Scotland's Budget: Draft Budget 2017-2018

Annex I

GLOSSARY

Annually Managed Expenditure ( AME)

Annually Managed Expenditure is spending that does not fall within Departmental Expenditure Limits ( DEL). AME is generally less predictable than expenditure in DEL and is not subject to multi-year limits. It is set each year and contains those elements of expenditure that are not readily predictable. For example, NHS and Teachers' pensions count as AME.

Audit Scotland

Audit Scotland was set up in April 2000 to audit the accounts of the Scottish Government and other public sector bodies in Scotland and to ensure that public funds are used properly, efficiently and effectively.

Barnett Formula

The Barnett Formula allocates to Scotland a population share of changes in comparable spending programmes in England. Comparability is the extent to which services delivered by Whitehall departments correspond to services delivered by devolved administrations. Scotland gets exactly the same pounds per head increase as England. Barnett only applies to expenditure classified within Departmental Expenditure Limits - about 85 per cent of Scotland's total budget. Details can be found in the Statement of Funding Policy available on the HM Treasury website.

Best Value

Best Value is about continuous improvement, seeking to change what we do in a way that transforms and sustains the delivery of quality public services in Scotland.

Block Grant Adjustment

Most Scottish taxes are collected by HMRC, which operates at UK level. Scotland receives most of its funding via the block grant. When taxes are devolved, receipts are paid directly into the Scottish budget and are no longer available to the UK Government. In recognition of this, the block grant is adjusted downward based on a calculation agreed between Scottish and UK Governments.

Budget Exchange ( BX)

HM Treasury allow the Scottish Government to carry forward DEL under spends and draw down these under spends up to a maximum of 0.6 per cent on the Resource budget and 1.5 per cent on the Capital budget.

Cash Terms

Figures expressed in cash, or nominal, terms which are not adjusted for the effect of inflation (See Real Terms).

Common Agricultural Policy ( CAP)

The CAP was set up under the European Union Treaties to increase agricultural production, provide a fair standard of living for farmers and make sure that food is available at reasonable prices.

Community Planning Partnerships

Community Planning, as set out in the Local Government in Scotland Act 2003, is delivered by local Community Planning Partnerships ( CPPs). There are 32 CPPs in Scotland, one for each local authority area. As well as statutory partners, a wide range of other organisations such as Jobcentre Plus, Further and Higher Education institutions and Scottish Natural Heritage are involved in CPPs, as are the third and private sectors. Third sector participation in CPPs is delivered through the third sector interfaces that have been established in each local authority area.

Cross-border Public Authorities

The Scotland Act 1998 allows for cross-border public authorities to be specified by Order in Council. They are public bodies and agencies, government departments, offices or office-holders which have functions exercisable in or as regards Scotland that do not relate to reserved matters. GB or UK bodies which deal only with reserved matters in Scotland cannot be cross-border public authorities.

Consumer Prices Index ( CPI)

The Consumer Prices Index is an internationally comparable measure of inflation used by the UK Government that measures the change in the general level of prices charged for a defined 'shopping basket' of goods and services bought for household consumption. The CPI forms the basis of the UK Government's inflation target that the Bank of England's Monetary Policy Committee is required to achieve.

Departmental Expenditure Limits ( DEL)

Departmental Expenditure Limits ( DEL) form the majority of the Scottish Government's budget. This is the budget provision that the Scottish Government can plan and control over the Spending Review period. The DEL budget is presented for both resource DEL and capital DEL as follows:

Resource DEL - current expenditure such as pay or procurement;

Capital DEL - for new infrastructure investment and net policy lending; and

Ringfenced Resource DEL (non-cash) - depreciation or impairment costs associated with the ownership of assets. HM Treasury rules mean that this element of the overall DEL budget cannot be used to fund pay or procurement costs and as such this budget does not represent spending power for the Scottish Government.

Depreciation

A depreciation charge is a non-cash item which measures the wearing out, consumption or other reduction in the useful life of a fixed asset.

European Structural Funds

European Structural Funds include the European Regional Development Fund ( ERDF) and the European Social Fund ( ESF). They are used to tackle regional disparities and support regional development through actions including developing infrastructure and telecommunications, developing human resources and supporting research and development. The Scottish Government is the managing authority for the Funds in Scotland.

Executive Agency

Semi-autonomous executive agencies operate within a framework set by the responsible Cabinet Secretary or Minister, which specifies policies, objectives, and available resources. All agencies are set annual performance targets by their Minister, who in turn accounts to Parliament for the work of the agency.

Financial Transactions

Financial Transactions are allocated by HM Treasury to the Scottish Government and can only be used for the provision of loans or equity investment beyond the public sector. Financial Transactions facilities have to be repaid to HMT in future years.

