Finance and Public Administration Committee: finance update
Background information provided to the Finance and Public Administration Committee to help with members' scrutiny of the Spring Budget Revision 2021 to 2022.
A. Guide to the Spring Budget Revision
1. The Spring Budget Revision is part of the annual budget process. The budget process for 2021-22 commenced with the publication of the Scottish Budget and annual Budget Bill which provided details of the Scottish Government's spending plans. These plans (as amended at Stages 2 and 3 of the Budget Bill) were approved by the Scottish Parliament on 9 March 2021.
2. Once the Budget Act has been approved by the Scottish Parliament, there are usually two opportunities to amend the budget as the year progresses - the Autumn Budget Revision and a Spring Budget Revision. The Spring Budget Revision provides the final budget figures, against which outturn is reported in the Scottish Government's annual accounts.
A.1 Summary of the Spring Budget Revision
3. The Spring Budget Revision is routine parliamentary business that proposes amendments to better align the Government's budget with its planned spending profile.
4. The changes proposed in the Spring Budget Revision result in an increase in the approved budget of £1,202.2 million from £56,495.2 million to £57,697.4 million.
5. The changes to the Budget are broken down in to four main areas:
- A.2 - Funding changes (including COVID-19 allocations) to reflect deployment of available resources to portfolios (Total net increase to the budget of £1,428.3 million);
- A.4 - Technical adjustments (net decrease to the budget of -£357.3 million);
- A.3 - Whitehall transfers and HM Treasury allocations to the Scottish Government (£131.2 million); and
- A.5 - The transfer of resources between Scottish Government portfolios.
6. The main changes included under each heading are categorised in table 1.2 in the Budget Revision document and summarised below.
| Scottish Government Portfolios | Resources other than Accruing Resources as shown in Autumn Budget Revision | Changes Proposed | Revised Budget | |||
|---|---|---|---|---|---|---|
| Funding Changes | Technical Changes | Net Whitehall transfers | Net Transfers within Scottish Block* | |||
| £m | £m | £m | £m | £m | ||
| Health and Social Care | 17,720.7 | 682.0 | 141.0 | 67.7 | -213.0 | 18,398.4 |
| Social Justice, Housing & Local Government | 16,252.8 | 97.4 | -99.7 | 2.1 | 158.5 | 16,411.1 |
| Finance & Economy | 2,128.8 | 464.3 | 0.7 | 22.2 | 2,616.0 | |
| Education and Skills | 4,921.4 | -9.4 | -374.2 | 49.0 | 4,586.8 | |
| Justice & Veterans | 2,837.8 | 224.5 | 14.6 | 53.0 | -6.4 | 3,123.5 |
| Net Zero, Environment & Transport | 4,556.7 | -27.2 | 20.3 | 7.0 | -20.7 | 4,536.1 |
| Rural Affairs & Islands | 1,016.2 | -73.8 | 3.0 | 0.8 | 1.5 | 947.7 |
| Constitution, External Affairs & Culture | 293.5 | 55.0 | 10.0 | 0.1 | -4.0 | 354.6 |
| Deputy First Minister & Covid Recovery | 64.7 | 6.9 | 71.6 | |||
| Crown Office and Procurator Fiscal | 161.7 | 14.5 | 2.0 | 1.6 | 179.8 | |
| Scottish Government | 49,954.3 | 1,434.2 | -282.3 | 130.7 | -11.3 | 51,225.6 |
| National Records of Scotland | 64.3 | -0.9 | 0.3 | -2.6 | 61.1 | |
| Office of the Scottish Charity Regulator | 3.6 | 3.6 | ||||
| Scottish Courts & Tribunals Service | 167.3 | 0.3 | 0.4 | 10.5 | 178.5 | |
| Scottish Fiscal Commission | 2.0 | 2.0 | ||||
| Revenue Scotland | 7.1 | 7.1 | ||||
| Registers of Scotland | 15.4 | -4.3 | 8.8 | 1.1 | 21.0 | |
