Scottish Budget 2022 to 2023

Chapter 1 Strategic Context: A Fairer, Greener Scotland

Economic and Fiscal Context

Since the publication of Scottish Budget 2021-22, Scotland has taken significant strides in reopening our economy, and in returning our lives to something approaching normality. But the aftermath of the pandemic, together with supply chain bottlenecks, labour market shortages, inflationary pressures and rising energy prices, may hold back growth in the short term, and falling levels of trade and lower productivity growth resulting from the UK’s exit from the EU may still harm long-term living standards.

The most recent Scottish Fiscal Commission (SFC) forecasts provide a more optimistic outlook on the economy – with the Scottish economy forecast to recover to pre-pandemic levels by April–June 2022, almost two years earlier than forecast at the previous Scottish Budget in January 2021. As economies across the globe reopen, there is evidence in various markets of temporary shortages or supply chain bottlenecks where demand has risen much faster than supply. These include energy markets, where soaring prices are putting pressure on businesses and households; product markets, where key components are in short supply; and labour markets, where vacancies are around 40% above pre-pandemic levels, and certain sectors – such as qualified HGV drivers – are facing skill shortages. These are holding back both our economic recovery and future prosperity.

While unemployment is still expected to rise in late 2021 due to the unwinding of the furlough scheme, labour shortages in various sectors and record levels of job vacancies mean the SFC now forecast a peak unemployment rate of 4.9% in quarter four of 2021 – reflecting a small increase after the unwinding of the Furlough scheme, although one far below the 7.6% forecast at the time of the previous Scottish Budget. Set against this, however, we know that existing inequalities have been exacerbated by the pandemic, and that those most impacted by, and at risk of, poverty have experienced unequal and disproportionate impacts.

In line with the Office for Budget Responsibility (OBR) October 2021 inflation forecast for the UK, the SFC is also forecasting significantly higher price inflation in the economy which is now expected to peak at 4.4% in April–June 2022. Consequently, the SFC forecast real earnings growth of -0.8% in 2022-23.

The SFC are now also forecasting the level of long-term economic “scarring” to the Scottish economy from COVID-19 of around -2%, similar to the OBR’s forecast for the UK economy. But this means the long-term impact of Brexit on the economy will be worse than that caused by COVID-19, with the OBR attributing a 4% long-term reduction in living standards to EU exit. Initial trade data also supports the OBR’s assumption that UK trade with the EU will be 15% lower due to EU Exit. For Scotland, HMRC regional trade statistics showed that exports to the EU decreased by 8% (£584 million) to £6.4 billion in the first six months of 2021 – the first period of EU Exit trade barriers being in place – compared to the first six months of 2020.

Scottish Government funding

Against this wider economic and fiscal context, and as a result of UK Government funding decisions, the Scottish Government will face further financial pressure in delivering our ambitious programme to secure a fair and green recovery.

While the recent UK Government Autumn Budget and Spending Review announced what was described as a significant increase in Scotland’s block grant, the reality is a cut in day-to-day funding for each year of the spending review compared to 2021-22 – in addition to the continuing challenges of Covid-19 and EU exit.

The average annual increase of £4.6 billion portrayed by the UK Government is only a rise after all 2021-22 COVID-19 and other one-off funding from the Block Grant is stripped out. In practical terms, between 2021-22 and 2022-23, resource funding is 7.1% less in real terms.

Alongside revenue funding, the UK Spending Review also fell short of the Scottish Government’s ambitious capital spending plans – constraining our ability to invest in the infrastructure required to support our economy and public services, and deliver the green jobs and technology required to reach Net Zero. The equivalent reduction for Scotland’s capital budget grant funding is a 9.7% real terms cut between 2021-22 and 2022-23. Despite that, this budget demonstrates our continued progress in delivering on our National Infrastructure Mission, with a £1.5 billion increase in infrastructure spend by 2025-26 – and a total investment of £34.1 billion between 2021-22 and 2025-26.

Over the longer term, there are similar, real terms reductions for resource and capital against the current year’s funding for 2023-24 and 2024-25.

Despite being five years on from the EU referendum result, and repeated assurances, the Spending Review also failed to provide clarity on the UK Government’s plans for EU Structural Funds replacement, the UK Shared Prosperity Fund. Not only has the UK Government’s approach to date undermined the devolution settlement, it has left the Scottish Government – and in turn communities and industries – far short of the funding received from previous EU Structural Funds programmes.