Fiscal Framework

The fiscal framework is an agreement between the UK and Scottish Governments that governs the funding of the Scottish budget and underpins the powers devolved through the Scotland Act 2016.

Gross Domestic Product ( GDP)

The Gross Domestic Product is a measure of the total economic activity in a region. References to growth in the economy are quoted using GDP. It is a measure of the total amount of goods and services produced within a year in a country. In the UK, three different approaches (measuring production, income or expenditure) are used in the generation of one single GDP estimate.

Land and Buildings Transaction Tax ( LBTT)

A tax on land and property transactions which replaced Stamp Duty Land Tax ( SDLT) in Scotland from April 2015. LBTT has a progressive rate structure which means that only the proportion of the price above each tax threshold is taxed at the next rate, rather than the whole purchase price as is the case under SDLT.

Local Government

All 32 local authorities in Scotland.

Non-Departmental Public Body ( NDPB)

A body that operates independently of Ministers, although Ministers have ultimate responsibility. There are two main types of NDPB: executive NDPBs, which carry out administrative, regulatory, executive or commercial functions, and advisory NDPBs, which provide independent, expert advice to Ministers.

Non-Profit Distributing ( NPD)

The Non-Profit Distributing model is a system for funding capital infrastructure projects. It is 100 per cent debt-financed, maximises value for money and allows shareholder transparency.

Office for Budget Responsibility ( OBR)

The Office for Budget Responsibility ( OBR) was formed in May 2010 to make an independent assessment of public finances and the economy for each UK Budget and Pre-Budget Report.

Prudential Regime

The prudential regime for local authority capital expenditure took full effect on 1 April 2004. It allows local authorities to make their own decisions about how much to borrow or spend, but they are under a duty to determine how much they can afford and to keep this under review.

Real Terms

Any price or value adjusted for the effect of inflation.

Regulatory Asset Base ( RAB)

The value of a regulated industry's assets. For the rail industry, this is the Office of Rail Regulation's ( ORR) calculation of the value of Network Rail's assets. The regulator agrees investment plans for five-year periods, including adding new investments to the Regulated Asset Base.

Scotland Reserve

The new Scotland Reserve applies from 2017-18 and enables the Scottish Government to, within limits, smooth spending and manage tax volatility and determine the timing of expenditure. Payments into the Reserve may be made from the resource or the capital budget. Resource reserve funds may be used to fund resource or capital spending. Capital reserve funds may be used only to fund capital spending.

Scottish Fiscal Commission

The Scottish Fiscal Commission provides independent assurance of the Scottish Government's devolved tax forecasts and the economic determinants underpinning forecast receipts from non-domestic rates. The Scottish Parliament endorsed the creation of the Commission and approved the appointment of its chair and members in June 2014. From 1 April 2017, the Commission will become an independent Statutory body and its duties are set out in the Scottish Fiscal Commission Act 2016.

Scottish Futures Trust ( SFT)

The Scottish Futures Trust is the independent company established by the Scottish Government to deliver value for money across public infrastructure development.

Scottish Income Tax

Scottish Income Tax is a tax paid by Scottish taxpayers on all non-savings, non-dividend taxable income. It will commence in April 2017.

Scottish Landfill Tax

Scottish Landfill Tax is a tax on the disposal of waste to landfill. It replaced UK Landfill Tax in Scotland in April 2015.

Single Outcome Agreement ( SOA)

The Concordat between the Scottish Government and COSLA in November 2007 required each local authority and its Community Planning Partners to develop a Single Outcome Agreement. They are intended to set out outcomes at a local level which local public bodies will work towards in order to contribute to the National Outcomes set by government. They are characterised by streamlined external scrutiny, effective performance management and a focus on outcomes.

Strategic Transport Projects Review ( STPR)

The Strategic Transport Projects Review ( STPR) supports the process of prioritisation applied by Scottish Ministers when allocating the capital budget across all sectors and when determining the level of infrastructure investment that can be supported from revenue finance ( e.g. public private partnerships ( PPP/ PFI), non-profit distributing, and borrowing against regulated asset base ( RAB) for investment in rail infrastructure).

Total Managed Expenditure ( TME)

Total Managed Expenditure is made up by the Departmental Expenditure Limit ( DEL) and Annually Managed Expenditure ( AME), the broadest measure of total public spending.

Tax Incremental Financing ( TIF)

Tax Incremental Financing is a way of unlocking private investment in the regeneration of local areas. Initial borrowing by local authorities to fund the infrastructure is repaid through future increases in non-domestic rate revenues due to increased business creation resulting from the local authority's investment.