Spring budget 2016-2017: supporting document

Introduction

1. This booklet provides information for the Parliament and others in support of the 'Budget (Scotland) Act 2016 (Amendment) Regulations 2017' - the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in February 2017. The booklet itself has no statutory force - it is produced as an aid to understanding the Order.

2. The purpose of the Spring Budget Revision is to amend the Budget (Scotland) Act 2016, which authorises the Scottish Government's spending plans for the financial year 2016-17.

3. The main changes to the Scottish Government's spending plans are:

i) An increase of £123.8 million to portfolios
ii) A net increase of £26.9 million in respect of Whitehall Transfers and HM Treasury allocations to/from the Scottish Government;
iii) Net technical adjustments of £221.5 million include additional Annually Managed Expenditure ( AME) budget cover from HM Treasury for provisions and impairments; and adjustments to align the budget with accounting requirements;
iv) The transfer of resources between Scottish Government portfolios (£-0.1 million).

In total these changes will increase the Scottish Government budget by £372.1 million from £37,208.8 million to £37,580.9 million.

4. The purpose of the Spring Budget Revision is to seek Parliamentary approval for these changes.

Funding Changes (£123.8 million)

5. The main significant funding change recorded at this Spring Budget Revision relates to the Scottish Government's £100 million capital stimulus commitment announced in September 2016.

6. The remaining £23.8 million is allocated over a number of lines. As in past years, as part of the internal robust monitoring process and in line with good practice, we have also taken the opportunity at the Spring Budget Revision to ensure that we maximise the budget available in 2016-17 through the redeployment of emerging/planned underspend alongside the remaining unallocated resources held centrally. This strategy is reflected in the portfolio schedules.

Whitehall Transfers / Allocations from HM Treasury (£26.9 million)

7. There are seven Whitehall transfers recognised at the Spring Budget Revision together with six allocations from HM Treasury. The net positive impact on the Scottish Budget is £26.9 million.

8. In respect of Whitehall transfers, there are two transfers from the Business, Energy & Industrial Strategy Department for Citizens Advice Scotland (£1.2 million) and Public Sector Energy Efficiency (£4.7 million), a £1.7 million transfer from Ministry of Justice arising from the O'Brien Judgement, a £1.2 million transfer from the Department for Transport in respect of the Dundee/London Public Service Obligation, a £0.1 million transfer from the Home Office in respect of Marriage Civil Partnership Changes, a £2.1 million transfer from the Department for Work and Pension for the Fit for Work programme and a -£4.0 million transfer to the Home Office in respect of an adjustment to the Migrant Surcharge levy.

9. There is a £5.7 million allocation from HM Treasury to cover the forecast spend on the Coastal Communities Fund in Scotland, an allocation of £1.7 million in respect of Deficit in the Fire Pension Scheme, a £0.2 million in respect of LIBOR funding for New Cumnock, a £5.0 million allocation for V&A Museum in Dundee, £5.0 million in respect of the Burrell Renaissance Project and £2.3 million in respect of the Aberdeen City Deal.

Technical Changes (£221.5 million)

10. The Spring Budget Revision records net technical changes of £221.5 million. The main technical changes are due to increased AME budget, as agreed with HM Treasury to cover provisions, impairments, fair value adjustments and pension liabilities (£100.5 million) as well as changes to align budgets with accounting requirements (£20.6 million) under the Government Financial Reporting Manual (the FReM).

11. In addition, the Education & Skills portfolio has increased its non-cash Student Loans budget by £50 million to reflect changes in the estimates of the RAB charge, the Health and Sport portfolio has increased its non-cash budget by £40 million and the non-cash budgets of the Finance & Constitution Economy, Jobs & Fair Work and Justice portfolios have been adjusted slightly. The National Records of Scotland has reduced its non-cash budget by £0.6 million. An increase in Grant-in-Aid for both Creative Scotland (£6.7 million) and the Scottish Funding Council (£5 million) has been allocated to support working capital requirements. In addition, £0.3 million has been transferred from the Judicial Salaries budget which lies outwith Scottish Budgets to Scottish Courts and Tribunals Service for part-time sheriffs.

Internal Transfers

12. Internal transfers do not affect the Scottish Government's budget as a whole. Instead, they move budget within or between portfolios, often to reflect changes in responsibility between portfolios, changes in payment mechanisms and virement intended to maximise the use of available resources in a given financial year. Traditionally, given the timing within the financial year, the Spring Budget Revision reflects a number of internal budget transfers.

