The Scottish Government is failing to take the necessary action to address its budget deficit, relying instead on "short-term" fixes that risk the long-term affordability of public services, Audit Scotland has warned. 

In a damning report, the watchdog said ministers had "not been sufficiently transparent with the Scottish Parliament or the public" over the state of the finances.

They said the SNP had failed to adequately communicate the current fiscal situation, including the medium-term risks and the choices required to balance the budget.

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In the report, Audit Scotland pointed to the use of £460 million in one-off ScotWind revenues to fund public sector pay awards.

The money raised from an auction of seabed leases to companies planning to build offshore wind farms, was supposed to be used to “tackle the twin climate and biodiversity crises.”

The auditors pointed out that with the Scottish Government having emptied the ScotWind reserves to fund this year's public sector pay hikes, they did not have a plan to pay for this higher level of spending in the coming years.

Audit Scotland said while the government had "so far been effective in balancing the budget," this sort of short-term approach "risks disrupting services at short notice and restricting progress towards better long-term outcomes for people."

The report also criticised delays in publishing key financial documents, including the Medium-Term Financial Strategy, which, they said, had all made "scrutiny of the current uncertain financial situation more difficult".

There was also, they added, insufficient leadership from SNP ministers in driving the reform programme across public sector bodies.

Despite public service reform being a key component of the Scottish Government’s approach to fiscal sustainability, the auditors said there was "no evidence of large-scale change on the ground."

Stephen Boyle, Auditor General for Scotland, said: “People do not fully understand the medium-term risks public services are facing because of a lack of transparency from the Scottish Government.

“The reality is that we need a fundamental change to how public money is spent to ensure services can meet demand and remain affordable beyond the short-term.

“To turn that into action on the ground, the Scottish Government must set out a clearer vision of what its plans for reform will achieve, including delivery milestones and the likely impact of reform on services and people.”

The critical report comes just two weeks before Finance Secretary Shona Robison is due to present her Budget for the upcoming financial year.

Scottish Labour Finance spokesperson Michael Marra said the report was "damning".

“The SNP has created a black hole at the heart of public finances but has refused to be honest about how it happened or what it means," he said.

“Labour has delivered a record block grant settlement for Scotland, but the SNP is at risk of squandering this opportunity through waste and poor planning."

The Scottish Tory shadow cabinet secretary for finance and local government Craig Hoy described the report as "devastating".

“Scots are typically being kept in the dark over how taxpayers’ money is being spent, or if SNP ministers have any vision to fix the overwhelming mess they have made of public services.

“Their gross financial incompetence means that it is only short-term decisions that are being taken and there is a complete lack of leadership from SNP ministers.

“It is astonishing that the SNP simply do not even know how much funding will be required to support future reforms."

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Scottish Liberal Democrat leader Alex Cole-Hamilton said the report showed the need for a "step change" in how public money is spent.

“When it comes to the SNP’s approach to the public purse, short-term is the watchword," he said.

“Ministers don’t have any plan for public services.

“Instead, they have undermined them by making one expensive blunder after another, from the ferries scandal to selling off the seabed on the cheap."

Responding to the report, Public Finance Minister Ivan McKee said: “This Government has delivered a balanced budget since 2007 while taking forward a range of actions to improve the overall sustainability of the public finances.

“As Audit Scotland recognises, UK Government choices on spending significantly affect how we plan and while the autumn Budget goes some way to increasing our funding position, it does not give us certainty about future funding.

“We welcome this report’s recommendations, many of which are aligned with our programme of public service reform. This programme will ensure that public services are high-quality, effective and fiscally sustainable, prioritising prevention and reducing future demand.

“We remain committed to doing all we can to ensure the public finances remain on a sustainable trajectory, and through decisions we have made on income tax policy, we expect to raise an additional £1.5 billion in 2024-25, compared to if we had matched UK Government policy.

“While this report covers a period in time from March to June this year, there has been significant work on reform since, including capturing data on spending by public bodies that will provide crucial information as we map efforts to ensure investment on behalf of the people of Scotland is used efficiently and sustainably.”