Investing in Scotland's Future: Resource Spending Review

2. Delivering Strategic Outcomes for Scotland

We are committed to providing strong, responsive public services which serve the needs of people and communities, improve national outcomes and create the right opportunities for Scotland to be healthier, happier and more prosperous. We will invest public funding to build a Scotland where communities are fairer, inclusive and empowered, and people grow up loved and respected, well-educated, and healthy. We will work to ensure our economy is globally competitive and sustainable, with thriving businesses and quality jobs and fair work for everyone. The collective impact of the investment we are making through the spending review will help achieve this.

To do this we must also maintain sustainable public finances, ensuring we can meet the needs of today and those of future generations. This requires a strong focus on ensuring our policies deliver the outcomes needed, within the constraints of the spending envelope available to us.

The multi-year spending framework set out in this document will enable public sector bodies and delivery partners to work with the Scottish Government to plan effectively over the medium-term for the future of Scotland's public services.

These plans are distinct from annual budgets and do not replace that normal process. More detailed spending plans, including how key priorities will be funded, will be set out in the 2023-24 Scottish Budget and subsequent annual budgets.

The spending review provides an overarching financial framework focusing on four key Scottish Government priorities:

• Tackling child poverty;
• Addressing the climate crisis;
• Securing a stronger, fairer, greener economy; and
• Delivering excellent public services.

As set out previously, our focus must also now be on supporting the Scottish public through the cost of living crisis as best we can with the powers available. Action is already being taken in the current financial year, setting the foundation for longer-term steps supported by the spending review.

2.1 The Cost of Living Crisis

Since the spending review framework was published for consultation in December 2021, addressing the cost of living crisis is clearly a further and immediate priority.^[15] Every household across the UK is impacted but those on low incomes are hardest hit. The Scottish Government is doing everything within its powers and fixed budgets to ensure people, communities and businesses are supported as far as possible. However, it is clear that while both the UK and Scottish Governments are faced with the same crisis in the cost of living, we do not have the same fiscal or regulatory powers to respond to it.

We will continue to press the UK Government to do all that it can within the wider economic and fiscal powers available to them. The Scottish Government has prioritised tackling child poverty, reducing inequalities and supporting financial wellbeing. Almost £770 million in cost of living support is already being delivered in 2022-23. This package of support includes social security payments not available anywhere else in the UK, to help households. This reflects a conscious decision on the part of the Scottish Government to prioritise areas of spend that help families, including mitigating UK Government welfare cuts as far as possible, which therefore means that funding isn't available for other areas of spending. Within a fixed budget, and in the absence of additional funding from the UK Government, we are maximising our spending power to help households most in need. We are taking action across a range of areas, including:

• Doubling the Scottish Child Payment to £20 and increasing it to £25 per child per week and extending it to under 16s by the end of the year, support not provided elsewhere in the UK.
• Providing an annual £520 to families of around 144,000 children and young people with bridging payments ahead of expansion of the Scottish Child Payment, support not provided elsewhere in the UK.
• Our five family benefits, when the Scottish Child Payment is increased, will provide support of up to £10,000 for a child in the first six years of life, and £9,700 for subsequent children. This is over £8,200 more than is available elsewhere in the UK.
• Uprating eight social security payments delivered by Social Security Scotland by 6 per cent, compared to 3 per cent in the rest of the UK, to support people facing rising costs.
• Allocating £150 to all those in council tax bands A-D to help meet rising bills.
• Introducing a new Low-Income Winter Heating Assistance in winter 2022-23 that guarantees a £50 annual payment to over 400,000 low-income households to help with energy bills, support not provided elsewhere in the UK.
• Introducing the £200 Child Winter Heating Assistance to help families of severely disabled children and young people with their heating bills.
• Introducing the Carers Allowance Supplement to support around 90,000 carers with an additional £450 a year, support not provided elsewhere in the UK.
• Providing over £120 million for the Scottish Welfare Fund and Discretionary Housing Payments to mitigate the UK Government bedroom tax and help around 90,000 tenants sustain their tenancies, support not provided elsewhere in the UK.
• Using public sector pay policy to support those on low incomes.
• Introducing a £10 million Fuel Insecurity Fund in 2022-23 to support a range of direct assistance options to help households at risk of severely rationing their energy use, or self-disconnecting entirely.
• Stepping up our investment to accelerate the deployment of heat and energy efficiency measures and to support those least able to pay.
• Providing £336 million in 2022-23 to heat, energy efficiency and fuel poverty measures.
• Supporting family incomes and helping young children to thrive by giving everyone in primaries one to five access to a free school lunch during term time and over 140,000 children and young people access to food or alternate provision over holiday periods, with plans being developed for further expansion.
• Making free bus travel available for around half of Scotland's population through concessionary travel for eligible people including those over the age of 60, under the age of 22, and those with disabilities.

