Scottish Budget 2022 to 2023

Chapter 3 Pre-Budget Scrutiny by Parliamentary Committees

This chapter details how the Scottish Budget 2022-23 has been informed by pre-budget scrutiny from the Scottish Parliament’s Committees. In addition to the content below, following the publication of the Scottish Budget, each Cabinet Secretary or relevant Minister will provide a more detailed, written response to each individual Committee on their pre-budget scrutiny reports. These will be provided within five parliamentary sitting days of the publication of this Budget.

The Scottish Government would like to thank all Committees and their witnesses for the time taken to provide such detailed pre-budget scrutiny letters and reports.

Constitution, Europe, External Affairs and Culture Committee

The Committee’s report focused on the culture spending in the portfolio and its support through, and recovery from, the pandemic. The Committee welcome the Scottish Government’s commitment to supporting the culture sector to make a strong recovery from the pandemic and acknowledge the dependency on Barnett consequentials from the UK Government being received. The report points out the opportunity in the forthcoming resource spending review to align budget choices with the National Performance Framework and the Culture Strategy, and help mainstream culture across the Scottish Government, in particular as regards health and wider social benefits of cultural activity. The 2022 Scottish Budget confirms £277 million of support for Scotland’s culture and heritage sector to protect key cultural provision and support recovery. Our Resource Spending Review Framework published alongside this Budget sets out our intentions to deliver multi-year portfolio spending plans, which will provide the culture sector with more certainty for future planning.

Criminal Justice Committee

In its pre-budget scrutiny report the Committee recognised that the justice sector, has been greatly affected by the pandemic and that although some recovery and return to normality is underway, the effects of COVID-19 will continue and that this journey of recovery will require additional funding in 2022-23, specifically to fund recovery and transformation. The Committee highlighted the court backlog and the impact of this on the victims of crime, the perpetrators of crime and on those who work across the system. In addition, the Committee concluded that many of the budget challenges across the justice system stem from long-standing problems that pre-dated the pandemic and which have not been adequately addressed over the years. It highlighted that more needs to be done to address these challenges as we come out of the pandemic, through development of a clear and collective long-term strategy which recognises the interconnectedness of the justice system, while also resolving the systemic problems across the justice sector through targeted investment to deliver improvements and deliver savings in the longer-term.

The 2022-23 Justice budget will address many of the Criminal Justice Committee’s recommendations. It includes additional funding to ensure the substantial activity on Justice recovery, renewal and transformation continues to address the courts backlog, and provides additional funding for community justice services. Additional funding will also be invested to improve victim-centred support, including for victims of violence against women and girls. The Scottish Police Authority resource budget will increase in real terms providing a stable basis from which to improve service delivery and enhance the safety and security of communities across Scotland. Additional support for the Scottish Fire and Rescue Service will allow it to expand its work on fire prevention and fire safety with vulnerable households, and improve firefighters’ emergency medical response capability.

Economy and Fair Work Committee

The Committee’s report focuses on three key areas: Support for businesses as part of the economic recovery; capital investment; and fair work and support for employment and skills. In terms of business support, the Scottish Government continues to offer a competitive business rates package, backed by the most generous Small Business Bonus Scheme anywhere in the UK. Furthermore, our Enterprise and Skills agencies provide access to a range of funding and support for businesses – including for those undertaking their transitions to Net Zero, a specific focus of the committee’s report.

On capital investment supporting economic growth, this budget confirms that we will continue to capitalise the Scottish National Investment Bank with Financial Transactions in 2022-23. This forms part of an overall capital investment package across the Scottish Budget worth over £6 billion. In terms of fair work and support for employability and skills, there are a range of support measures in place, and our full response will set those out in more detail. Our support includes helping low income families most at risk of experiencing poverty with £8.65 million for the Parental Employability Support Fund in 2021-22, and at least a further £15 million across 2022-24. We are also ensuring that, by the end of this financial year all of Scottish Enterprise’s financial support to businesses will require a commitment to Fair Work First.

Education, Children and Young People Committee

The Committee’s report highlights that tackling the COVID-19 impacts on education inequalities should be at the heart of the COVID-19 response, and the Scottish Government welcomes this focus, and can confirm that reducing inequality is at the heart of the Education and Skills portfolio’s investment. The report acknowledges that the full impacts are yet to be completely understood or quantified, and therefore cannot be budgeted for in their entirety. The Committee makes important calls for additional data to help in this regard, to help demonstrate the impact that new and existing policies like the Pupil Equity Fund have on tackling inequalities. Our Education Recovery Plan references a schedule of forthcoming data and evidence releases that will help to assess the impact of the pandemic on children and young people.

