Faster reform of the public sector is needed in order for the Scottish Government to avoid an unprecedented overspend in its annual budget.

Audit Scotland said the government’s budget is under growing pressure, including through increased pay deals which have cost an extra £700m so far.

A briefing paper said there is a risk of overspend in the current financial year and the upcoming budget will be “challenging”.

In May this year, Finance Secretary Kate Forbes said the public sector needed to “reshape and refocus”, warning continued growth of staffing levels was not sustainable.

Her Resource Spending Review, which set out indicative plans for the remainder of this parliamentary term, had a broad aim of keeping the pay bill for 2023/24 the same as 2022/23.

Audit Scotland said the pace and scale of these reforms needs to increase.

If the Scottish Government overspends during a financial year, the money can be clawed back in the following year’s budget – though this had not happened in the devolution era.

The auditors said setting the next budget will be affected by spending and tax decisions taken at a UK level.

Stephen Boyle, auditor general for Scotland, said: “The Scottish Government, like all governments, has to deal with the immediate challenges that external events bring.

“But to improve lives and protect services in the long-run, these challenges cannot distract from the need for broad reform of the public sector.

Want to see more SNP fails? – Health Matters