This builds on existing long-held measures that significantly reduce the cost of living for many across Scotland, such as providing baby boxes, free prescriptions, free university tuition, free personal care, and 1,140 hours of free early learning and childcare which will continue to be maintained. By keeping water in public hands, there are also no water meter charges. We continue to provide free period products in education and community settings.

2.2 Tackling Child Poverty

The recently published 'Best Start, Bright Futures: Tackling Child Poverty Delivery Plan 2022-2026' sets out how the Scottish Government will work with partners to deliver Scotland's national mission to tackle child poverty and drive progress toward the ambitious targets set for 2030.^[16]

The delivery plan is focused on using the three areas recognised as helping reduce poverty – increasing incomes through social security, increasing incomes through employment, and reducing household costs. These steps are complemented by a focus on building the services that will improve family wellbeing outcomes and support children and young people to reach their full potential.

As we navigate the cost of living crisis, our actions in the delivery plan will be all the more vital in supporting household incomes.

Along with the actions outlined above, the spending review and Capital Spending Review include funding plans for the following commitments and interventions:

• Investment of up to £10 million each year to mitigate the Benefit Cap as fully as we can within the scope of devolved powers, with 97 per cent of households impacted having dependent children.
• Enhancing access to advice and support, in places where families already go, investing up to £10 million over the parliament to increase access to holistic advice services, including expanding access to advice in health and education settings.
• Investing to strengthen our employability offer to parents, including keyworker, upskilling, and supported opportunities.
• The delivery of universal free school meals to primary school children in P1-5 and the expansion of provision beyond that along with continued alternate provision during school holiday periods for children from low-income families.
• Continuing our investment in early learning and childcare, including progressing work to build a system of school age childcare that is free to those on the lowest incomes, supported by the publication of a strategic childcare plan later this summer.

In addition to this, a small number of pathfinder areas will take forward an innovative approach to whole-system change, working with partners in local areas throughout 2022-23. Work is already underway to maximise the use of resources to provide holistic support tailored to the individual needs of families. For example, in Glasgow, partners including the city council, the Scottish Government and COSLA have agreed to work together to integrate child poverty interventions across the city with the aim that families in contact with services will be connected with the benefits and employability and other support they are entitled to. In Dundee we are working with the city council, DWP, Social Security Scotland and third sector organisations to test tailored support to assist parents to access work. The success of the outcomes achieved within the pathfinders will be evaluated with programmes scaled up to other localities where these services are delivering positive results for families.

The measures set out in 'Best Start, Bright Futures' will provide direct financial support to low-income families, including helping over 300,000 children through the Scottish Child Payment. It is estimated that this will lead to 50,000 fewer children living in relative poverty. Together with wider actions taken to date and those set out within the delivery plan, Scottish Government modelling published in March 2022 projected that these steps would help deliver the lowest levels of child poverty in over 30 years. The cost of living crisis will, without further UK Government action, undoubtedly have a negative impact on poverty rates at a time when the Scottish Government is working to reduce them. However, if the UK Government mitigates those impacts, the Scottish Government support set out here would mean that by 2023-24, when interim targets are due to be met, more than 60,000 fewer children are projected to be living in poverty than when the Child Poverty Act was passed in 2017.

Direct financial support is only one of three primary drivers in reducing poverty. The activity supported through the spending review will also continue to progress the opportunities and integrated support parents need to enter, sustain, and progress in work. Through actions taken over the remainder of the parliament, we aim to support up to 12,000 parents to access and sustain employment, and to support up to 3,000 parents already in-work to increase their earnings. This will be enabled by the strategic childcare plan due to be published later this year.

The third driver in reducing poverty is reducing household costs. By continuing the Connecting Scotland programme, families will be provided with digital access linking them to a wide range of services essential to reducing household costs, increasing earnings and improving wellbeing. In addition, we will continue to implement measures which reduce the cost of the school day, including expanding free school meal provision, saving families on average £400 per child per year and allowing more children and young people to access free, nutritious food. We will also continue to deliver alternate provision during school holiday periods for more than 140,000 children who need it most.

