THE Scottish Government has been told to improve the transparency of its loans to private companies after writing off another £12.5m last year.

The Auditor General for Scotland said SNP ministers needed to “clearly outline” their future investment plans “to increase transparency and value for money".

It followed the Government making loans of £3.5m to Prestwick Airport and £9m to Burntisland Fabrications (BiFab) which were subsequently valued at nil at the end of the 2019/20 financial year “to reflect the likelihood of repayment”. 

The losses were on top of £135m written off the previous year because of £45m and £33m in bad loans to Ferguson Marine Englineering and Prestwick Airport respectively, plus a worthless £37.4m stake in BiFab and £21.4m for an aluminium smelter in Lochaber.

The Fergus Marine shipyard on the Clyde went into administration in August 2019 after a contract to build two CalMac ferries ran out of control with costs doubling and years of delay.

The planned sale of Prestwick Airport, which the Government bought for £1 in 2013, was abandoned in September because of Covid devastating the airline industry.

And BiFab went into administration earlier this month.

The Government’s Consolidated Accounts for 2019/20 also showed that the Government technically overspent its budget by £669m responding to the start of the Covid-19 pandemic.

However the overspend was not a breach of the rule that the Scottish Government cannot overspend its budget, as it was a result of accounting standards reflecting £912m earmarked for two business support schemes.  

The overall £38.7bn budget to 31 March 2020, the week after the lockdown began, came to £39.4bn, with the resource budget of £36.8bn overspent by £899m and the £1.9bn capital budget underspent by £230m, meaning a net overspend, on paper, of £669m.

The Scottish Government later received an extra £8bn in Barnett formula funding from Westminster to cope with Covid, most of which will fall in the 2020/21 financial year.

Auditor General Stephen Boyle said: "Covid-19 is understandably having a significant effect on the Scottish Government's finances. 

“It's now more important than ever that the next financial strategy has clear links between spending plans and what that money is expected to achieve, as Scotland contends with the pandemic's ongoing impact.

"The Scottish Government also needs to clearly outline its plans for future investment in private companies to increase transparency and value for money."

Labour MSP Jenny Marra, the convener of Holyrood’s public audit committee, said: “The impact on public finances and the economy caused by the Covid-19 pandemic and the UK’s withdrawal from the EU will affect financial and policy decision-making for years to come. 

“An overspend of £669m in the 2019/20 budget reveals just how important our committee’s work will be in scrutinising financial management and governance in our collective mission to minimise the effects of the pandemic on our society.”

Responding to the report, a Scottish Government spokeswoman said: “The overspend was due to the provision for vital business support grants we made available from April 2020 and Audit Scotland confirm in their report that we are not in breach of the Budget Act.

“Like other governments around the world, we have listened to businesses and tailored our support during this economic crisis to support jobs and the economy of Scotland.

“The Scottish Government is committed to sound and transparent management of the country’s finances to deliver the best outcomes for the people of Scotland and to stimulate a sustainable recovery from the coronavirus pandemic.

“The Scottish Public Finance Manual sets out the considerations and decision-making process undertaken by ministers when considering investing public funds in a business.

“The Scottish Government’s accounts are also laid before Parliament and published annually.”