Scotland's Budget: Draft Budget 2017-2018

Chapter 5 Finance and the Constitution

PORTFOLIO RESPONSIBILITIES

The Finance and the Constitution portfolio is a wide-ranging portfolio that is at the heart of implementing and delivering the new powers over taxation that are provided for in the Scotland Act 2012 and 2016 and providing public services that are efficient, fair, flexible and valued.

The Scottish model of procurement aims to secure the maximum economic benefit from the £11 billion spent by the public sector on goods and services each year, through an approach that balances being both business friendly and socially responsible.

As part of its role, the portfolio includes:

• Scotland's devolved tax authority, Revenue Scotland, which operates as a Non‑Ministerial Department; and
• the Scottish Fiscal Commission, which will be a Non-Ministerial Department from 1 April 2017.

The portfolio also has responsibility for Scottish Parliamentary and local government elections and includes the Scottish Public Pensions Agency ( SPPA) which administers some public sector pension schemes, including the Scottish teachers' superannuation scheme and the NHS superannuation scheme.

The Digital Strategy budget is the responsibility of the Cabinet Secretary for Finance and the Constitution, but is held and described within the Rural Economy and Connectivity portfolio chapter. This budget includes dedicated funding to support action to design, deliver and continuously improve modern, efficient public services enabled by digital technology.

OUR PRIORITIES

In 2017-18 we will use the additional powers over income tax provided for in the Scotland Act 2016 for the first time in a way that will protect low-income taxpayers while supporting investment in high quality public services.

The Scottish Public Pensions Agency ( SPPA) has built on the Scottish Government's 'One Scotland' approach with its own change programme which aims to deliver transformation of services to pension scheme members and employers over the period to 2019-20. This programme will deliver better digital services based on an integrated pension administration and pensioner payroll system.

We will continue to invest in the successful Scottish model of procurement which will secure the continued provision of shared services across the public sector in Scotland, delivering further savings and maximising the social, environmental and economic benefits of public purchasing activity.

The Scottish Futures Trust ( SFT) will continue to improve the efficiency and effectiveness of infrastructure investment in Scotland by working collaboratively with public bodies and industry, leading to better value for money and ultimately improved public services.

In October 2016, the SFT Statement of Benefits 2015-16 estimated £146 million of net future benefits and savings. SFT is on course to reach its corporate objective of securing £500-£750 million of benefits and savings during its second corporate plan period covering 2014-15 to 2018-19. SFT estimates that since its inception in 2008 it has delivered over £920 million of savings and benefits to the people of Scotland through innovative new ways of working and improved value for money.

Table 5.01: Spending Plans (Level 2)

Level 2	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Scottish Public Pensions Agency	3,461.9	3,322.2	3,424.7
Revenue Scotland	5.2	5.2	6.1
Scottish Fiscal Commission	1.0	1.0	1.7
Finance & Constitution	52.4	75.3	148.4
Total level 2	3,520.5	3,403.7	3,580.9
of which
DEL Resource	75.4	96.1	172.5
DEL Capital	3.5	4.0	2.0
AME	3,441.6	3,300.3	3,406.4
Financial Transactions	-	3.3	-

Table 5.02: Spending Plans (Level 2 Real Terms) at 2016-17 Prices

Level 2	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Scottish Public Pensions Agency	3,461.9	3,322.2	3,375.6
Revenue Scotland	5.2	5.2	6.0
Scottish Fiscal Commission	1.0	1.0	1.7
Finance & Constitution	52.4	75.3	146.3
Total level 2	3,520.5	3,403.7	3,529.6
of which
DEL Resource	75.4	96.1	170.0
DEL Capital	3.5	4.0	2.0
AME	3,441.6	3,300.3	3,357.6
Financial Transactions	-	3.3	-

Scottish Public Pensions Agency

Table 5.03: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Agency Administration	16.8	18.4	16.3
IT Provision	3.5	3.5	2.0
Scottish Teachers' Superannuation Scheme	1,259.1	1,208.3	1,229.6
NHS Superannuation Scheme (Scotland)	2,182.5	2,092.0	2,176.8
Total	3,461.9	3,322.2	3,424.7
of which
DEL Resource	16.8	18.4	16.3
DEL Capital	3.5	3.5	2.0
AME	3,441.6	3,300.3	3,406.4

