Spending excess exposes ministerial weakness – Daily Business Magazine

A new report raises more questions over the failure to control public spending, writes TERRY MURDEN

Perhaps it was just unfortunate timing that a warning over low water levels was issued on the same day that an inquiry has condemned the industry’s regulator of a culture of excess. Consumers are being asked to control consumption while reading about seemingly limitless sums of money pouring into the pockets of executives to enjoy a lavish lifestyle at taxpayers’ expense.

MSPs have been told about “inappropriate” spending at the Water Industry Commission for Scotland (Wics), including £200-a-head meals, gift cards for staff and a £77,000 Harvard business course for a senior manager.

A new report to the Holyrood’s public audit committee confirmed earlier revelations from Audit Scotland about failure to control spending outside public finance guidelines that led to the departure of the chief executive and chairman Alan Sutherland and Donald Macrae.

The significance of this latest report, described by committee convener Richard Leonard as “simply extraordinary” is that it confirms poor management of finance in government at a time when we hear regularly from ministers about budgets being under the cosh.

Coming also in the week that MSPs were told that the cost of completing the CalMac ferry contract will now run to five times more than the original forecast, this has been a bad week for government finances.

We hear regularly from local authorities about a lack of money to invest in basic services, yet there is always enough for golden goodbyes to senior staff, not least Glasgow City Council which is facing scrutiny over exit packages worth more than £1m to five former employees.

Next time the First Minister John Swinney or Finance Secretary Shona Robison say public services are being squeezed by “austerity” measures imposed by the UK government, perhaps they will be reminded that they have control of the Scottish budget and a responsibility to be judicious in their use of the money made available to Holyrood, either from within Scotland or from Westminster.

Investment holds up, but a change may be imminent

An uplift in business investment in the UK in the first quarter has caught analysts by surprise, coming alongside stronger than expected growth figures, though there could be a sting in the tail of the latest data.

ONS figures show investment expanded by 5.9% in the three months to the end of March, the fastest pace in two years and following a 1.9% contraction at the end of last year.

New figures from the Scottish Retail Consortium also provide the best monthly performance for almost two years. Total sales in Scotland increased by 4.5% compared with April 2024, when they had decreased by 4%. Director David Lonsdale, while acknowledging the later Easter this year and a prolonged period of sunny weather, described the figures as “sparkling”.

While some will see this as a welcome defiance of an anticipated slowdown, there are warnings that this could be as good as it gets, and the calm before the storm. Higher payroll taxes, US tariffs and other costs which came into effect from the beginning of April are likely to paint a different picture for the second quarter.

Some large retailers have warned of reducing headcount, there has been a slew of administrations across all sectors among companies with cash flow problems as growing uncertainty led to firms pressing the pause button on orders. Oil and gas firms have cut jobs on the back of higher taxes. Even the previously booming whisky and gin sectors are seeing a slowdown, with some distilleries reporting weaker demand.

The data is certainly providing mixed messages. In the past week we have had figures showing unemployment rising, while GDP is rising.

On the back of the latter, Chancellor Rachel Reeves has been boldly proclaiming that her plans are working. “When I became Chancellor, I was clear I would lead the most pro-growth Treasury in the country’s history,” she said in a LinkedIn post that prompted some readers to choke.

One managing director replied: “Pro growth? How can you seriously look at yourself in the mirror and believe that the carnage you are reaping over the UK with your ridiculous policies can in any way be labelled “pro growth”. Your policies are destroying business and confidence. Ridiculous press release as usual.”

Another responder said: “With the way you’ve wrecked the job market in under a year, you’ll be out of your seat in four years.”

The next three months will be telling. By the end of summer we should get early indications as to whether those tax rises really have knocked the economy for six, or if businesses have found a way to weather the storm.

Terry Murden was Editor and Business Editor at The Sunday Times Scotland, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business.

>Latest Daily Business news

Related