Spring budget revision: 2020 to 2021

Introduction

1. This booklet provides information for the Parliament and others in support of the 'Budget (Scotland) Act 2020 (Amendment) Regulations 2021' - the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in February 2021. 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 2020, which authorises the Scottish Government's spending plans for the financial year 2020-21.

3. The main changes to the Scottish Government's spending plans, as set out in the supporting document to the Budget Bill, are explained below:

i) COVID-19 and other funding changes to reflect deployment of available resources to portfolios (total net increase to the budget of £3,263.5 million);

ii) Reprioritisation - emerging underspends used to manage emerging shortfalls elsewhere with in the budget (-£745.4 million)

iii) technical adjustments (net decrease to the budget of -£679.1 million);

iv) Whitehall Transfers and HM Treasury allocations to the Scottish Government (£18.2 million); and the transfer of resources between Scottish Government portfolios (£0.3 million due to roundings).

4. In total these changes will increase the Scottish Government budget by £1,857.5 million from £54,495.9 million to £56,353.4 million.

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

COVID-19 and other Funding Changes

6. On 23 December the Chief Secretary to the Treasury confirmed an increase in the minimum guaranteed allocation of funding for COVID-19 to £8.6 billion. Financial planning for the Covid support for public services, businesses and individuals in Scotland has been finalised on the basis of this guaranteed level of funding. £3.581 billion of these consequentials were allocated at the Summer budget Revision and a further £2.381 billion were allocated at the Autumn. The changes set out in this Revision include the allocation of the remaining £2.638 billion of those consequentials.

7. £3,063m of these consequentials have been added to the Scottish Government Block Grant at the UK Main Estimate. The balance of these funds are added to the Scottish Government budget at UK Supplementary Estimate. Some significant additional funding beyond the £8.6 billion guarantee has been provided as a result of the final calculation of UK Government funding allocations for 2020-21. The additional amounts are;

• £873.510 million of additional Resource funding;
• £236.845 million of Capital funding; and
• £41.532 million of Financial Transactions.

Recognising the very late notification of this additional funding and the issues with effectively planning and deploying such significant sums so late in the financial year, the Chief Secretary to the Treasury has agreed that this funding can be deferred into 2021-22. This deferral supports planned continuity in the range of support for public services, businesses and individuals into next financial year.

8. Additional non-COVID-19 related funding allocations have been made from reprioritised resources where emerging pressures have been identified through the monthly monitoring of budgets.

Reprioritisation

9. In areas where underspends have emerged through the monthly budget management and monitoring process, budgets have been reduced and redeployed to areas, including on COVID-19 related measures, where pressures have been identified. The areas affected by these transfers are detailed throughout the document (-£745.4million).

Technical Adjustments

10. The Spring Budget Revision records net technical changes of -£679.1 million. The largest technical change (-£911.9 million) relates to an accounting adjustment in relation to the COVID-19 business grants paid through Local Authorities. The 2019-20 consolidated accounts contained a late adjustment of £911.9 million to create a non-cash provision for these business support measures, recognising the commitment to provide that funding was made in 2019-20, although the payments themselves were not made until 2020-21. This adjustment supports the release of that provision such that it matches against the appropriate expenditure for which budget cover was provided in the 2020-21 Summer Budget Revision. Full details on the creation of the provision are provided in the 2019-20 accounts. The adjustment here results in a reduction of £911.9 million in AME non cash budget requirement in 2020-21 and is processed so that the budget aligns with the treatment required in the 2020-21 consolidated accounts. There is additional non cash funding for Education (£217.8 million), Social Security (£10.7 million) and other portfolios (£2.5 million); there is a reduction to the AME provision for future NHS and Teachers pension costs (£155.9 million). This arises from reduced opening pension liability and reduced current service costs. Allocations of notional funding have been made to cover expected credit losses (£41.3 million); allocations of notional funding have also been made to cover accrued staff benefits resulting from Covid-19 (£94.9 million). A technical accounting adjustment in respect of a pre-payment for the sleeper service (£5 million). There are also revisions of AME budget, as agreed and funded by HM Treasury, to cover provisions, impairments, fair value adjustments and pension liabilities (net -£5.1 million) as well as a small number of changes (£21.6 million) to align budgets with accounting requirements under the Government Financial Reporting Manual (the FReM).