This combines to mean a UK Government settlement which is far short of what is required for continued management of the pandemic while also enabling us to capture the opportunities of the next decade.

In the face of these pressures, the Scottish Government is committed to using the full resources at our disposal to ensure a fair and green future – supporting people, businesses and communities to recover from the impacts of the pandemic, and setting them on a path towards a wellbeing economy. The Scottish Budget provides the first investment towards meeting our key priorities of ending both child poverty and Scotland’s contribution to climate change, securing an economic transformation rooted in a just transition to Net Zero, and rebuilding our public services to best meet the needs of the people who use them.

Tables 1.01 and 1.02 show the Scottish Government’s 2022-23 Budget Control Limits, including the block grant settlement, borrowing and revenues, and 2022-23 portfolio budget plans.

Long-term spending

The UK Government Autumn Budget and Spending Review provided some clarity for the Scottish block grant in the medium-term – albeit not for the full duration of this Scottish Parliament. That allows the Scottish Government to provide greater certainty over our spending plans, and to plan now for the positive reforms in public policy and services that will be required to deliver a fair and green recovery, and to our partners who will help to deliver that recovery.

In September, the Scottish Government published our Programme for Government and Shared Policy Programme with the Scottish Green Party, setting out ambitions and commitments across this Parliament to deliver better outcomes for the people of Scotland, and meet the challenges and opportunities of our time. This was followed by an update to our Climate Change Delivery Plan, and Covid Recovery Strategy, and we will shortly publish a National Strategy for Economic Transformation, followed by a new Tackling Child Poverty Delivery Plan in spring 2022. To demonstrate how those commitments will be met, the Scottish Government will publish a Resource Spending Review in May 2022. Alongside the Scottish Budget, we have published a framework document, setting our principles and approach – for comment and consultation – to that spending review.

In February 2021, we also set out five year capital spending plans in our Capital Spending Review and Infrastructure Investment Plan. Given our Programme for Government and Shared Policy Programme commitments, and the updated financial position following the UK Spending Review, a targeted review of this will be undertaken in early 2022. In conducting this review, the Scottish Government is committed to the principles set out in the Infrastructure Investment Plan and the recommendations of the Infrastructure Commission for Scotland – maintaining our vision for future infrastructure to support and enable a just transition to Net Zero, and an inclusive economy.

Spending Priorities

While a transitional budget, ahead of the Resource Spending Review to be published next year, Scottish Budget 2022-23 begins the process of investing in our collective recovery, and directing resources towards the Scottish Government’s and Scottish Green Party’s shared ambition for a fairer, greener future: reducing child poverty and driving up living standards; redoubling our efforts to end Scotland’s contribution to climate change through a just transition to Net Zero; securing an economic transformation which drives shared prosperity across of Scotland’s communities; and protecting and rebuilding our precious public services.

Following the UK Government’s decision to strip out all COVID-19 funding and other one-off consequentials from their Autumn Budget and Spending Review baselines, spending figures here are provided against a directly comparable 2021-22 baseline.

Tackling inequalities

While it has been a difficult 18 months for many young people and their families, particularly those on the lowest incomes, the Scottish Government is determined that they will not bear a long-term burden. While Scotland has the joint-lowest level of child poverty in the UK (alongside Northern Ireland), we know that there is significant work to do to meet our statutory targets to end it.

Game-changing initiatives like the Scottish Child Payment will help us get there, but will not be enough in isolation. To succeed in being the country we want to be – fairer, greener, and more prosperous – this budget continues a national mission to tackle child poverty, and to make Scotland a land of opportunity for everyone, across every portfolio, and through our Shared Policy Programme with the Scottish Green Party.