13. The significant budget transfers between portfolios are as follows:

• Transfer of £5.0 million from Economy, Jobs and Fair Work portfolio to Education & Skills portfolio for energy efficiency measures.
• Transfer of £5.0 million from Economy, Jobs and Fair Work portfolio (Enterprise and Energy) to Health for energy efficiency measures.
• Transfer of £7.5 million from Economy, Jobs and Fair Work portfolio to Rural, Economy and Connectivity portfolio for loans to farmers.
• Transfer of £10.0 million from Education & Skills portfolio (Learning) to Local Government in relation to maintaining teacher numbers.
• Transfer of £5.0 million from Education & Skills portfolio (Learning) to Local Government to support 1+2 Languages policy implementation in schools.

Capital

14. Table 1.7 on page 10 of the supporting document provides a complete picture of capital spending. As the Finance Committee is aware, in respect of the Scottish Budget, the definition of capital applies to only spending that scores as capital in the Scottish Government's consolidated accounts or the accounts of Directly Funded Bodies.

Table A: Revisions by type Scottish Budget

Change Type	Total
	£m
Funding Changes	123.8
Technical Changes	221.5
Whitehall Transfers	26.9
Scottish Block Transfers	-0.1
Total Changes	372.1

Format of Supporting Document

15. The Scottish Government continues to discuss with the Finance Committee and others how it can improve the presentation and usefulness of supporting information. This document builds on changes introduced in previous Budget (Scotland) Bill supporting documents, and the rest of the document is set out as follows.

16. Following this introduction, the summary tables on pages 5 to 10 set out the changes sought in the Order at portfolio level, and the effect of the proposed changes on the overall cash authorisations. There is a clear read across from the numbers shown on the face of the Budget Act to those in these tables, and to the revised numbers shown in the Spring Budget Revision Order itself. A third set of summary tables provides a reconciliation between the resource budgets and the cash authorisations. A final table shows the voted Capital Spending and Net Investment for each portfolio following the Spring Budget Revision adjustments. It should be noted that for the remainder of the document, only spending that scores as capital in the Scottish Government's or Direct Funded Bodies' annual accounts is shown as capital.

17. The main body of the document then provides a more detailed analysis of the proposed changes on a portfolio by portfolio basis. For each portfolio and direct-funded body, it shows:

• a summary of the changes proposed for the portfolio;
• how the proposed revised portfolio budget is comprised in terms of operating and capital resources, divided into the main spending aggregates: DEL (Departmental Expenditure Limit), AME (Annually Managed Expenditure) and spending outside DEL ( ODEL) to show TME (Total Managed Expenditure) in respect of the Scottish Budget;
• details of the proposed major changes; and
• details of the proposed revised budgets disaggregated to Level 3.

18. The Scottish Government's spending proposals are in the main presented to Parliament in resource terms. But to meet the requirements of the "Public Finance and Accountability (Scotland) Act 2000", Budget Bills and Revisions seek authority for the budgets of NDPBs in cash, and NDPB numbers in this supporting document are also given in cash terms. In order to allow comparison with NDPB budgets presented in other Scottish Government publications, the following table compares cash and resource budgets.

Table B - Revised NDPB Cash and Resource Budgets by Portfolio, 2016-17

Portfolios (with at least one Executive NDPB)	NDPB Budget (Cash terms)	Non Cash items	NDPB Budget (Resource Terms)
	£m	£m	£m
Finance and the Constitution	12.8	1.5	14.3
Health and Sport	61.5	1.1	62.6
Education and Skills	2,028.1	98.6	2,126.7
Economy, Jobs and Fair Work	197.8	31.2	229.0
Justice	1,484.3	159.4	1,643.7
Communities, Social Security & Equalities	1.7	0.0	1.7
Environment, Climate Change and Land Reform	102.2	16.0	118.2
Culture, Tourism & External Affairs	195.0	12.5	207.5
Rural Economy and Connectivity	95.8	71.2	167.0
Total	4,179.2	391.5	4,570.7

Process for the Budget Revision

19. Following detailed consideration by the Subordinate Legislation and Finance & Constitution Committees, the Scottish Parliament has an opportunity to vote on the Spring Budget Revision order subject to a recommendation by the Finance & Constitution Committee.