Transfers

11. There are 13 Whitehall Transfers recognised as part of the Spring Budget Revision totalling £18.2 million. A transfer of £0.7 million in respect of the Scottish Infected Blood Support Scheme and three other minor transfers to and from Health netting to £0.1 million. A transfer from Department for Transport of £1.3 million for Dundee to Stanstead PO, two transfers from BEIS of £7.3 million for Public Sector Energy Efficiency and £1 million for GovTech Catalyst funding. A £7 million transfer for Fisheries Transition Funding, a £0.9 million transfer of funding from the Tampon Tax for Scottish Charities, two minor transfers to Economy, Jobs totalling £0.1 million and a £0.1 million transfer from the Home Office for Marriage Civil Partnership changes. There is also a £0.3 million transfer from Justice to the Cabinet Office.

12. Internal transfers do not affect the Scottish Government's budget as a whole and net to zero. Internal transfers move budget provision 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. The significant portfolio transfers are as follows:

• transfer from Health & Sport to Communities & Local Government to support children and young people's mental health (£11.3 million);
• transfer from Health & Sport to Marketing for public awareness campaigns about Covid-19 (£11.2 million);
• transfer from Health & Sport to Education & Skills in respect of nursing and midwifery education (£9.9 million);
• transfer from Rural Economy & Tourism to Health & Sport to fund delivery of the shielding box scheme (£32.0 million);
• transfer from Transport, Infrastructure & Connectivity to Health & Sport to fund fleet decarbonisation (£5.7 million);
• transfer from Communities & Local Government to Transport, Infrastructure & Connectivity for Energy Efficient Scotland (£133.7 million);
• transfer from Communities & Local Government to Finance (Digital Strategy) for Connecting Scotland initiative (£23.0 million);
• transfer from Economy, Fair Work & Culture to Communities and Local Government for Winchburgh project (£6.5 million);
• transfer from Economy, Fair Work & Culture to Education and Skills for Young Persons Guarantee (£8.7 million);
• transfer from Transport, Infrastructure & Connectivity to Communities and Local Government for Affordable Homes programme (£5.0 million);
• transfer from Social Security & Older People (Scottish Welfare Fund) to Communities & Local Government to tackle financial insecurity(£20.0 million);

Format of Supporting Document

13. The Scottish Government continues to discuss with the Finance and Constitution Committee and others how it can improve the presentation and usefulness of supporting information.

14. 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. Tables 1.5 and 1.6 provide a reconciliation between the resource budgets and the cash authorisations. Tables 1.7 (a) and (b) show the sources of funding that support the changes applied and the movement of available resources. Table 1.8 shows the voted Capital Spending and Net Investment for each portfolio following the SBR 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.

15. 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: Expenditure Limit, UK Funded AME (Annually Managed Expenditure) and Other spending 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.

16. 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 A - Revised NDPB Cash and Resource Budgets by Portfolio, 2020-21

Portfolios (with at least one Executive NDPB)	NDPB Budget (Cash terms)	Non Cash items	NDPB Budget (Resource Terms)
	£m	£m	£m
Health and Sport	110.1	1.3	111.4
Communities and Local Government	2.0	0.0	2.0
Finance	8.9	2.9	11.8
Education and Skills	2,458.7	264.6	2,723.3
Justice	1,698.6	126.4	1,825.0
Transport, Infrastructure & Connectivity	124.9	55.5	180.4
Environment, Climate Change and Land Reform	119.3	28.4	147.7
Rural Economy and Tourism	228.2	23.1	251.3
Economy, Fair Work and Culture	822.9	95.6	918.5
Total	5,573.6	597.8	6,171.4

Process for the Budget Revision

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