Finance and Public Administration Committee: finance update

B. Emergency Budget Review

B.1 – September Emergency Budget Review Savings

43. The Deputy First Minister wrote to the Finance and Public Administration Committee on the 7th of September setting out the significant financial challenges that were faced within the 2022-23 Scottish Budget.

44. As part of this letter he outlined £560 million of total resource and capital savings that the Scottish Government had identified to help enable it to balance the budget. These amounts were outlined prior to the conclusion of the Emergency Budget Review which was presented in Parliament on the 2nd of November.

45. While the amounts outlined in the letter are savings based on the in-year budget monitoring position, these do not necessarily correspond to a budget being formally surrendered as part of a gross funding movement. This is because these savings may be against forecast pressures, they are being transferred internally to other areas to fund other existing pressure or there is a delay in funding being returned.

46. Included in the table below is an analysis of how the £560 million has been included in the Autumn Budget Revision.

47. £145 million of the total relates to changes in the overall funding position. These movements result in additional budget being available to be allocated without reductions in any portfolio allocation. This movement comes from four sources:

• £41 million of consequentials received in March's Spring Statement following the £500 million expansion of the UK Government's Household Support Fund.
• A further £41 million in May following the UK Government's decision to double the Household Support Fund in May.
• £56 million of additional funding generated by the ScotWind clearing process.
• £7 million of interest income expected on the cash proceeds from the sale of the ScotWind options.

48. Further details on the changes to the overall funding position are included in section C.

49. £223.9 million of the total figure of £560 million has been included within the ABR. £120 million is being provided to Local Government as capital support as outlined in section A paragraph 12. This funding has been provided following surrender of savings identified across portfolios, with the early savings identified in Energy (£91.8 million) and Digital Connectivity (£28 million) allowing this funding to be redistributed.

50. The balance of the savings which have been included at ABR have been discussed in detail in Section A above. This includes the £33 million of ring-fenced rural funding, £20.7 million of Under 22 Concessionary travel and the £20 million which relates to savings following the Social Security recruitment review.

51. The balance of £191.5 million relates to amounts which have not been reflected within the Autumn Budget Revision. The vast majority of these amounts are reductions to previously unfunded pressures which have emerged since the Scottish Budget was published. There may be savings included in this list that will come through in the SBR exercise.

B.2 – November Emergency Budget Review Savings

52. The Deputy Fire Minister presented the Emergency Budget Review to the Scottish Parliament on 2nd of November.

53. The EBR process identified approximately £615 million of additional options for spending reductions and reprioritisations in order to support the urgent priorities of enhancing public sector pay and cost of living support. These can be grouped into three categories:

• £400 million of reprioritisation within the Health and Social Care portfolio to support a fair pay offer of approximately 7% to NHS Agenda for Change staff and to manage wider pressures in the Health and Social Care sector.
• £33 million of further resource saving from across the Scottish Government to add to the £440 million announced on 7 September, to support balancing the budget, and to fund emerging Government priorities and the policy measures set out in this document.
• c£180 million of capital and Financial Transaction reductions to support wider financial management, taking account of the market outlook for demand-led investment, global supply chain issues and construction capacity.

54. The full balance of the £400 million Health and Social Care reprioritisation will remain within the Health and Social Care portfolio. The net impact on the portfolio budget as a whole is nil, although there will be some movement of funding within the portfolio. These movements have not been reflected within the ABR. The reprioritisation within the portfolio will be reflected in the Spring Budget Revision where necessary, but will not affect the overall funding available to be allocated at SBR.

55. None of the amounts which make up the further resource saving balance of £33 million have been included within the ABR. The majority of these amounts are savings against allocated budgets that will result in increased funding being available for reallocation at the Spring Budget Revision.

56. In addition to the resource savings which have been outlined there are approximately £150 million of capital and £30 million of financial transaction savings which have also been identified. These are detailed in the tables below.

57. Only the £16 million 'Digital capital projects' saving, which was part of the £28 million total capital return of funding on the R100 project, and £2.5 million of Forestry capital projects have been returned at ABR. The balance will be returned at the Spring Budget Revision

58. None of the £30 million of financial transaction savings have been reflected within the ABR. These are savings against allocated budgets and that this will result in increased funding being available for reallocation at the Spring Budget Revision.

B.3 – November Emergency Budget Review Policy Measures

59. In addition to identifying savings to support the balancing of the 2022-23 Scottish Budget while also providing enhanced pay awards for public sector workers, a small number of additional policy measures have been announced as part of the Emergency Budget Review. These were:

• Doubling the value of the December Scottish Child Bridging payment (£18.9 million).
• Doubling the Fuel Insecurity Fund to £20 million (£10 million).
• Providing funding to local authorities for additional Discretionary Housing Payments (£5 million.)
• an Island Cost Crisis Emergency Fund to support island households who are already experiencing higher costs of living (£1.4 million).

60. As noted in section A paragraph 11 the first three measures outlined above have been included within the Autumn Budget Revision at a total cost of £33.9 million. The £1.4 million Island Cost Crisis Emergency Fund is being funded from reprioritisation within the Rural Affairs and Islands portfolio and no additional budget is required.

61. The remaining measures outlined in the Policy Measures section of the Emergency Budget Review do not have a budgetary impact for the Scottish Government.