The most immediate and direct way to tackle poverty is by putting more money into the pockets of those in need, increasing family incomes and ensuring they have a decent standard of living. This budget will:

• Invest £197 million in the Scottish Child Payment – doubling it to £20 per week from April 2022, and expanding eligibility to children aged 6-15 from December 2022. Once expanded, around 400,000 children will be eligible, and 40,000 are expected to be lifted out of poverty. The doubled payment, together with the three Best Start Grant payments and Best Start Foods, can give families up to £8,400 by the time their first child turns six.
• Ahead of expansion to under 16s, invest £68.2 million in Scottish Child Payment ‘bridging payments’ – providing a £520 payment for every child in receipt of free school meals due to low income.
• Protect the Scottish Welfare Fund with £41 million, helping people in times of crisis, and provide £80.2 million in Discretionary Housing Payments, helping people sustain tenancies and directing resources towards mitigating the UK Government’s bedroom tax.
• In total, we will invest over £4 billion across social security and welfare payments, providing vital support for low income families, carers and disabled people – including £1.95 billion to start delivery of the Adult Disability Payment in 2022-23, replacing the UK Government’s controversial Personal Independence Payment.
• £24 million in a range of measures to support young people and their families with the cost of the school day – including free music tuition, the removal of curriculum charges, and increasing the school clothing grant.
• £110 million to provide free bus travel for young people from January 2022 – putting more money in their pockets, and encouraging more use of public transport as a means to tackle the global climate emergency.
• Over £72 million for the continued expansion of free school lunches – providing lunches for all children in P1-5 and special schools, and supporting the infrastructure required to roll-out lunches to all primary children. Alongside this, we will provide over £21 million to continue the provision of free lunches during school holidays, focused on those who will benefit the most, and continue to work on a phased approach for the provision of a universal milk scheme, maintaining the current subsidy arrangements for local authorities.
• £10 million to take forward our Ending Homelessness Together action plan, with a key focus on shifting to a national Housing First approach.
• £831 million for affordable housing – progressing our commitment to deliver 110,000 affordable, energy efficient homes across the next decade, leveraging further private sector investment and supporting employment in the construction sector.

While this budget invests in lifting children out of poverty now, we must work to break its generational link. Children born into poverty should not grow up to be parents in poverty. We will continue to invest in early learning and childcare and education to ensure that every child and young person has the opportunity to fulfil their potential. Key measures will include:

• £200 million for the Scottish Attainment Challenge – the next instalment of our commitment to provide £1 billion over this Parliament to tackle the poverty-related attainment gap.
• £145.5 million for local authorities to ensure the sustained employment of additional teachers and classroom assistants recruited during the pandemic – as part of our commitment to support the recruitment of at least 3,500 teachers and 500 classroom assistants over this Parliament – and to help councils make these posts permanent, and a £2 million increase in initial teacher education places, creating a pipeline for future expansion. Our investment includes the biggest increase in funding to support teacher recruitment since 2007.
• £544 million to deliver free funded ELC for three and four year olds, and two year olds from lower income households, while taking forward work to expand that to one year olds from low income households within this Parliament.
• Provide the first £50 million of our commitment to invest £500 million in a Whole Family Wellbeing Fund across this Parliament – creating a pool of funding, with contributions across portfolios, to help ensure we #KeepThePromise priority to improve provision of holistic whole family support. Funding will ramp up significantly through the Spending Review, as capacity and capability for transformational change builds in the sector.

We want to create an enduring legacy of positive futures for all, free from the risk of poverty. We know that one of the single greatest ways we can do that is by providing good, sustainable employment – not just providing a route into jobs, but ensuring those are secure and well paid, with fair work at their heart, particularly for those most at risk of poverty. Our key actions will include:

• Over £90m to support those most impacted by the pandemic, including the long term unemployed, young people and parents. The funding will also support people upskilling and retraining, including through the Green Jobs Workforce Academy.
• £23.6 million for the delivery of Fair Start Scotland services – providing person-centred support for people furthest from the labour market, including disabled people and those with long term health conditions, people from minority ethnic communities, and those who face other barriers to moving into fair and sustained work.
• £3 million to begin the early phasing of a school age childcare offer, targeted to support the six priority groups in the Tackling Child Poverty Delivery Plan, and £10 million to support delivery of holiday childcare for low income families. We will take forward work to build an affordable and accessible system of wraparound school age childcare, free to families on the lowest incomes, within this Parliamentary term, supporting more parents to work, train or study.
• A public sector pay policy with a floor of £10.50 per hour, increasing wages for the lowest paid workers. We will also improve Fair Work Conditionality, covering all forms of Scottish Government support to business, requiring organisations in receipt of public sector grants to pay at least the real Living Wage to all employees.
• £3 million in funding for community learning and development, providing vital support to some of the most disadvantaged learners, allowing them to increase their skills for learning, life and work.