| Food Standards Scotland | 19.5 | 0.3 | 0.3 | 0.1 | 1.9 | 22.1 |
| Scottish Housing Regulator | 5.1 | -0.3 | 4.8 | |||
| NHS and Teachers' Pensions | 6,121.0 | -94.2 | 6,026.8 | |||
| Scottish Administration | 56,359.6 | 1,429.0 | -366.8 | 131.2 | -0.4 | 57,552.6 |
| Direct-Funded Bodies | ||||||
| Scottish Parliamentary Corporate Body | 124.5 | -0.7 | 3.5 | 0.4 | 127.7 | |
| Audit Scotland | 11.1 | 6.0 | 17.1 | |||
| Total Scottish Budget | 56,495.2 | 1,428.3 | -357.3 | 131.2 | 0.0 | 57,697.4 |
A.2 Funding Changes
7. Funding changes represent additional budget that provides spending power within portfolios and programmes, and also some deductions where funding has been returned to the centre for redeployment elsewhere. Table 1.2 provides the funding changes on a net basis by portfolio of £1,428.3 million, however the gross impact is shown below.
| Portfolio | Gross Funding Changes | Reductions | Net Funding Changes |
|---|---|---|---|
| Health & Social Care | 782.0 | -100.0 | 682.0 |
| Social Justice, Housing & Local Government | 207.4 | -110.0 | 97.4 |
| Finance & Economy | 555.8 | -91.5 | 464.3 |
| Education and Skills | 57.8 | -67.2 | -9.3 |
| Justice and Veterans | 252.5 | -28.1 | 224.5 |
| Net Zero, Energy & Transport | 0.6 | -27.8 | -27.3 |
| Rural Affairs & Islands | 13.0 | -86.8 | -73.8 |
| Constitution, External Affairs & Culture | 57.6 | -2.6 | 55.0 |
| Deputy First Minister & Covid Recovery | 6.9 | 0.0 | 6.9 |
| Crown Office and Procurator Fiscal | 14.5 | 0.0 | 14.5 |
| Scottish Government | 1,948.1 | -513.9 | 1,434.1 |
| National Records of Scotland | 0.1 | -1.0 | -0.9 |
| Scottish Courts & Tribunals Service | 3.8 | -3.8 | 0.0 |
| Registers of Scotland | 1.9 | -6.2 | -4.3 |
| Food Standards Scotland | 0.3 | 0.3 | |
| Scottish Housing Regulator | -0.3 | -0.3 | |
| Scottish Administration | 1,954.2 | -525.2 | 1,428.9 |
| Direct-Funded Bodies | |||
| Scottish Parliamentary Corporate Body | -0.7 | -0.7 | |
| Total Scottish Budget | 1,954.2 | -525.9 | 1,428.2 |
A.2.1 Covid-19 Funding Changes
8. The majority of the net funding changes here are Covid-19 related. Further information on Covid-19 cumulative allocations is detailed in section B but the equivalent gross and net splits for this budget revision are detailed below.
| Covid-19 Funding Changes (£m) | Gross Funding Changes | Reductions | Net Funding Changes |
|---|---|---|---|
| Health & Social Care | 782.0 | -100.0 | 682.0 |
| Social Justice, Housing & Local Government | 62.0 | -7.8 | 54.2 |
| Finance & Economy | 460.1 | 460.1 | |
| Education and Skills | 13.7 | -25.2 | -11.5 |
| Justice and Veterans | 6.8 | 6.8 | |
| Constitution, External Affairs & Culture | 54.2 | 54.2 | |
| Deputy First Minister & Covid Recovery | 6.9 | 6.9 | |
| Scottish Government | 1,385.7 | -133.0 | 1,252.7 |
| Registers of Scotland | -6.2 | -6.2 | |
| Scottish Administration | 1,385.7 | -139.2 | 1,246.5 |
| Direct-Funded Bodies | |||
| Total Scottish Budget | 1,385.7 | -139.2 | 1,246.5 |
9. The largest Covid-19 allocation relates to Health and Social Care with £782 million of gross funding. This comprises £52 million of Capital and Financial Transactions funding and £730 million of Fiscal Resource. Health Barnett resource consequentials have been passed in full to the Health and Social Care portfolio. All funding is passed on to NHS Health Boards, Integration Authorities and core directorates on the basis of costs associated with the pandemic response.