2.3 Addressing the Climate and Nature Crises

We are committed to a just transition to a net zero and climate resilient Scotland by 2045, with an ambitious interim target of a 75 per cent reduction in emissions by 2030. This is the most ambitious legally binding commitment for this next decade that we are aware of, for any country in the world. It is also a commitment which is driving real change in Scotland, with emissions down by over 50 per cent compared to the 1990 baseline.

The spending review comes at a critical point in the global challenge to address the climate crisis, adapting to the impacts of the irreversible change that is already evident and seeking to mitigate the extent of future change through a just transition. Following on from COP26 in Glasgow in 2021, our continued high ambition and driving tangible action will ensure Scotland plays its full part in delivering on the Glasgow Climate Pact and retain our position as a global leader on climate action.

We will build on our work at COP26, including using our role on the Under2 Coalition to drive global climate action, and support communities overseas disproportionately impacted by the climate crisis but who have done the least to contribute to it.

Our focus is resolutely on delivering the ambitious packages of economy-wide policies to reduce emissions, set out in the updated 'Climate Change Plan (2018 – 2032) - update', and to build resilience to the irreversible impacts in the 'Climate Change Adaptation Programme (2019 – 2024)'. ^{[17] [18]}

Experts agree that public spending now to address the climate crisis delivers future benefits which far outweigh the costs today. Our investment will help tackle the climate and nature crises and support the creation of green jobs across Scotland. However, government investment on its own will not be sufficient. While there are areas of society that should always remain government funded, the scale and urgency of the climate emergency means private and third sector investment will be critical to shift to a net zero, climate resilient, wellbeing economy.

To harness this investment effectively and maximise the impact of collective action to address the climate crisis, activity to move from a "funding to financing" policy model will be scaled up to ensure that future climate change policy leverages private sector investment and action, better amplifying the impact of public investment.

The investment required to address the climate crisis is weighted towards capital funding. The targeted review of capital spending carried out alongside this resource spending review supports critical low carbon capital spending, with an increase of over half a billion pounds directed towards net zero programmes to address the climate crisis over the next three years.

The plans set out in the resource spending review will prioritise the delivery of Scotland's climate change and nature restoration ambitions by providing for:

• Up to £75 million per year increased resource spend to support delivery of our Heat in Buildings strategy, enabling £1.8 billion (including capital and financial transactions) of overall public investment across this parliament towards decarbonisation of over a million homes and 50,000 non-domestic buildings by 2030.
• Increased investment across the spending review period in active travel, including capital funding, to secure our commitment to invest £320 million per annum from 2024-25 onwards and as part of a shift of transport funding to walking, wheeling and cycling – supporting our commitment to cut car kilometres by 20 per cent by 2030.
• £95 million of further investment across the spending review period to support the scaling-up of activity to meet our annual target of 18,000 hectares of woodland creation target by 2024-25, alongside delivery of ambitious programmes focused on nature restoration and addressing biodiversity loss.
• Investment of over £12 million for peatland restoration across the spending review period, supporting delivery of £62 million of capital spend to double current restoration rate of 6,000 hectares to the 2023 target of 12,000 hectares per year and then on to the 2024-25 target of 20,000 per year.
• Increased funding to deliver the fisheries management measures for the existing Marine Protected Areas network and meeting our world leading commitment on Highly Protected Marine Areas.
• £4 million of resource spending alongside at least £150 million of capital and financial transaction investment over the spending review for the 10-year North East and Moray Just Transition Fund.
• Starting rollout of the Agriculture National Test Programme, which will support the Preparing for Sustainable Farming strategy launched in April 2022 to improve farmers and crofters' awareness of their climate performance.
• Maintained support for public transport, including £46 million of resource spend to introduce the community bus fund (supported by an additional £30 million of capital funding) and an uplift over the spending review period to maintain the delivery of concessionary travel schemes, driving behavioural change to more sustainable travel options.

Scotland has an abundance of renewable energy resources, and the coming years will see a major acceleration in deployment of on- and off-shore energy generation. The results of the recent ScotWind leasing round reflect the confidence placed in Scotland as a major producer of offshore wind with the market recognising the opportunity of a just transition to a low carbon economy. We have a long-term commitment to the planning and consenting of Offshore Renewable Energy in support of ScotWind and society's longer-term energy needs as we head towards net zero, while also protecting our precious marine environment and respecting the interests of other marine users. We have already made clear that a key priority for the investment of ScotWind revenues will be to tackle the twin climate and biodiversity crises and this Resource Spending Review delivers on that commitment.

