Scottish police service faces £188m funding gap

Scotland's police service is facing a £188m funding gap by 2020/21, the country's financial watchdog has said.

In a highly-critical report, the auditor general said she had again found "substantial issues" during her examination of the Scottish Police Authority (SPA) accounts.

The accounts cover the £1.1bn spent by the SPA and Police Scotland in the past year.

Auditor general Caroline Gardner said they were of "poor quality".

Ms Gardner said she had made "significant corrections" because of inaccurate records and poor financial management, and called for "substantial improvement".

In response, the SPA said it had "demonstrated continued progress in the reform of policing and the delivery of further significant financial savings and efficiencies".

But it acknowledged that more work needed to be done to address the concerns over its accounting procedures.

Third consecutive year

The auditor general's report was highlighted by the Conservatives and Labour at First Minister's Questions, which saw Nicola Sturgeon welcome the improvements that have been made and criticising the UK government over the £25m in VAT that Police Scotland pays.

This is the third consecutive year that the Auditor General for Scotland had drawn the Scottish Parliament's attention to substantial issues found during her annual audit of the police service.

In her report to the Scottish Parliament, she wrote: "Aspects of the accounting records and access to information and explanations in the area of property, plant and equipment were of poor quality.

"In my opinion, therefore, adequate accounting records have not been kept in respect of these areas for the 2015/16 financial year."

She also said the SPA needed to be more open about how it allocated funding to Police Scotland and what the money was expected to achieve.

Auditor General Caroline Gardner has criticised the financial management of new police service for the past three years

The SPA prepared an initial long-term financial strategy in March 2016, following the auditor general's recommendation that it do so in 2013.

Ms Gardner said updating the strategy was essential given the scale of the financial challenge facing the police service, despite the Scottish government's commitment to maintain a real terms increase in the policing budget for the duration of the current parliament.

She wrote: "Together, the Scottish Police Authority and Police Scotland are among the largest and most important public bodies in Scotland.

"I have reported to the parliament on weak financial leadership and management in all three years of their existence".

Financial challenges

She said the projected funding gap of £188.2m by 2020/21 included the Scottish government's commitment for a real terms rise in the policing budget for the duration of the current Scottish Parliament.

It also assumed that the government continues to pay VAT for both the SPA and Police Scotland, and includes the "continuing commitment" to maintain police officer numbers at 17,234.

The projected funding gap for 2016/17 is £17.5m and the budget gap predicted for 2018/19 has fallen from £84.6m in last year's Audit Scotland report to £45.8m.

Ms Gardner said the scale of the financial challenges facing the police service made "strong and effective financial leadership, long-term financial planning and good governance and scrutiny essential".

She added: "The SPA and Police Scotland have begun to take steps to improve both financial leadership and management and governance arrangements but these have not yet had a chance to have an impact."

The SPA annual accounts for the 2015/2016 financial year showed the police service delivered £34m of savings during the year, which it said brought the total recurring savings achieved to date by police reform to £127m.

The body will also publish a new 10-year policing strategy in 2017.

SPA chairman Andrew Flanagan said: "Over the last nine months a number of significant improvements have been announced and implemented to strengthen financial management of policing.

"I am confident that the new arrangements translate to a step-change in policing's approach to financial planning and control and will help address more fully the issues Audit Scotland raise within the current financial year."

Speaking in the Holyrood chamber, opposition parties said the report had been published just an hour and a half before parliament went into recess for the festive period - which they said had left members with little time to scrutinise it.

Scottish Conservative leader Ruth Davidson said nearly £1bn of funds had been handed to Police Scotland "without us knowing what it was for".

'Westminster bad'

Her Scottish Labour counterpart, Kezia Dugdale, said the report was "damning" and asked the first minister what she was trying to hide by publishing it at the last possible point before recess.

In response, Ms Sturgeon said "even the opposition" should be able to read a nine page report in an hour and a half, and denied suggestions that her government had imposed "stealth cuts" on the police service.

She said the report highlighted that both Police Scotland and the SPA have taken steps to improve their financial leadership and governance arrangements, but these have not yet had a chance to have an impact.

And she said there would be £25m extra to invest in the police if the UK government did not insist on making Police Scotland pay VAT.

But Ms Davidson said the report was highlighting poor financial management by the SPA, and that "running to 'Westminster bad' is not exactly going to cut it".

She also said the Scottish government had "done nothing" when it was warned about VAT at the time Police Scotland was being set up.

Scottish Green MSP John Finnie called on the SPA to "get a grip" in order to prevent further loss of public confidence in it and Police Scotland.

And Scottish Liberal Democrat justice spokesperson Liam McArthur said the report confirmed that police finances were "calamitous".