Ending Scotland’s contribution to climate change

Scotland was one of the first countries in the world to declare a global climate emergency, with world-leading targets to end our contribution to climate change by 2045. We are already over halfway there, and ahead of the rest of the UK – but despite progress, the need for urgent, transformative action to tackle the twin crises of climate change and ecological decline remains. While COP26 put the international spotlight on Scotland, the focus must now be firmly set on delivery at pace and scale, and for all countries, including Scotland, to provide ambitious but credible plans to deliver the necessary reductions to meet the Paris Agreement.

Our focus now is to set Scotland on a path to achieving our 2030 targets through the delivery of our updated climate change plan, recognising that that will be harder, require more investment, and the mobilisation of public and private sector partners to achieve. The Scottish Government’s approach has been strengthened by our Shared Policy Programme with the Scottish Green Party. Through this Budget, we will redouble our efforts to meet our emissions reduction targets in a fair and just way that leaves no one behind – investing billions of pounds, and attracting private investment, to decarbonise how we heat our homes and buildings, transport and industry, and in turn supporting businesses to create the good, new and green jobs of the future.

We will lay the groundwork to secure a green recovery, and follow through on our commitment to implement the recommendations of the Just Transition Commission across this Parliament. In this Budget, we provide:

• the first £20 million of our 10 year, £500 million Just Transition Fund – identifying key projects, through co-design with those impacted by the transition to Net Zero, to accelerate the development of a transformed and decarbonised economy in the North East and Moray.
• £336 million for energy efficiency, and low carbon and renewable heat – cutting emissions, making homes warmer, tackling fuel poverty and creating jobs across Scotland – including £160 million to support those least able to pay for home energy improvements and tackle fuel poverty, and £60 million for large scale heat decarbonisation projects. The budget increase will allow us to double and refocus grants for energy efficiency and heat measures, including heat pumps, open to all households, and drive forward our commitment to decarbonise the heating of one million homes, and the equivalent of 50,000 non-domestic buildings, by 2030.
• £53 million across a range of energy transition and industrial decarbonisation projects, including £20 million in a range of Energy Transition Fund projects in the north-east, to ensure Scotland’s energy sector plays a leading role in the development and deployment of new, low carbon projects and the creation of new, green jobs.
• £23.5 million for our Green Jobs Fund - helping businesses create green employment through investment.

We will continue to invest in a co-ordinated approach to tackling climate change – working across and joining up sectors to harness opportunities for inclusive jobs, growth and wellbeing, and ensuring that climate change action is integrated into all of the decisions we make across government. In this Budget, we provide:

• £6 million for the Climate Justice Fund, as part of our commitment to invest £36 million across this Parliament to help those countries most affected by climate change, yet least responsible for it. As well as providing direct funding to developing countries for climate adaptation and mitigation, and tackling loss and damage, as seen through our leadership at COP26, this can also help leverage more countries to step up.
• A record £150 million for walking, wheeling and cycling – progressing our ambitions to create an active travel nation and reduce car kilometres, and putting us on track to ensure 10% of the Transport budget goes towards active travel by 2024-25.
• We will ensure all annual revenues from Scotwind, due to be confirmed early in 2022, are invested in projects that support Scotland’s transition to Net Zero.
• £53 million to protect and restore nature, including our internationally important peatlands, to address the twin crises of climate change and nature loss. A further £69.5 million to be invested in woodland creation and sustainable management of Scotland’s woodlands – enabling an increase of our woodland creation target to 15,000 hectares.
• Over £96 million for delivery of our place-based investment programme and a range of projects to regenerate communities – revitalising town centres, supporting local approaches to tackling inequalities and climate change, and enhancing the environment.
• Building on the platform of COP26, we will work to attract investment into Scotland’s Green Investment Portfolio, which will bring together market-ready projects worth £3 billion by 2022, and accelerate work on developing our pipeline of investible projects with credible and robust business cases.
• Invest a further £1 million to widen the development of our Green Growth Accelerator programme which together could unlock £40 million of local government investment in green infrastructure, backed by long-term Scottish Government funding.