What the budget does

The Scottish Public Pension Agency's budget supports its principal role of providing pensions administration services for and paying pensions to members of Scotland's NHS, Teachers', Police and Firefighters' pension schemes. Its other administrative responsibilities include injury benefits schemes for the NHS, Police and Fire & Rescue services in Scotland and providing pension calculation services for the Scottish Parliament Pension Scheme and the Scottish Legal Aid Board Pension Scheme. Its customers are all current or former public servants or their employers. The DEL resource and capital budgets support the running of the Agency and the four associated Pension Boards. The AME budget covers the cost of pension payments to approximately 200,000 retired scheme members.

The Agency also develops scheme regulations covering, and working with, Scheme Advisory Boards and provides policy advice to Ministers on Scotland's local government, NHS, Teachers', Police and Firefighters' pension schemes. It also determines appeals made by members of these pension schemes.

In 2017-18 we will:

• commission an integrated pension administration and payroll IT system;
• enhance services to scheme members and employers through better digital web services; and
• conclude quadrennial actuarial valuations for the Scottish NHS, Teachers', Police and Firefighters' pension schemes.

Revenue Scotland

Table 5.04: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Revenue Scotland	5.2	5.2	6.1
Total	5.2	5.2	6.1
of which
DEL Resource	5.2	5.2	6.1
DEL Capital	-	-	-
AME	-	-	-

What the budget does

Revenue Scotland is the Scottish tax authority and is responsible for the collection and management of the devolved taxes - currently Land and Buildings Transaction Tax ( LBTT) and Scottish Landfill Tax ( SLfT). The taxes collected are paid into the Scottish Consolidated Fund where they are invested in Scotland's public services.

In 2017-18, Revenue Scotland will:

continue to improve its systems and process for the collection and management of the devolved taxes, including compliance; and

prepare for the collection and management of a Scottish replacement for Air Passenger Duty which will be devolved under the Scotland Act 2016 with effect from April 2018. We will continue to take a collaborative approach, working with aircraft operators and other stakeholders to develop the systems, processes and guidance needed for the administration of the tax.

Scottish Fiscal Commission

Table 5.05: More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Scottish Fiscal Commission	1.0	1.0	1.7
Total	1.0	1.0	1.7
of which
DEL Resource	1.0	1.0	1.7
DEL Capital	-	-	-
AME	-	-	-

What the budget does

The Scottish Fiscal Commission is currently a non-statutory body that provides independent scrutiny of Scottish Government forecasts of tax receipts and the economic determinants underpinning forecasts of receipts from non-domestic rates. From 1 April 2017 the Commission will be a Non-Ministerial Department established by the Scottish Fiscal Commission Act 2016. The Act also expands the Commission's functions and responsibilities.

In 2017-18, the Scottish Fiscal Commission will:

• prepare independent forecasts of all revenue from fully devolved taxes, income tax and Non-Domestic Rates. Subject to secondary legislation being approved by the Scottish Parliament, the Commission will also prepare forecasts for demand‑led social security expenditure and Scottish GDP; and
• lay before the Scottish Parliament two reports on its forecasts of tax receipts, first when the Scottish Government publishes its Draft Budget and then when the Budget Bill is published.

Finance & Constitution*

Table 5.06 More Detailed Spending Plans (Level 3)

Level 3	2016-17 Draft Budget £m	2016-17 Budget £m	2017-18 Draft Budget £m
Public Information and Engagement	2.8	2.8	2.8
Procurement Shared Services	18.4	18.2	16.8
Scottish Futures Trust	4.7	13.0	4.7
Royal and Ceremonial	0.3	0.3	0.3
Scottish Parliamentary Elections	9.6	17.3	0.6
Local Government Elections	0.4	7.4	1.0
Local Government Boundary Commission**	-	0.2	0.2
Scotland Acts - Tax Provision implementation and management	16.2	16.1	12.0
Scotland Act 2016 non-tax Implementation	-	-	80.0
Capital Borrowing Repayment	-	-	30.0
Total	52.4	75.3	148.4
of which
DEL Resource	52.4	71.5	148.4
DEL Capital	-	0.5	-
AME	-	-	-
Financial Transactions	-	3.3	-

*This Level 2 was previously called 'Other Finance'.