10. Allocations to NHS Boards (that utilise the majority of additional funding available) are provided to them across the year, with costs subject to scrutiny by Scottish Government officials. Of the additional funding provided to Health and Social Care portfolio at Spring Budget Revision, £300 million has been passed to the Boards to address winter pressures. The remainder relates to Covid costs where we are committed to meeting additional reported costs within health and social care sector in full. The deduction of £100 million relates to the amounts which were re-prioritised for wider public health measures in December, including Self Isolation Support Grants.
11. The Finance and Economy Covid-19 allocation includes the following:
- £295 million in Business Support for distribution by local authorities.
- £131 million allocated for Self Isolation Support payments.
- £24 million of Capital Grants for businesses to provide ventilation.
- £10 million for Visit Scotland (part of the Cultural Support package of £64 million).
12. Whilst the budget was provided to Business Support in full the specific allocations by programme have been announced through distinct tranches over the course of subsequent weeks. This is detailed further in section B.3 below. The balance of the cultural support package is included within the allocation to Constitution, External Affairs and Culture. The majority of this (£41.5 million) being funds allocated to Creative Scotland for distribution.
13. Other significant Covid funding elements include:
- £30 million of non-discretionary support for Local Government to assist with Covid-19 pressures.
- £25 million of Covid-19 support (part of the 2021-22 winter package) to allow Local Government support low income households with food and fuel support.
- £11.2 million for higher education student bursary schemes. This is a "net" impact of £20 million in Covid related pressure on the budget offset by savings as a result of decreased applications.
- £7 million to assist with CO2 and ventilations assessments and monitors.
- £6.8 million further support for legal aid resilience fund to support the Justice sector through the pandemic.
14. Reductions to allocations include the following:
- £7.8 million release of Covid-19 funds initially allocated to Social Justice across an array of programmes. Partly due to programmes now commencing in 2022-23 and partly as a result of further funding provided during the winter package.
- £25 million reduction in Scottish Funding Council funding due to lower than expected demand on further education student support schemes.
- £6.2 million of Covid funding released by Registers of Scotland as a result of better than forecast income received.
A.2.2 Other Funding Changes
| Non Covid Funding Changes (£m) | Gross Funding Changes | Reductions | Net Funding Changes |
|---|---|---|---|
| Health & Social Care | 0.0 | 0.0 | 0.0 |
| Social Justice, Housing & Local Government | 145.4 | -102.2 | 43.2 |
| Finance & Economy | 95.7 | -91.5 | 4.2 |
| Education and Skills | 44.1 | -42.0 | 2.2 |
| Justice and Veterans | 245.7 | -28.1 | 217.7 |
| Net Zero, Energy & Transport | 0.6 | -27.8 | -27.3 |
| Rural Affairs & Islands | 13.0 | -86.8 | -73.8 |
| Constitution, External Affairs & Culture | 3.4 | -2.6 | 0.8 |
| Deputy First Minister & Covid Recovery | 0.0 | 0.0 | 0.0 |
| Crown Office and Procurator Fiscal | 14.5 | 0.0 | 14.5 |
| Scottish Government | 562.4 | -380.9 | 181.5 |
| National Records of Scotland | 0.1 | -1.0 | -0.9 |
| Office of the Scottish Charity Regulator | 0.0 | 0.0 | 0.0 |
| Scottish Courts & Tribunals Service | 3.8 | -3.8 | 0.0 |
| Scottish Fiscal Commission | 0.0 | 0.0 | 0.0 |
| Revenue Scotland | 0.0 | 0.0 | 0.0 |
| Registers of Scotland | 1.9 | 0.0 | 1.9 |
| Food Standards Scotland | 0.3 | 0.0 | 0.3 |
| Scottish Housing Regulator | 0.0 | -0.3 | -0.3 |
| NHS and Teachers' Pensions | 0.0 | 0.0 | 0.0 |
| Scottish Administration | 568.5 | -386.0 | 182.4 |
| Direct-Funded Bodies | |||
| Scottish Parliamentary Corporate Body | 0.0 | -0.7 | -0.7 |
| Audit Scotland | 0.0 | 0.0 | 0.0 |
| Total Scottish Budget | 568.5 | -386.7 | 181.7 |
15. Significant funding changes include:
- £183 million of additional funding for Police & Fire Pensions in Justice & Veterans.