We will continue to drive concerted change through each and every sector in Scotland, to ensure they all play their part in meeting the required emissions reductions – accelerating a transition away from fossil fuels, putting land use and nature-based solutions central to emissions reductions, and decarbonising our homes and industries. This Budget provides:

• Almost £1.4 billion to maintain, improve and decarbonise Scotland’s rail network, including £247 million on Major Project Enhancements which includes Decarbonisation of the Barrhead corridor, East Kilbride corridor, Fife and Borders electrification.
• £112 million to support a range of sustainable low and zero carbon transport initiatives, including investing in: bus priority as part of our over £500 million long-term commitment; growing and developing electric charging and zero emission refuelling infrastructure to accelerate the switch to zero emission vehicles across public and private fleets; and supporting employment and growth through investment in test facilities and related emerging transformative technologies.
• £35 million to support Scotland’s Zero Emission Bus Challenge Fund for the purchase of ultra-low and zero emission buses, and the costs of infrastructure required to run these buses – ensuring progress towards our commitment to remove the majority of fossil-fuelled buses from public transport by 2023.
• £304 million – on top of the additional £110 million free bus travel scheme for young people – to support bus services and their users through the older and disabled persons free bus scheme, smartcard technology, increased support for services as they recover from the impacts of the pandemic and a new Community Bus Fund to help local transport authorities improve services.
• Over £50 million to support the farming sector in tackling the climate and nature emergencies and to produce food more sustainably, including £10 million for the National Test Programme to transform agriculture and £35.8 million for agri-environment schemes.
• £43 million to drive forward Scotland’s circular economy, which will reduce reliance on scarce resources and reduce waste as an essential contribution to tackling the twin crises of climate change and biodiversity loss.

Supporting Scotland’s recovery

As we recover from the pandemic, a return to how things were before is not enough. We have seen the opportunity, and the necessity, to chart a different path for Scotland’s economy and public services. This Budget invests in helping people, businesses and services to get back on their feet following the crisis, and begins the process of securing long-term transformation – securing an inclusive economy to deliver our twin ambitions for child poverty and emissions reductions, bolstering health and social care to deliver services in new and innovative ways, and supporting the recovery and transformation of our public, emergency and justice services.

Our forthcoming 10-year National Strategy for Economic Transformation will set out how we will work towards a wellbeing economy: one that supports business activity, entrepreneurship and innovation, is environmentally sustainable, enables places to thrive, and through better wages and fair work reduces the social inequalities that have been exacerbated by the pandemic. That will be a long-term process, but starting now. This Budget:

• Maintains our generous non-COVID-19 non-domestic rates reliefs package, which is forecast to save ratepayers around £745 million and help businesses get back on their feet. This includes the Small Business Bonus Scheme, which takes over 111,000 properties out of rates altogether and is the most generous relief of its type in the UK. We will also expand the Business Growth Accelerator relief for property improvements to include the installation of solar panels as a qualifying improvement, and we will extend Enterprise Areas Relief by one year to 31 March 2023.
• Building on the 100% non-domestic rates relief offered to retail, leisure, hospitality and aviation over the last two years we will support businesses in their return to more normal levels of trading, providing a below-inflation increase to the poundage and a continuation of the relief for properties in the retail, hospitality and leisure sectors at 50% relief for the first three months of 2022-23, capped at £27,500 per ratepayer.
• A further £205.9 million towards capitalisation for the Scottish National Investment Bank – helping it deliver against its missions of supporting Scotland’s transition to Net Zero; building communities and promoting equality; and harnessing innovation.
• Investment of £51 million in rural services and islands, supporting delivery of activities linked to the National Islands Plan and introducing a new Islands Bond Fund.
• £225.6 million to deliver a range of national training interventions through Skills Development Scotland, including maximising apprenticeship starts, and delivery of the Scottish Government’s national redundancy service, and local careers information, advice and guidance services.
• Over £1.9 billion for Scotland’s universities and colleges – protecting their role in driving an inclusive economy, delivering high quality education and training for the future workforce, and ensuring young people from disadvantaged backgrounds continue to have access to and succeed in higher education.
• £370.5 million to support our enterprise agencies and £49.2 million for VisitScotland to strengthen key sectors so that they prosper within and drive a Net Zero economy, promote innovation and achieve sustained success in new and emerging markets.
• £9.2 million to harness the digital ambitions of our SMEs and strengthen our digital economy.

Central to our recovery will be investment in the long-term sustainability of our public services – not least our health and social care services, and the extraordinary staff who kept them running during the toughest of times – but we know that came at a cost, and exacerbated existing pressures within the system.

