Moving forward - Auditor General Caroline Gardner on the recovery and why she fears more austerity would be "disastrous"

Leaving can be liberating. It’s a moment to draw conclusions and, sometimes, to say things that need to be said.

Caroline Gardner, Scotland’s Auditor General of the last eight years, has reached that threshold. Her tenure finishes at the end of June, when the baton will pass to Stephen Boyle, currently an audit director at Audit Scotland.

Her term of office has taken place during an economically and politically turbulent period, and throughout it all she has had an all-seeing eye, unique outside of government, when it comes to how public services in Scotland are run and paid for. 

Audit Scotland scrutinises 222 public bodies in Scotland, including central government organisations, the Scottish Parliament, councils, and 23 NHS organisations, to assess whether public money is being spent efficiently and effectively. Auditors aim to slice open public services and get an idea of how well run they are at all levels, which helps to explain Gardner’s respect for star middle managers who aren’t usually visible to the public.

The Auditor General is independent of government and politically neutral. But on the eve of her departure, and as the UK and Scottish governments plan for the post-COVID recovery, Gardner is prepared to give some clear views about which direction they should take.

First, COVID-19. It has not made the auditors’ job easier. Audit Scotland is giving public bodies longer deadlines and has paused most of its performance audits. Does this mean auditing is going to be less rigorous than previously?

“I would hope not less rigorous but certainly different,” she says. Money has had to be distributed to individuals and businesses quickly to be effective, she notes. “At the same time though I think we all expect that given the sums of money involved – and we’re talking about 100s of billions across the UK – there have to be appropriate checks and balances to make sure it’s reaching the right people and the right businesses; that it’s achieving what it ought to.”

Most of the money is needed to help support people until they come out the other side of the crisis, “but there are always small numbers of people who are looking to take advantage of that sort of thing”.

She recognises that many public bodies have had fewer staff available during the pandemic. Audit Scotland has encouraged them to put an appropriate level of scrutiny in place and provide a trail so that parliament and others who might be reviewing their decisions afterwards can see they were weighing up the risks and opportunities, and “making decisions that all of us as citizens and taxpayers would think were reasonable in the circumstances”.

Gardner has also committed her organisation to keep a focus on the government’s longer-term challenges, like integrating health and social care or using digital to transform services.

But how much cash will there be to spend once the pandemic subsides? It’s not a rosy picture. The Scottish public finances were already under pressure before the pandemic, having crawled back after the financial crash more or less to where they were a decade ago, but with markedly greater inequality than before. 

Added to that, the Scottish Government was facing a £1bn shortfall in taxes over three years, due to differences between forecast and actual income tax revenues.

Gardner says of the tax base post-COVID: “It’s not going to be in a good state and it’s going to be more difficult for the Scottish Government than the UK government.”

Scotland, she notes, was already at a disadvantage over income tax because it has a less skewed income distribution than London and the south east of England, with fewer very high earners. Now, income tax is likely to be impacted by slow wage growth and higher unemployment, at least in the short term. 

There will be a hit to Land and Buildings Transaction Tax, and a cost arising from non-domestic rates relief.

The pandemic, she anticipates, will also increase the cost of services, for instance by social distancing requirements forcing GP practices and schools to operate differently.

Not good, then.

“I think it’s really important for me to say, though, that the Scottish Government’s package of financial powers was never intended to deal with a crisis like this,” she says. “The Scottish Government can’t borrow to provide more services or to cover for falling tax rates – all of that borrowing will have to be dealt with at a UK level – and it’s the choices the UK Government makes on how to repay the borrowing it’s now incurring that will have a major impact on Scotland’s public finances in future.”

Although the Bank of England judges a sharp recovery to be possible, she thinks it will be “complicated” unless a vaccine becomes available very quickly.

So we face some important decisions. Gardner is certainly clear about what shouldn’t happen next.

“After the 2008 financial crisis, the government in power from 2010 made a political choice about austerity, about reducing public services to repay the debt that had been incurred,” she says. “There is growing evidence that that choice has led to some of the inequality and the consequences that we’ve seen of that across the country. It’s affected the amount of government money the Scottish Government has to spend on public services.

“There are alternatives. We know that the UK government now is borrowing hundreds of billions of pounds to pay for the response that we have.

“It could choose to go back to austerity again; my personal view is that that would be disastrous.”

