Budget - provisional outturn 2023 to 2024: Ministerial speech

Presiding Officer, I welcome the opportunity today to update Parliament on the provisional outturn against the budget for the financial year 2023-24.

The provisional outturn demonstrates once again this Government is prudently and competently managing Scotland’s finances whilst protecting our priorities and ensuring that we have sustained effective delivery of public services.

Managing the financial position for 2023-24 once again represented a significant challenge. The continued impact of persistently high inflation, pressure on public sector pay, backlogs as a result of the Covid pandemic and the ongoing war in Ukraine, combined, have placed pressure on the public finances. In addition, inflationary pressures continued to impact households and businesses across the country.

The Scottish Government’s budget must balance each and every financial year. The majority of our funding continues to be tied to the decisions of the UK Government and as such is subject to high levels of uncertainty until very late in the financial year.

Whilst the Fiscal Framework was revised in August 2023, and does offer some additional flexibility, we are still unable to borrow to meet day-to-day costs. Our income tax powers do not allow changes to be made during the current financial year. The only real lever we have to respond to emerging pressures and ensure we balance the budget is to reprioritise current year spending plans. No-one should underestimate the scale of that challenge - our spending is committed to supporting vital public services. The Cabinet Secretary for Finance and Local Government has already made clear to this Parliament some of the difficult choices that had to be taken over the course of this year. It is with careful management and rigorous reprioritisation that Scottish Government funding has been channelled to where it is most needed.

However, this statement is not just about the challenges we have had to manage, I also want to underline the positives. We have continued to proactively drive efficiency savings and to maximise income streams.

In 2023-24 :

We supported fair and affordable pay deals for workers who provide our essential public services, thereby avoiding strike action and minimising further disruption, for the people of Scotland. Through meaningful engagement with trade unions and employers, the Scottish Government provided a record junior doctor pay deal and an increased Agenda for Change pay deal. Over the last two years we have invested an additional £1 billion in NHS Agenda for Change pay to support staff through the cost-of-living crisis.

We spent nearly £5.2 billion on Social Security benefits including £429 million on the Scottish Child Payment, a payment unique to Scotland, lifting families out of poverty and helping with the cost-of-living crisis. The Carer Support Payment was introduced in pilot areas, which once fully rolled out in 2024, will allow thousands more unpaid carers to receive the benefit. During 2023-24 we also widened the eligibility for Best Start Foods which will see an estimated 20,000 people able to access money to help provide milk and healthy food for their children.

We spent over £160 million in 2023/24 on the Ukrainian Resettlement programme to ensure people continued to receive a Warm Scots Welcome and are supported to rebuild their lives in our communities for as long as they need to call Scotland home.

We continued to support a strong Scottish economy. The 2023 EY Attractiveness Survey showed that Scotland has outpaced both the UK and Europe for the second year in a row in attracting inward investment projects. Indeed, Scotland has been the top performing part of the UK for inward investment projects, outside of London, for the last 8 years.

We continue to out-perform the UK as a whole in delivering long-term reductions in Scotland’s greenhouse gas emissions and to achieve net zero emissions by 2045. Domestically, we have continued support for our multi-year Just Transition Fund grant funding, with £16.8 million spent on projects to deliver our just transition aims and positive impacts for the Northeast and Moray regions. In addition, in 2023, we committed, allocated and spent another £3 million to support vulnerable global communities address loss and damage, bringing our total commitment to £10 million.

In rail services, revenue growth exceeded budget forecasts due to effective delivery of services and the benefits of partnership working with the trade unions under the public sector railway. In Scotland, we avoided the costly industrial relation disruption that impacted other rail operators. Enhanced deployment of customer support teams helped reduce fare evasion and anti-social behaviour, thereby building customer confidence and increasing revenue. A continued focus on controlling the costs of delivery has contributed to the improvement of the net cost of delivering Scotland's rail service. The finalisation of the closure of the previous franchise agreement for Scotrail also resulted in a one-off receipt back to government from Abelio. This, and other savings generated as part of our work to make our public sector more efficient and release more funds to the front line, have resulted in savings across a number of portfolios which have contributed to our underspend in 2023-24. These savings are welcome and are, as a consequence, available to support essential services in this financial year.

We will continue to press the UK Government to provide funding to meet pressures and to allow us to deliver a broad range of high-quality public services and improve the lives of the people of Scotland. The Scottish Government is absolutely committed to delivering on our priorities, priorities which have the most immediate benefits for our people in their everyday lives by:

• Eradicating child poverty;
• Growing a thriving economy;
• Ensuring sustainable and excellent public services; and
• Tackling the climate emergency.

Turning now to the 2023-24 provisional outturn.

Under the current devolution settlement, the Scottish Government is not permitted to overspend its budget. We must therefore operate within a tight margin of just over 1%. The level of volatility in our overall funding envelope continues to increase. Our block grant is not finalised until February each year. We only received confirmation of an additional £0.5 billion of funding just 6 weeks before the end of the financial year. Whilst we welcome that additional funding, the timing highlights the challenge in managing the financial position.

Despite this volatility, I am pleased to confirm that the Scottish Government has once again delivered a balanced budget with a provisional fiscal outturn for 2023-24 of £49.3 billion against a total fiscal budget of £49.6 billion.

The remaining budget of £292 million, which represents just 0.6% of our total budget will be carried forward in full through the Scotland Reserve if confirmed at final outturn. This incorporates £162 million of fiscal resource, £130 million of capital and a break-even position in financial transactions.

I must stress, there is no loss of spending power to the Scottish Government as a result of this small underspend. £109 million of the capital underspend was anticipated at the Spring Budget Revision and of the resource position, around £100 million is required annually to manage post year-end audit adjustments, with the remainder to be utilised to support the 2024-25 budget. The First Minister highlighted, as part of setting out his priorities for Scotland to Parliament in May, the enormous financial pressure facing the Scottish Government.

 As has been said before, we are required to manage our spend against an annual budget which is not confirmed until the final quarter of the financial year. We cannot overspend. Therefore, our financial strategy is to plan a modest underspend to mitigate the risk of post year-end audit adjustments, as have occurred in previous years. Managing the position to a 0.6% underspend, underlines the financial competence of this government.

I know colleagues across the chamber follow these matters closely, and that, for the most part, they have a robust understanding of the intricacies of accounting standards. I am sure, therefore, that I don’t need to remind them that an element of our budget allocation from HM Treasury is non-cash, which is used for accounting adjustments, predominantly depreciation. To reiterate previous references to this ring-fenced budget, it cannot be used to support day-today spending, nor does it flow to the Scotland Reserve and is therefore not included in our headline provisional outturn results. For 2023-24 this shows an underspend of £1.1 billion against a budget of £2.5 billion. A large proportion, circa £0.9 billion of this budget, relates to non-cash consequentials for student loan impairments which are simply not required at the same level in Scotland because of our policy of free university tuition.

Finally, I want to emphasise that the figures I am reporting to you today remain provisional as they are subject to change pending completion of 2023-24 year-end audits. Finalised figures will be reported as usual in the annual Scottish Government Consolidated Accounts and a Statement of Total Outturn later this financial year.

I commend today’s figures to Parliament.