in COVID-19 related Barnett consequentials. The same analysis shows that the Scottish Government has allocated £14.9 billion in support of its COVID-19 response over the two financial years 2020-21 and 2021-22.
As such, the Scottish Government has spent (or intends to spend) around £300 million more on its COVID-19 response than it has received from the UK government in additional funds over this period. It will have achieved this by using its reserves and re-prioritising existing budgets.
The chart below summarises the information on spend that is presented by the Scottish Government. As these figures relate to actual (rather than planned) spend, they only cover the first nine months of 2021-22.
The information shows that the biggest areas of spend – as would be expected – have been local government and health and social care. Together, these two areas account for just over two-thirds of total spend on the pandemic response. Major areas of spending that are identified include:
- Health and social care (£3.6 billion)
- Business grant schemes (£2.5 billion, much of which was routed via local government)
- Non-domestic rates relief (£1.7 billion)
- Local Government support (£1.2 billion)
What does the published information NOT tell us?
Total spend of £11.8 billion is accounted for by this information. So, with the Scottish Government stating that it has allocated £14.9 billion to its COVID-19 response, this would suggest that just over £3 billion of spend remains to be accounted for in the last three months of the 2021-22 financial year. This represents the same amount as has been accounted for in COVID-19 related spend over the first nine months of the financial year, so represents a substantial amount.
The Scottish Government notes that “there remains scope for considerable volatility in the final outturn data for Covid expenditure for 2021-22”. The Scottish Government also gives some indication of where additional spending might be recorded in the final three months of the year, for example noting that significant additional allocations have been made to health boards, and that the majority of the business support package announced in December 2021 (in the light of the Omicron wave) will be recorded in quarter 4 expenditure. Greater clarity on plans for the remainder of the financial year would be welcome.
The published information also makes it very hard to establish whether the Scottish Government has met its commitment to pass on all health-related Barnett consequentials to the health and social care budget in Scotland.
HM Treasury’s December 2021 Block Grant Transparency report identifies a total of £13.6 billion in COVID-19 related Barnett consequentials allocated to Scotland. This information will cover a shorter period than the information set out by the Scottish Government, so a difference between the two would be expected. The main difference is the final Supplementary Estimate allocations which are not included in the £13.6 billion, but are included in the £14.6 billion figure quoted by the Scottish Government.
Bearing that in mind, the chart below provides a breakdown of the £13.6 billion figure according to the UK government department from which the Barnett consequentials came.
Although the Scottish Government is free to spend Barnett consequentials in any area that it chooses, it has made a commitment to pass any health-related Barnett consequentials on to its own health and social care budget. According to the analysis above (and to figures presented elsewhere by the Scottish Government), this would suggest plans to spend an additional £6.1 billion on health and social care as a result of the pandemic, as this is the value of health-related Barnett consequentials that have been received.
The Scottish Government has stated that all health-related consequentials have been allocated, but the analysis presented here shows a wide gap between the COVID-19 related health and social care spend that has been reported up to December 2021 (£3.6 billion) and the amount that has been reportedly allocated (£6.1 billion) for the period to March 2022. On the basis of current information, there is a significant gap between allocations and spend to date.
As noted above, the information on spend does not yet cover the whole financial year, so additional spend would be expected in the remainder of the financial year. In addition, there may be issues with what is classified as ‘covid’ spend that will account for some of the gap. For example, some additional health spending may not have been formally classified as ‘covid’ spend and, as the Scottish Government note, this is not a formal accounting definition. Nonetheless, the gap of £2.5 billion is large and more transparent information would be helpful in informing effective scrutiny and establishing whether commitments have been met.
It’s not all that easy to find the information…
The information on 2020-21 spend was presented in the 2020-21 Consolidated Accounts that were published in December 2021. Although this is an appropriate place for the final audited information to be set out, it would have been helpful to have similar information – even on a provisional basis – presented earlier in the year. This is what the Scottish Government has done for 2021-22 in the information presented to the Finance and Public Administration Committee. Something similar for 2020-21 at an earlier point in the year would have been very helpful. The additional 2020-21 Summer Budget Revision that was published in May 2020 was very helpful in providing information on the first £4 billion of COVID-19 funding, but the subsequent budget revisions for that financial year (in September 2020 and February 2021) did not provide such a clear or detailed picture of COVID-19 funding.
It is also unclear why the Scottish Government published this new and useful information for 2021-22 in a relatively obscure document, which is not available published on the Scottish Government website and can only be accessed via the Parliament’s Committee pages. It seems that this valuable information would have been worthy of a separate publication, given the level of public and Parliamentary interest in this issue. This was raised by the Public Audit Committee in a recent letter to the Permanent Secretary.
Obviously, as time goes on, it becomes harder to separate out COVID-19 spend from other areas of spend, so it is not realistic to expect this distinction to continue to be made in the presentation of budget and expenditure data. However, in its 2020/21 audit of the Scottish Government Consolidated Accounts, Audit Scotland noted that:
“The Scottish Government needs to be proactive in publishing comprehensive Covid-19 financial reporting information which clearly links budgets, funding announcements and spending levels. This will increase transparency in the Government’s financial reporting in an area of significant parliamentary and public interest.”
A comprehensive statement of pandemic spending would be a very valuable element of public finance reporting. It would provide useful lessons for any future public health or other large scale emergency government interventions. Furthermore, the experience of the pandemic and the challenges in tracking finances could also serve as a useful case study in how in-year reporting could be made more transparent even in more ‘normal’ times.
Nicola Hudson, Senior Analyst, Financial Scrutiny Unit