- £47.5 million additional funding for Emergency Services Mobile Communications in Justice & Veterans.
- £32.9 million additional funding to Social Justice to support the delivery of Scottish Child Payment Bridging Payments for around 150,000 children and young people from low income households.
- £19 million to support the delivery of Scotland's export growth plan in the Finance & Economy portfolio.
- £16.6 million capital allocation for Social Security programme costs.
- £15.6 million additional funding to Local Government to support the Teacher Induction Scheme and allow the employment of around 3,000 teachers on their induction year in schools.
- £15 million additional funding for working capital for the Scottish Police Authority in Justice & Veterans.
- £12.3 million additional funding provided to enable unitary charges from the Schools for the Future programme's revenue funded projects.
- £12.2 million additional funding for Cities Investment in Finance and Economy.
16. Funding changes to support the 100 Day Commitment include:
- £50 million additional funding to increase teacher numbers by 1,000 and classroom assistants by 500 to assist with education recovery in Local Government.
- £25 million additional funding to 3,000 SMEs to invest in digital capability to increase competitiveness, productivity and growth in the Finance & Economy portfolio.
17. Reductions to allocations include the following:
- £77 million of ring-fenced funding reprioritised for use on Farmers, Crofters and Land Managers journey towards net zero, with a small proportion of underspend relating the demand-led variance which can occur in agricultural or rural schemes in the Rural Affairs and Islands portfolio.
- £40 million released from the Affordable Housing Supply Programme due to ongoing supply issues and the effect this has on the pace of delivery.
- £33.3 million reduction from Enterprise, Trade and Investment as a result of lower financial transaction uptake couple with significant investment exits within Scottish Enterprise, in the Finance & Economy portfolio.
- £24.1 million reduction from Finance and Economy due to underspends in the Young Person's Guarantee.
- £20.3 million released by the Scottish Prison Service as Covid and Brexit have caused slippage in capital programme at the Women's National Facility in Stirling as well as IT projects slowing down.
- £19.9 million returned from Social Security in respect of Advice, Policy and Programme Costs savings.
- £19.4 million returned from Social Security to reflect demand led benefit expenditure.
- £16.9 million released by the Scottish Funding Council after lower than anticipated demand from institutions for funding through the financial transactions budget, in the Education and Skills portfolio.
- £15.3 million released from Concessionary Fares and Bus Services to reflect the budget requirement for the U22 Concessionary Travel Scheme.
- £12.5 million released from Enterprise Zones as it is not required by the University of Strathclyde to complete works during the current financial year on theNational Manufacturing Institute Scotland building.
- £10.7 million released by the Scottish Funding Council following receipt of European Structural Funds income.
A.3 Whitehall Transfers
16. There are eight specific Whitehall transfers and allocations from HM Treasury recognised at the Spring Budget Revision. The net positive impact on the Scottish Budget is £131.2 million.
