NICOLA Sturgeon’s flagship plan to overhaul Scotland’s care system has “significantly understated” the potential costs involved, the country’s spending watchdog has warned.

Audit Scotland said considerable uncertainty surrounded a range of costs associated with the proposed new National Care Service, including inflation, pay, VAT and pensions.

In a submission to tomorrow’s Holyrood finance committee, Audit Scotland said the final pricetag was likely to be “significantly above the amounts currently assessed”.

The estimated cost of the shake-up is already put at between £620million and £1.25bn between 2022/23 and 2026/27.

The First Minister has described the National Care Service (NCS) as “arguably the most significant public service reform since the creation of the National Health Service” in 1948.

It is intended to “oversee local delivery of community health and social care, ensuring consistent and high standards and embedding the principles of fair work for care workers”. 

When the Holyrood Bill to deliver it was published in June, SNP Health Secretary Humza Yousaf said it would end the “postcode lottery” in care provision around the country.

However it is proving increasingly controversial, with councils warning it represents a “power grab”, taking responsibilities away from elected local government to a centralised system.

At last week’s finance committee, two SNP MSPs also criticised it.

Convener Kenneth Gibson said creating a new system to improve standards in a relatively small number of care homes was like using “a sledgehammer to crack a nut”.

While Michelle Thomson said she had “no confidence whatsoever” in its financial plan, calling it a “blank cheque for the public purse”.

Donna Bell, the Government's director of Social Care and National Care Service Development, admitted there was "significant work" to be done to examine costs and risks "were very much at the front of our minds."

Asked about her colleagues comments at last Thursday’s FMQs, Ms Sturgeon inisted: "A national care service is the right way to go."

She said: “The national care service is about improving social care, about better rewarding those who work in social care, and about removing any postcode lottery in the provision of social care. 

“Obviously, the National Care Service (Scotland) Bill is in its early stages of parliamentary scrutiny. A number of different committees in the Parliament are scrutinising that legislation and, as we always do, we will listen very carefully to points made and views expressed in the course of that scrutiny. That is the right and proper way to proceed with any legislation.”

In the latest blow, Audit Scotland warns the inflation assumptions built into the Bill’s financial memorandum, of between 3 and 6 per cent, are obviously out of date.

It said: “More recent information on actual and forecast inflation are well ahead of the assumptions used. 

“There is significant uncertainty about the future path of overall inflation measures and how this translates to public sector pay and other costs, but in our view the margin of uncertainty in the figures is likely to be significantly understated as a result.”

It also says there are “a number of costs associated with the measures set out in the Bill that have yet be assessed”, something the Government has recognised by “providing a broad description of the anticipated cost and the difficulty in assessing it at this stage”. 

But it goes on: “In some of these, the potential for additional cost is significant and taken together it is likely that the overall cost of the measures will be significantly above the amounts currently assessed.

“Areas where cost information has not been provided include:

•the costs of any national care boards

•transition costs for Local Authorities and Health Boards, including double running. These may be significant and it will not be to unpick existing services from the other services these bodies provide

•the impact of changes to VAT treatment, with the expectation that Care Boards will not be able to recover input VAT to the same extent as local government bodies. While recognising thedifficulties in making such an assessment it is import that the Scottish Government is able to provide its overall assessment of the potential significance of this issue as soon as it can

•the impact of any changes to pension scheme arrangements and associated contribution costs arising from pay harmonisation/ rationalisation

•the extent of potential changes to capital investment and maintenance costs

•the cost of the health and social care information scheme.

"In our view such costs have the potential to add significantly to the overall costs reported and are not currently reflected in the assessed margin of uncertainty."

SNP Social Care Minister Kevin Stewart said: “The establishment of a National Care Service will be the most ambitious reform of public services since the creation of the National Health Service.

“We are committed to taking long term action to change our society and make it a fairer and more equal place to live.

“We have set out a range of potential costs of the National Care Service, based on current assumptions. Any decisions about spending on the NCS service will based on rigorous evidence and will be subject to future Parliamentary budget-setting processes.

“As the Independent Review of Adult Social Care made clear there is a wider need for investment in social care. Many of these are areas are not set out in the Financial Memorandum for the National Care Service as they do not directly relate to the legislation.

“The Financial Memorandum sets out the best current estimate of the costs which directly relate to the Bill.”