As we emerge from the pandemic, we will ensure that everyone gets the care they need, while recognising and repaying the efforts of staff. We will protect the fundamental principle of free care at the point of need for everyone, while ensuring that – whether physical or mental – it is delivered in a way, place and time that works best for people, and addresses the underlying health inequalities our society faces, and the pandemic has exacerbated. This Budget invests:

• Barnett consequentials in full for front-line health and care spending in health and care services, and delivers record funding of £18 billion for Health and Social Care.
• Over 50% of front-line spend will be directed towards community health services, delivering on our commitment to increase primary care funding by 25% over this Parliament, providing more care for people in a place and in a way that meets their needs.
• £12.9 billion for health boards – delivering the first increase to ensure front-line funding which directly supports patient services increases by at least £2.5 billion by 2026-27.
• £554 million investment in health infrastructure – supporting continued delivery of our NHS Recovery Plan by increasing capacity and treatments through expansion of our network of National Treatment Centres.
• Over £1.2 billion for mental health – taking forward our commitment to ensure direct mental health funding increases by 25%, and that 10% of all front-line NHS spend goes to mental health, by the end of this Parliament – shifting the focus to prevention and early intervention, and reducing demand and waiting times for clinical services.
• £147.6 million to address the twin public health emergencies of drugs deaths and the harms from alcohol – including £61 million specifically to address the national tragedy of drugs deaths, as part of our commitment to invest £250 million over the lifetime of this Parliament.

The importance of our social care services has never been clearer. We owe an enormous debt of gratitude to our nation’s carers, paid and unpaid, for the commitment and compassion we have seen throughout the pandemic. Chief among our priorities for rebuilding heath and care is the creation of the National Care Service. We will take forward ambitious reforms, but this Budget ensures we do not wait for the service to come into being to continue to drive up standards and quality.

• We will provide total investment of over £1.6 billion for social care and integration – a significant step towards our commitment to increase spend in social care by 25% by the end of this Parliament, and beginning to lay the groundwork for the establishment of a National Care Service.
• Funding of £846.6 million will be transferred from the Health and Social Care portfolio to local authorities for a range of investments in health and social care and mental health services.
• To support retention, and begin to embed improved pay and conditions for care workers, the Scottish Government considers that this funding requires local government to deliver a £10.50 minimum pay settlement for adult social care workers in commissioned services, in line with the equivalent commitment being made in the public sector pay policy. This brings the total transfer to over £1.4 billion.
• Our wider investment in social care will also see an additional £25 million for social work capacity, £50 million investment in Fair Work for adult social care staff, £40 million investment in Multi-Disciplinary teams, and £5 million to support a right to respite for unpaid carers.

Alongside health and care services, our emergency services and justice agencies were a mainstay of the pandemic. This Budget recognises the role they have played, and supports their continued operation and reform. Given the experience of the pandemic, we will also ensure the necessary funding to reform our wider justice system – tackling the pandemic-induced backlog, while making access to justice as efficient and effective as possible. That includes redoubling our focus on community justice and prevention, and on the needs of victims and their families. This Budget provides:

• An additional £40.5 million for the Scottish Police Authority – to £1.3 billion – maintaining our commitment to protect the police resource budget in real terms for the entirety of this Parliament – providing a stable basis from which to improve service delivery and enhance the safety and security of communities across Scotland.
• £53.2 million to continue Justice recovery, renewal and transformation – including £15 million for community justice services – alongside £13 million to the Crown Office and Procurator Fiscal Service for court recovery and addressing trial backlogs.
• Over £23 million support to front-line organisations that help eradicate and prevent Violence Against Women and Girls, and £4 million in additional funding to improve victim-centred support.
• An additional £9.5 million for Fire and Rescue Scotland – to £352.7 million – enabling it to expand its work on fire prevention and safety with vulnerable households, and improve firefighters’ emergency medical response capability.

In delivering on our ambitions, the Scottish Government cannot do it alone. A national recovery is a national endeavour. We are reliant on countless partners – across the public, private and third sectors – to ensure delivery, and provide joint leadership, not least within local government.