So what are the alternatives?

“It could also choose to be looking at whether the money could be raised through taxation that is raised in different ways on different people and players in the economy.

“Or it could take a position that actually having a significant amount of public debt at the moment is not actually the worst thing that could happen, with low interest rates and the ability over time to grow our way out of that with a different economic model. 

“I think those are the choices we should all be talking about as a country, UK-wide and here in Scotland, and then thinking about how we use the funding that is available to sort of leapfrog to where we want to be, to be thinking genuinely about what is a more resilient and sustainable economy and society for us to live and work in.”

She mentions climate change and inequality. “Those are the sorts of long-term emergencies that we need to be taking this opportunity to be thinking about while everything is up in the air.”

So in her view, should we no longer be focusing on our ability to pay down debt?

“I think in 2010 the then UK government did a very good job of suggesting that there was no alternative to austerity to pay down the debt that had been incurred in 2008 by the previous government.

“I think that debate became very narrow. The media on the whole didn’t challenge the idea that holding large amounts of public debt was a bad thing in current circumstances and that became the orthodoxy that most politicians and most of society started to live with. 

“I think what’s fascinating about this pandemic is that it has demonstrated how interdependent we all are and that there are some things that only government can do. Nobody else is in a position to step in and support the economy, to provide the healthcare response we need, to support individuals through something that is this dramatic, traumatic, has such a huge impact on everybody’s lives and doesn’t have an easy answer.

“I think that does upend some of those things that have become economic and political orthodoxy.”

She mentions the billions the Chancellor has spent on the wages of 7.5m people.

“What this does is give us a chance to step back and say, all of these things we took for granted, actually they’re choices we’ve made and we can make different choices.”

On taxation, she highlights that the UK Government has wider powers at its disposal than the Scottish Government, though notes that there is the potential in Scotland to look again at council tax (something that Scottish ministers have dragged their feet over).

Overall, though, she believes that in the short term it won’t be possible to raise taxes enough to repay the much elevated borrowing necessitated by COVID-19: “I think it raises particular challenges for Scotland but we have to take a long-term view, not think that next year’s budget is going to have the tax rises needed to pay back the hundreds of billions that we’re incurring just now.”

COVID has hit like an asteroid in Gardner’s last three months, but for most of her term, she has been focused on other issues. One frustration has been the slow progress towards integration of health and social care, an undertaking that has the capacity to make the NHS much better able to meet patients’ needs. 

Since 2016 when the integration joint boards began, she says, “they’ve been taking absolutely baby steps that have been all round governance and process, starting to develop plans”.

She contrasts that with the speed major projects have been achieved in the last three months, like setting up the NHS Louisa Jordan Hospital in Glasgow and getting economic support out to people. “So that’s now five years of trying to get integration authorities up and running compared to five weeks, eight weeks, of getting some of these big interventions there.

“I think there’s a real lesson about, if this really matters, how do we get our resources behind it and really make it work, and tying that to the National Performance Framework.”

The temptation might be to put integration on the back burner after the crisis, but she is convinced it needs to go even faster.

Integration is typically crowded out of the political debate by the focus on totemic issues like waiting times. While Gardner understands the importance of waiting times, she is frustrated that discussion of them “squeezes out the space for making the change we need [on health and social care]”.

She points out that when the First Minister or Cabinet Secretary for health are in front of parliament, the questions they are asked are about progress on waiting times.

“The government I think has not helped itself in some respects,” she adds. “A couple of years ago it asked Prof Sir Harry Burns to look at targets and I thought that was a really brave way of starting to say these targets are telling us part of the story but not the whole thing.

“Two years later, still until the pandemic, [we’re] focused on how long people were waiting last week to get into A&E. If anything they’ve narrowed the focus.

“But equally the opposition parties know that this is a bit of a political game they’re all playing. I’ll be in the Garden Lobby on a Thursday morning before the Public Audit Committee and opposition spokespeople will come up to me and say ‘of course if we were in power we would have the same challenges’ and then three hours later they’re standing up at FMQs throwing pelters at the First Minister from the opposite argument.

“We need to move on from all of that to find a way of doing politics which is longer term.”

That’s much easier to say than do, she admits.

Another frequent concern she is conscious of in parliament every week is the “understandable appetite for people to be held to account when things go wrong”.

