Scottish Budget 2022 to 2023: final outturn report

Final Outturn Report for the Scottish Budget 2022-2023

Purpose

1. The purpose of this report is to present a statement of Final Outturn for the financial year 2022-23 against the statutory limits authorised through the appropriate legislative processes by the Scottish Parliament.

2. The report then summarises the financial outturn of the Scottish Government, the bodies within the Scottish Administration and bodies funded directly from the Scottish budget (Scottish Parliamentary Corporate Body and Audit Scotland) against HM Treasury budgetary limits. It also provides a reconciliation to the Scottish Government’s 2022-23 Consolidated Accounts.

Background

3. Building on the Scottish Government’s 2022-23 Consolidated Accounts^[1], this report summarises the financial outturn of the bodies within the Scottish Administration, to report against the statutory budget limits authorised by the Scottish Parliament.

4. This report also includes the outturn of other bodies funded directly from the Scottish Budget, the Scottish Parliamentary Corporate Body and Audit Scotland.

5. Final Outturn reports the position of the Scottish Government’s expenditure against the fiscal controls set by HM Treasury which include all bodies within the Scottish Government budgeting boundary (with the areas making up the budgeting boundary set out in tables 1 and 2). The Provisional Outturn statement announced in June 2023 also follows this format.

Scottish Government Consolidated Accounts

6. The scope of the Scottish Government’s Consolidated Accounts are determined by the requirements of the Government’s Financial Reporting Manual (FReM) and covers elements not included within HM Treasury fiscal totals. The variances are driven by different reporting boundaries and with the Accounts based against the Spring Budget Revision (SBR), which does not include final borrowing and funding decisions, as well as the impact of any consequential changes from the final UK Supplementary Estimates process which concluded post SBR. Therefore, as these reports are generated on a different basis, the figures reported in the Consolidated Accounts and the Provisional and Final Outturns will differ.

7. The Scottish Government’s 2022-23 Consolidated Accounts^[1] reports a final expenditure outturn of £49.8 billion against the approved budget of £50.3 billion, generating an underspend of £509 million.

8. Taking into account other bodies included within the wider Scottish Administration boundary, the position shows final expenditure outturn of £57.2 billion against the approved Parliamentary budget of £57.6 billion, generating an underspend of £344 million.

9. The inclusion of the directly-funded bodies (i.e. Scottish Parliament and Audit Scotland) completes the picture. The overall reported position for the total Scottish Budget in 2022-23 shows an expenditure outturn of £57.4 billion against the approved Parliamentary budget of £57.7 billion. This results in an underspend of £347 million which represents 0.6 percent of budget. Table 1 below provides further detail. It should be noted the figures provided are as reported in the audited accounts of each body.

10. The total underspend of £347 million does not represent a loss of spending power to the Scottish Government.

11. Full details of the Scottish Government Consolidated Accounts underspends which make up the £509 million underspend are outlined at: https://www.gov.scot/publications/scottish-government-consolidated-accounts-year-ended-31-march-2023.

12. Of the remaining figures over and above the Consolidated Accounts position, the most material variance (a £175 million overspend) relates to NHS and Teacher pension schemes. The pension schemes fall under Annually Managed Expenditure (AME) budgets which are ring-fenced budgets set by HM Treasury. Any under/over spends shown against UK-funded Annually Managed Expenditure cannot be deposited in the Scotland Reserve and have no subsequent impact on the Scottish Budget. These budgets are not available for general public services.

Taxes, Borrowing and the Scotland Reserve

13. The Fiscal Framework Outturn Report 2023^[2] published by the Scottish Government on the 29^th of September provides information in relation to Scottish Income Tax, fully devolved taxes, the use of borrowing powers and the operation of the Scotland Reserve. The Fiscal Framework Outturn Report sets out the position as reported in the Provisional Outturn statement to Parliament in June 2023. The next section provides an update to that position and an explanation of the key movements between Provisional and Final Outturn.

Final Outturn – HM Treasury Controls

14. The final 2022-23 fiscal outturn confirmed with HM Treasury in December was £46.8 billion against a budget of £47.1 billion, resulting in an underspend of £326 million. This is just under 1% of the total budget (Table 2 below provides further detail). This represents a movement of £82 million from the £244 million underspend reported in June 2023 in the Provisional Outturn Statement.

15. The Provisional Outturn Statement is presented to Parliament prior to completion of audited accounts for the Scottish Government and associated bodies and is therefore subject to change.

16. The changes between Provisional and Final Outturn were a result of accounting adjustments which occurred as part of the year-end process. The main driver of the change is within the Health and Social Care portfolio and relates to a timing difference between years arising from a different audit interpretation of how income from a contract relating to treatment of patients from other boards areas by Glasgow should be recorded (£68 million).

17. The £326 million underspend is carried forward in full in the Scotland Reserve. The majority of this carry forward had already been pro-actively anticipated, and the final 2023-24 spending plans, already approved by this parliament reflect full drawdown of the balances brought forward. This includes: the £39 million of Financial Transactions anticipated within the 2023-24 Budget (published in December 2022), and £115 million of additional funding announced (at stage 3 of the Budget Bill on 21 February 2023) by the Deputy First Minister to further support Local Government, and the inter-islands ferry network. The remainder has been fully allocated during 2023-24 as part of the Autumn and Spring Budget Revision processes.

18. Annex A provides a reconciliation to the Scottish Government’s Consolidated Accounts versus Final Outturn statement against HM Treasury Totals. The difference is driven by non-cash and funding adjustments.

Summary

19. The Scottish Government’s approach means that budgets are carefully managed across more than one year, with limited funding carried forward into the following year to support budget plans approved by the Scottish Parliament. This approach recognises fluctuations in demand and associated costs across spending review periods, ensuring no loss of spending power in Scotland. Table 3 below sets out the final Reserve carry forward position.