17. The largest of these relates to a further instalment of the migrant health surcharge of £62.4 million. This income is pooled centrally by the UK Government and redistributed on a Barnett basis. However as this is not based on additional departmental allocations by HM Treasury it is not classified as a Barnett Consequential.
18. £65 million of COP26 transfers are included across a number of budget lines, the largest being £51.5 million for increased policing and staff costs. These transfers were to cover specific costs of the Conference as agreed between the Scottish and UK Governments and have no impact on Scottish Government discretionary funding.
19. Other amounts include:
- £0.7 million in respect of the Scottish Infected Blood Support Scheme;
- A transfer from Department for Transport of £0.9 million for Dundee to Stanstead PO;
- £0.8 million transfer from DEFRA to Marine Scotland;
- £1.1 million transfer of funding from the Tampon Tax for Scottish Charities;
- a transfer to Food Standards Scotland of £0.1 million; and
- a £0.1 million transfer for the Edinburgh Cultural Summit.
A.4 Technical Adjustments
20. In line with past years, the Spring Budget Revision recognises a number of technical changes which are essentially budget neutral and do not provide additional spending power for, or detriment to, the Scottish Government. The net Total changes in this year's Spring Budget Revision are -£357.3 million and are summarised below.
21. The largest technical change (-£298.7 million) relates to a reduction in the Student loans non cash RAB charge requirement. This is to cover the latest estimates from economists on the impact of the current macro-economic climate on impairment of the student loan book.
22. There is a reduction to the AME provision for future NHS and Teachers pension costs (-£94.2 million). This arises from reduced opening pension liability and reduced current service costs.
23. There is also an upward adjustment to the non-cash budget of £18.4 million due to increases of £12.6 million in Health and net increase of £5.8 million in other portfolios' non-cash budgets.
24. In addition, the Spring Budget Revision reflects net technical adjustments to align budgets with the year-end accounting requirements for the Scottish Budget for revenue financed infrastructure projects as set out in the Government Financial Reporting Manual (the FReM) of £36.6 million.
25. The Spring Budget Revision records other AME adjustments, as agreed with HM Treasury to cover provisions, impairments, fair value adjustments and pension liabilities (net -£44.1 million).
26. Other technical adjustments to the Expenditure Limit budget include £5 million for the Sleeper Service related to a pre-payment and £15 million to Scottish Police Authority for working capital.
A.5 Internal Transfers
27. There are a number of internal transfers within the Scottish Block as part of the Spring Budget Revision process. Transfers between and within portfolios are 'zero-sum'.
28. The significant budget internal transfers between portfolios include:
- transfer from Health & Social Care to Social Justice, Housing & Local Government to support the Adult Social Care Winter Plan (£142.3 million);
- transfer from Health & Social Care to Social Justice, Housing & Local Government for the Best Start Foods Scheme (£12.0 million);
- transfer from Health & Social Care to Social Justice, Housing & Local Government for the Self Isolation Assistance service (£9.1 million);
- transfer from Health & Social Care to Marketing for public awareness campaigns about Covid-19 (£15.0 million);
- transfer from Health & Social Care to Marketing for various Health marketing campaigns (£6.8 million);
- transfer from Health & Social Care to Education & Skills in respect of nursing and midwifery education (£13.3 million);
- transfer from Health & Social Care to Education & Skills in respect of Clinical Academies and SAGP funding (£7.3 million);
- transfer from Social Justice, Housing & Local Government to Finance & Economy for the Community Recovery Fund (£9.0 million);
- transfer from Net Zero, Energy & Transport to Finance & Economy to fund Offshore Wind projects (£6.5 million);
- transfer from Finance & Economy to Education & Skills for additional college courses and grad internships (£9.5 million); and
- transfer from Finance & Economy to Education & Skills for the National Transition Training Fund (£7.5 million).
29. The Spring Budget Revision records a small number of internal portfolio transfers which have no effect on the portfolio Totals, but play a role in ensuring effective internal budget management.
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