“Sometimes that’s absolutely appropriate,” she says. “Somebody has made a mistake which was reckless, unreasonable, they shouldn’t have done in their position, or was simply doing a bad thing, was pocketing money they weren’t entitled to and bending rules to do it.

“On the whole in those circumstances, people are held accountable, people lose their jobs and the deterrent effect of that we shouldn’t underestimate.

“But equally a lot of the time when things go wrong it isn’t one person’s fault. It is the system within which they’re working that makes it hard to achieve a better result and I think we’re much less good at understanding those underlying causes and dealing with them.”

One example she gives is of health service managers being under pressure to meet very narrow annual financial targets, which in turn puts them under pressure to do things which “aren’t sensible”.

Another example is the numerous big high profile IT systems which have failed, wasting public money and entailing an opportunity cost by preventing a much-needed transformation in the way services are provided. That kind of accountability is harder to get right, she reflects, but if we could understand it better, it would have a big impact on how well future public money was spent.

In her eight years Gardner has seen good and bad examples of public sector management, but big IT systems have delivered more than their share of head-in-hands moments. She struggles to understand how it is that people don’t seem to get the advice, expertise and assurance they need in advance, given how often such projects go wrong.

But alongside the frustrating examples of public sector practice are the great ones. NHS 24 she singles out as a public sector high performer, an organisation which, six years ago, had a failing IT system and struggled to command public trust, but which is now at the centre of the COVID response, and was already using digital to enhance its service, as well as working with the police and ambulance service to run mental health hubs. “That’s a huge achievement,” she says.

She also pays tribute to “individual public service leaders in schools and GP surgeries and the police, every day, who are taking their own responsibility to be leaders”. They are using their own networks and influence to “introduce more of that person-centred, flexible, what-can-we-do-to-help kind of approach”.

Do you need a thick skin to do her job? “You kind of do,” she says, pointing out that her job is to give credit for things that are going well but also to highlight things that have gone wrong.

“Any government will find that difficult and I think that’s been particularly the case in the eight years I’ve been in the job, given the passions around the independence debate and the high stakes around that. I absolutely get all of that and it’s my job to make sure the work we produce is high quality, is grounded in the evidence, it’s fair and balanced and we communicate it clearly.

“As long as we do that I’m comfortable with whatever it brings, really.”

Every now and then, she says, it’s necessary to follow up where staff have been subject to “undue pressure to water down their messages or not look at a particular thing”. “That’s not to say we weigh in in a crude way; we have to listen to what people are grappling with and where things are difficult for them, but when we’ve done the work and come to a conclusion we have to be able to communicate it clearly.”

It might have been tricky at times, but it doesn’t compare with the year she spent in the Turks and Caicos islands in 2010/11. She was there on Dfid’s request as chief financial officer after the islands went through a corruption scandal following the global financial crash and were on the way to becoming bankrupt. Her job was to get them back into a financially sustainable position.

“They were genuinely at the point of not being able to pay staff, to pay bills,” she recalls. “You’d open a drawer and find another wodge of invoices that had just been stuck in there and nobody knew about; the tax revenues had fallen off a cliff because most of it came from tourism from North America and people were just not travelling with the global financial crisis.

“It was not an easy environment and in the Caribbean there’s a legacy of British slavery. There had been self-government in place for a decade which had then been suspended on the back of the judicial inquiry into the corruption.

“Having a white woman come along and take control of the cheque book wasn’t entirely popular.” She had to build lots of relationships very quickly.

Her verdict on the experience? “It was the toughest thing that I’ve ever done but it was also the best experience of my career.”

Presumably dealing with Scottish politicians didn’t seem so hard after that?

“Indeed,” she replies. “On the whole they’re not armed over here which makes a big difference.”

Born in London before moving aged three to Swindon with her family “one of that generation who moved out from very poor housing in London to a council house with a bathroom and a garden”, Gardner went to university in Birmingham before returning to London for a while and then coming to Scotland in 1995. She has been here ever since (except for the year in the Caribbean) and it’s home for her and her husband. She is not planning to get another full time job and, pandemic permitting, is due to start a part time masters in Victorian literature in September (her favourite author is Elizabeth Gaskell).

And then?

“And then I want time to do things which are useful and worthwhile and interesting,” she says. “To continue to make a difference.”   

* This is an extended version of an interview that appeared in Holyrood magazine on 15 June 2020.