While the Scottish Government's focus is on delivering existing climate change targets and commitments, we are also beginning to develop the next Climate Change Plan and Climate Change Adaptation Programme along with the first set of regional and sectoral Just Transition plans. We can therefore anticipate new and strengthened policies. The multi-year resource funding set out in this spending review will need to provide flexibility to further pivot portfolio plans and accommodate future costs for these priority activities.

2.4 A Stronger, Fairer, Greener Economy

A stronger, fairer, greener economy benefits everyone. To achieve the true potential for Scotland to be a highly productive and innovating place to live, work and do business on a global scale, well-functioning capital and labour markets are a prerequisite. For Scottish based businesses to drive sustained higher levels of investment, they need to be able to draw on an increasingly skilled and dynamic labour market. While the Scottish labour market has remained robust, with low levels of unemployment, addressing skills and labour shortages is key to delivering the step change in productivity across our regions and businesses, boosting both wellbeing and inclusive growth.

Investing in inclusive economic growth is a priority for the spending review, not just to provide employment and incomes to households, but also to safeguard the future of revenues needed to support public services. The recently published 'National Strategy for Economic Transformation' (NSET) outlines our vision for Scotland's economy and streamlines the interventions, investments and actions we will take to deliver this vision.^[19]

NSET was launched in March this year and contains five transformational programmes, chosen on the strength of evidence and focusing on: stimulating entrepreneurship; building new markets; increasing productivity, including across the regions; developing the skills we need for the decade ahead; and ensuring fairer and more equal economic opportunities. A sixth programme sets out how we will deliver this programme, working in partnership with business and with clear accountability and metrics of success.

A stronger, fairer and greener economy is both a driver and a consequence of our actions to tackle child poverty and address the climate crisis. We are developing prioritised and affordable delivery plans for each of the programmes in NSET, and we have established a new Delivery Board, drawing on expertise from private and public sector leaders, to provide challenge and ensure we deliver transformational change.

This is a shared responsibility across national government, local government and our enterprise and skills agencies. To deliver on our future plans in a greener and fairer way will require action and investment from all parts of government, but government cannot and should not do everything on its own. As part of the spending review, we have completed a significant amount of internal and external engagement. Going forward, active collaboration and partnership with national and regional partners across the private, public and third sectors will be crucial for realising Scotland's ambitions to become a Wellbeing Economy - thriving across economic, social and environmental outcomes.

Current and future plans for a greener and fairer economy are priorities within the spending review, and include the following:

• Through the high-level spending plans set out for the Finance and Economy portfolio and other partners, driving collaboration between economic development agencies focused on the NSET programmes.
• Establishing an Investor Panel, chaired by the First Minister, to attract investment to a pipeline of projects in Scotland that support our transition to net zero.
• Continuing through our Inward Investment Plan to set the direction on new Market Opportunities to attract high quality inward investment and the technologies required to deliver our ambitions in areas such as Energy Transition, focusing on ScotWind and Hydrogen, Space, and Decarbonisation of Transport.
• Pushing forward with the delivery of our export growth plan, 'A Trading Nation', to scale up Scotland's trade promotion, international reach and profile and targeted support for firms' export capacity.^[20] In particular, further developing Sector Export Plans in Renewables and Hydrogen to support the growth of renewables exports from Scotland and identifying new and critical markets.
• Our capital plans include £581 million of Financial Transactions towards supporting the economy, including exceeding the commitment to £200 million annual capitalisation of the Scottish National Investment Bank, and renewed support for the enterprise agencies.
• Implementing the next phase of the Green Jobs workforce academy to make sure people have the skills they need as part of a Just Transition.
• Ensuring Fair Work and access to good (and green jobs) is central to how we improve outcomes in the labour market and support people and business through our investments in skills and employability.
• Embedding entrepreneurship in our education system to help young people realise their ambitions and have the opportunity to start and grow businesses in Scotland.

Transforming our economy during a time of immense change and uncertainty requires all sectors to work together. We are committed to reforming the way in which we deliver our economic development, with greater use of digital technology and building on the cross-agency collaboration embodied in the Business Support Partnership. Investments, such as in two Green Freeports, and the National Manufacturing Institute will complement the development of new services such as the Tech-scalers network to support fast-growing businesses, and a Talent Attraction programme within the new migration service to encourage and support entrepreneurship and innovation.

It will be essential to monitor and evaluate our progress effectively. What we measure matters, and our Wellbeing Economy Monitor will allow us to report progress against our ambition for a Wellbeing Economy. Similarly, our delivery plans and progress reports will include data specific to our actions including equality monitoring and will take account of the different strengths, assets and opportunities in Scotland's regions, especially in rural and island areas.