Throughout the pandemic, local government led the way in supporting the resilience of our communities and safeguarding some of our most at-risk and vulnerable people. They will continue to play a vital role in our recovery – delivering a diverse range of services, working to improve the lives of people across all of our communities, and helping support economic recovery and prosperity. In difficult financial circumstances, this Budget delivers stability and certainty for councils: protecting funding for those services in real terms, ensuring they are an equal partner in delivering on our shared ambitions, and starting to open up new revenue-raising opportunities, putting more say over local resources in local hands.

• We will provide an overall funding package of almost £12.5 billion, representing a real terms increase of 4.5%.
• This includes a real terms resource increase of 4.4%, to £11.8 billion, and a real terms capital uplift of 7.2%, to £679.5 million – ensuring a fair settlement for councils. It provides additional funding for shared commitments to deliver additional teachers, enhance social care provision, extend free school meals, and provide greater protection against flooding.
• We will provide full flexibility to local authorities in setting council tax rates – enhancing their fiscal autonomy – while taking forward our commitment to hold a Citizens’ Assembly on local government funding, including Council Tax, within this Parliament.
• For future years, we will introduce secondary legislation imminently on a Workplace Parking Levy to enable local authorities to introduce such schemes from 2022, alongside their work on low emissions zones, and will resume work on the Visitor Levy proposal. We will also work collaboratively with local government to develop and agree a fiscal framework.

Promoting Equality and Human Rights

We will provide a Promoting Equality and Human Rights budget line of £44.98 million this year – an increase of 39% – demonstrating the Scottish Government’s commitment to promoting equality and realising human rights for the people of Scotland. This will enable continued funding to organisations supporting some of the most vulnerable in society, through Delivering Equally Safe and Embedding Equality and Human Rights funds. It also delivers on a range of Programme for Government commitments in equality, inclusion and human rights, including support to front-line organisations that work to tackle gender-based violence or deliver Equally Safe.

Outcomes and Equality

The Scottish Budget is underpinned by Scotland’s National Performance Framework. This sets out a vision for a more successful country, where all of Scotland has the opportunity to flourish through increased wellbeing, and sustainable and inclusive economic growth. Alongside this vision, the Scottish Budget delivers against our eleven national outcomes:

Figure description:

Our Purpose

To focus on creating a more successful country with opportunities for all of Scotland to flourish through increased wellbeing, and sustainable and inclusive economic growth

Our Values

We are a society which treats all our people with kindness, dignity and compassion, respects the rule of law, and acts in an open and transparent way

National Outcomes

• Children and Young People: We grow up loved, safe and respected so that we realise our full potential
• Communities: We live in communities that are inclusive, empowered, resilient and safe
• Culture: We are creative and our vibrant and diverse cultures are expressed and enjoyed widely
• Economy: We have a globally competitive, entrepreneurial, inclusive and sustainable economy
• Education: We are well educated, skilled and able to contribute to society
• Environment: We value, enjoy, protect and enhance our environment
• Fair Work and Business: We have thriving and innovative businesses, with quality jobs and fair work for everyone
• Health: We are healthy and active
• Human Rights: We respect, protect and fulfil human rights and live free from discrimination
• International: We are open, connected and make a positive contribution internationally
• Poverty: We tackle poverty by sharing opportunities, wealth and power more equally

Table 1.01: Scottish Government Budget Control Limits 2020-21 to 2022-23

Cash Terms	2020-21 £m	2021-22 £m	2022-23 £m
UK Government - SR20 settlement		36,073
UK Government - SR21 settlement			39,257
Total Budget Limit from HM Treasury (A)	35,051	36,073	39,257
of which:
Fiscal Resource Budget Limit	29,711	30,892	34,322.1
Capital Budget Limit	4,734	4,973	4,468.9
Financial Transactions	606	208	466.1
Block Grant Adjustment for Social Security (B)	3,203	3,310	3,587
Ring-fenced and Non-Barnett Funding - Resource (C)	472	756	704
Ring-fenced and Non-Barnett Funding - Capital (C)			643
Total Covid-19 Funding (D)		3,686	0
Block Grant Adjustment for Taxes and Non-Tax Income	(12,991)	(12,430)	(14,639)
Scottish revenues:
Scottish Income Tax	12,365	12,263	13,671
Land and Buildings Transaction Tax	641	586	749
Scottish Landfill Tax	116	88	101
Non-Tax Income	25	25	25
Net Resource Budget Adjustment for Taxes and Non-Tax Income (E)	156	532	(93)
Reconciliation to Outturn (F)	(207)	(319)	(15)
Resource Borrowing (G)	207	319	15
Capital Borrowing (H)	450	450	450
Total Scottish Government Funding (A+B+C+D+E+F+G+H)	39,332	44,807	44,548