**Local Government Boundary Commission was transferred to this portfolio from the Communities, Social Security & Equalities portfolio at the 2016-17 Autumn Budget Revision.

What the budget does

The Finance & Constitution budget covers a broad range of important functions ranging from delivering public information to the implementation of the new powers in the Scotland Act 2016.

Good communication lies at the heart of any competent and ambitious organisation and especially one which has committed to becoming Scotland's most open and accessible government. Insightful, creative and effective engagement with the public, with partners, with stakeholders and with staff helps to raise awareness, shift attitudes and change behaviours. It has the power to improve lives.

Under the Fiscal Framework, the UK Government agreed to provide a contribution towards the costs which the Scottish Government will incur in developing its existing, or establishing new, operations required to support the devolution of further powers under the Scotland Act 2016.

The agreed sums are: £200 million non-baselined transfer towards 'one off' implementation costs; and £66 million baselined transfer each year towards the annual running costs of those operations. The first tranche of funding - £100 million for implementation and £22 million for running costs - will form part of the Scottish Government's budget in 2017-18. Further discussions will take place in 2017 to agree the timetable for transferring the remaining funds in future years.

During 2017-18 the Cabinet Secretary for Finance and the Constitution will agree with Cabinet Secretaries detailed allocations of those funds to portfolios responsible for implementing the new powers. Some initial allocations have been made to support ongoing activity in support of the transfer of powers, and £80 million is included in the Finance and the Constitution Portfolio for this purpose.

Other associated transfers to fund the transfer of powers set out in the Act where activity is commencing in 2017-18 are reflected in the appropriate portfolio chapters.

The £30 million budget to cover the capital borrowing repayments reflects our estimated repayment costs for planned borrowing in 2016-17, although final figures for this commitment will not be settled until the end of 2016-17.

The SFT will continue to work to enhance value for money from infrastructure investment across the public sector in Scotland. This includes working in partnership with others to progress delivery of the extended pipeline of revenue funded investment and support other innovative ways of financing and procuring infrastructure.

The next local government elections will be held in May 2017. Local government councillors in Scotland are elected by the single transferrable vote ( STV) system of proportional representation. Due to the complex calculations involved in the system of STV used for local government elections, electronic counting is used. A project to deliver e-counting is being taken forward by the Scottish Government, the 32 local authorities and the contracted e-counting supplier, CGI.

The Government's procurement shared services support the delivery of procurement reform across the public sector. Public procurement in Scotland delivers value that goes well beyond financial savings, which includes:

• improving supplier access to public contracts, particularly for small and medium sized enterprises ( SMEs);
• maximising efficiency and collaboration; and
• placing the local, social and economic aspects of sustainability at the heart of the purchasing process.

Our procurement shared services provide cost effective, fast and reliable services and systems across the public sector. These:

• reduce risk;
• increase efficiencies, collaboration and financial savings;
• free up resources for public bodies to focus on making their own improvements; and
• simplify how government interacts with businesses.

Scottish Government-led procurement has delivered:

• some £753 million of savings from 2008-09 to 2015-16 and is on track to deliver another £100 million savings in 2016-17;
• over 3,500 apprenticeships and training opportunities have been created through community benefits; and
• procurement policy has been used to promote the payment of the living wage and to address 'blacklisting'.

In 2017-18 we will:

• fund the implementation and operation of the financial provisions in the Scotland Act 2016 and the ongoing operation of the powers devolved under Scotland Act 2012;
• continue to pursue the most cost-effective means of communications that deliver tangible results and outcomes;
• continue to work with Scottish Futures Trust to improve the efficiency and effectiveness of infrastructure investment in Scotland;
• deliver £96 million of savings through Scottish Government-led procurement exercises;
• continue with the implementation of the Procurement Reform (Scotland) Act 2014 and the new European Procurement Directives to deliver social, economic and environmental benefits across the public sector;
• provide a suite of e-commerce shared services across the public sector;
• implement recommendations to reform the procurement of construction;
• cover Royal and Ceremonial events and tasks within Scotland; and
• support the delivery of the 2017 local government elections and any Scottish Parliamentary by-elections, should they be required.