2.5 Effective Public Services

Every day across Scotland we all interact with public services in some way, from the more obvious, such as attending school or going to the GP, to the less obvious, such as using our parks and green spaces. Our public service workers provide services that support people's daily lives. For example, in 2021, this meant educating over 700,000 school children, administering over 8 million COVID-19 vaccine doses, and providing care at home services for almost 50,000 people aged 65 and over.^{[21] [22] [23]}

While it is right that we focus on the priorities set out above, this spending review commits to future funding to improve our existing services. As set out in section 1, we are building on a steady and growing investment in stronger public services for Scotland, within the constraints set out, and to mitigate the unwelcome effects of UK Government policy on some of the most vulnerable in our society. As well as providing funding for existing services to be maintained, the spending review also provides significant investment to drive improvement across all areas of government and to continue the collective recovery from the COVID-19 pandemic, as set out in our 'Covid Recovery Strategy: for a fairer future'.^[24]Since 2020, the pandemic has affected every single person in Scotland and our recovery from it is much more than just a financial recovery. It also requires leadership in the design and delivery of future public services. This section sets out how the spending review invests in and supports plans to improve public services through the course of this parliament.

Accounting for 44 per cent of annual devolved resource spending in Scotland, the Health and Social Care budget is responsible for improving the health and wellbeing of the population, ensuring that care and support is delivered when, how and where people need it. The budget will support an NHS workforce of over 155, 800 Whole Time Equivalent (WTE) staff, including around 65,000 nurses and midwifes, over 11,000 Allied Health Professionals and almost 6,000 medical and dental consultants. The spending review delivers on commitments to increase investment in frontline health services by 20 per cent over this parliament and increases levels of investment in primary and community care to ensure we pivot frontline health spend to support community health services. This will ensure our investment provides more care for people in a place and in a way that meets their needs.

Alongside our existing activity, we will establish the National Care Service. This will ensure social care has a parity of esteem with the NHS and will transform this essential service. This will be backed by a 25 per cent increase in social care investment – the equivalent of more than £840 million – which will also support measures to strengthen the implementation of self-directed support, improve prevention and early intervention and increase community-based support.

We will also continue our vital work to reduce health inequalities. We will invest £250 million over the lifetime of this parliament to tackle drug-related deaths and improve lives through our National Mission including delivering MAT Standards and our Treatment Target, expanding Residential Rehabilitation and introducing long-term funding for the third sector. We will bring forward investment plans for enhanced action through deep end general practice supporting population health in our communities where need is greatest.

The Education and Skills portfolio is also essential in tackling inequality and invests in changing lives for the better, including support to learners in our schools, colleges, universities and those participating in skills and community learning and development programmes. This spending review confirms investment of £1 billion over the course of this parliament to tackle the poverty related attainment gap and support education recovery through the Scottish Attainment Challenge. Recognising that some families need more support to thrive, we will also progress work to build a system of school age childcare that is free to those on the lowest incomes, and consider how we can successfully invest in early years support for the families who need it most. We will continue to implement measures which reduce the cost of the school day, including expanding free school meal provision, continuing to provide funding for school clothing grant, removing curriculum charges and for free music tuition.

The spending review will provide funding to our dedicated teaching workforce - vital to providing children and young people with the additional support needed as we tackle the impacts of the COVID-19 pandemic. Through supporting the recruitment of 3,500 teachers and 500 support staff we will ensure we have the right expertise working to deliver improved learning and societal outcomes for all children and young people in schools in Scotland, whatever their background and wherever they are being educated.

Education is one area where we deliver in partnership with Local Government to provide high quality, frontline services that improve outcomes for individuals and communities across Scotland. National, local and community collaboration is fundamental to improving public services. The spending review confirms our intention to embark on a new deal with Local Government, founded on the dual pillars of a Fiscal Framework for Local Government alongside a new Partnership Agreement.

The spending review will support and encourage justice agencies to continue the essential process of recovery from the COVID-19 pandemic, addressing the unavoidable backlog of cases built up during the pandemic, alongside wider transformation, with over £50 million in annual funding available for both recovery and reform.

In March 2022, the Scottish Government announced £48 million in funding through the new Victims Centred Approach Fund over the period from 2022 to 2025, reflecting Ministers' commitment to supporting the victims and survivors of crime. The Justice portfolio will also continue to work with other parts of Government, Justice agencies and the third sector to tackle all forms of violence against women and girls.