Figures may not add due to rounding

(A) The prior year comparators throughout this document reflect the position as set out in the Scottish Budget as approved by Parliament for that year. The funding position shown is consistent with that original budget allocation. The budget position changes throughout the year and subsequent budget revisions are available from the Scottish Government website. The Block Grant figures shown here represent core funding allocation calculated in accordance with the Barnett formula as detailed in the UK Spending Review of 27 October. This analysis is of Fiscal aggregates only and excludes ring-fenced non-cash budgets.

(B) Under the Fiscal Framework, there are additions to the block grant to reflect social security expenditure devolved to Scotland under the Scotland Act 2016. Further details on the devolved social security benefits with a corresponding Block Grant Adjustment are set out in Annex B of the Medium-Term Financial Strategy, published in December 2021.

(C) From 2020-21 Farm Subsidy direct payments are funded by HM Treasury (previously funding came from the EU). From 2021-22 HM Treasury are also funding Fisheries support that previously came from the EU. EU replacement funding is ring-fenced for that purpose. There are additional non-Barnett resource and capital allocations in respect of a specific Network Rail funding agreement.

(D) The UK Spending Review 2021 provided no Covid-19 funding for 2022-23 or beyond. The 2021-22 comparative figure here of £3,686m is £3,408m of Resource funding from a combination of 2020 UK Spending Review, UK March 2021 Budget and carry forward from 2020-21, £237m of Capital carry forward from 2020-21 and £40m of Financial Transactions carried forward from 2020-21.

(E) Under the Fiscal Framework, the block grant is reduced to reflect revenues devolved to Scotland under the Scotland Acts 2012 and 2016. The Block Grant Adjustment figures do not include Air Passenger Duty, devolution of which has been deferred. Revenues for Scottish Income Tax, Land and Building Transaction Tax and Scottish Landfill Tax are as forecast by the Scottish Fiscal Commission. Non-tax income is from Fines, Forfeitures and Fixed Penalties and Proceeds of Crime.

(F) Reconciliation to Outturn is the net impact to the Scottish Budget of the reconciliation for Income Tax, LBTT and SLfT, Non-Tax income, and devolved Social Security payments. Further details on the reconciliation to the 2022-23 Budget are set out in Annex B of the Medium-Term Financial Strategy, published in December 2021.

(G) Resource borrowing undertaken to smooth the impact of forecast errors on the budget – actual borrowing drawdown will be determined based on in-year financial position.

(H) Initial planned capital borrowing – actual borrowing drawdown will be determined based on in-year financial position.

Table 1.02: Total Proposed Budget for 2022-23

2022-23 Scottish Budget	Resource £m	Capital £m	Financial Transactions £m	Total £m	UK Funded AME £m	Total £m
Health and Social Care	17,378.7	554.0	10.0	17,942.7	100.4	18,043.1
Social Justice, Housing and Local Government	12,467.2	1,341.2	150.0	13,958.4	2,766.0	16,724.4
Finance and Economy	783.9	681.0	284.6	1,749.5	6,470.4	8,219.9
Education and Skills	3,279.1	484.0	22.1	3,785.2	361.3	4,146.5
Justice and Veterans	2,977.3	166.0	–	3,143.3	–	3,143.3
Net Zero, Energy and Transport	1,867.3	2,485.0	60.3	4,412.6	–	4,412.6
Rural Affairs and Islands	890.9	75.9	–	966.8	–	966.8
Constitution, External Affairs and Culture	340.0	30.5	–	370.5	–	370.5
Deputy First Minister and Covid Recovery	42.9	–	–	42.9	–	42.9
Crown Office and Procurator Fiscal Service	175.6	5.3	–	180.9	–	180.9
Scottish Government	40,202.9	5,822.9	527.0	46,552.8	9,698.1	56,250.9
Scottish Parliament and Audit Scotland	136.6	1.1	–	137.7	2.0	139.7
Total Scotland	40,339.5	5,824.0	527.0	46,690.5	9,700.1	56,390.6