The Committee welcomes the upcoming Resource Spending Review as an opportunity to set multi-year budgets and hopes this can be used to draw clear links between spending decisions and outcomes. The Scottish Government has already published local authority Scottish Attainment Challenge allocations over four years and will shortly do the same for Pupil Equity Funding allocations.

The Committee encourages Scottish Government to work with local government to deliver real-terms increases in funding for primary and secondary education and also to ensure efforts continue to be made to tackle rural deprivation. The Settlement and Distribution Group already has on its work-plan for 2022 a review of the deprivation indicators used in the settlement and the weighting they are given. The suitability of the indicators for both rural and urban areas will be included in this review.

On tertiary education, the Committee welcomes Scottish Government’s acceptance of most of the recommendations in the recent Scottish Funding Council review.

Equalities, Human Rights and Civil Justice Committee

The Committee’s report focuses on areas in which the Scottish Government can further embed equality and human rights in our budget processes. The report highlights recommendations from the Scottish Government’s Equality Budget Advisory Group (EBAG) and the First Minister’s National Advisory Council on Women and Girls (NACWG) that aim to drive progress in equality and human rights budgeting. The Scottish Government welcomes the ambitious recommendations from EBAG and the NACWG and the Committee’s report.

The Scottish Government has taken a range of actions to increase the use and effectiveness of equality budgeting including establishing the Equality Budget Advisory Group, the annual publication of the Equality and Fairer Scotland Budget Statement and wider work to mainstream equality and human rights. Building on this work, the Scottish Government will provide a response to the Equality Budgeting Advisory Group (EBAG) in spring 2022 on their 2021 recommendations, which include recommendations on human rights budgeting.

The report notes that equality data is an essential component of equality and human rights budgeting as it enables spend to be tracked and monitoring of its impact across protected characteristics. The Scottish Government has taken a range of actions to improve the availability and quality of equality data including establishing the Equality Data Improvement Programme (EDIP), which is working to strengthen Scotland’s equality evidence base. The Programme is led by a Board which includes representatives from key public sector organisations.

The Committee’s report also calls for increased participation and transparency in financial policy making, and the importance of multi-year budgeting. A Participation Framework has been developed as part of our membership of the Open Government Partnership, as a tool to support and promote good practice in participation and engagement across government and will be refined to focus participation on equality.

Finance and Public Administration Committee

The report offers a useful helpful summary of recent fiscal forecasts and an accessible commentary on current economic conditions, including the outlook for inflation. There are a number of important points made by the Committee around the Fiscal Framework review, including the “merit” of an ongoing minimum funding guarantee with HM Treasury. All of these Fiscal Framework points will be responded to more fully by Scottish Government in our more detailed response to the Committee.

In terms of the 2022-23 Scottish Budget specifically, the Committee once again raise the ongoing risks to Scottish Government around tax and social security forecast error – something that the pandemic has exacerbated by bringing additional uncertainty. On top of this, the report notes that many of the factors impacting on Scottish Government Budget pressures over the coming years remain, such as demographic change and skills shortages. The report notes the impact that this has on both the (income) tax base in Scotland relative to the rest of the UK and therefore revenue, and the impact on “demand-led services and social security payments”.

The Scottish Government is very conscious of the significant impact that demographic change may have in Scotland, in common with many advanced economies. For example, this was highlighted clearly in the previous (January 2021) Medium-Term Financial Strategy (MTFS), which also made clear the constraints that the current Fiscal Framework, places on our ability to manage these impacts. The previous MTFS also highlighted the key risks to Scottish Income Tax receipts across the medium-to-long term. MTFS documents will continue to reflect on demographics as one of the key strategic fiscal risks in the medium-term and accordingly the demographic change outlook will continue to inform spending decisions made by the Scottish Government.

Health, Social Care and Sport Committee

The Committee’s report covers a range of topics. The Committee champions the importance of preventative spend, and acknowledges the difficulty in prioritising this kind of spend whilst also looking to tackle acute pressures in the health system and the COVID-19 induced backlog of cases. The report also calls for a refreshed Medium-Term Financial Framework for health and social care.

The report also highlights the importance of continuing our drive toward greater health and social care integration, as part of wider calls to discourage silo working and driving continued effective co-ordination. Furthermore, the report calls for continued work to tackle health inequalities, as well as highlighting some positive innovations to come from the COVID-19 pandemic (such as the provision of digital services).

The 2022-23 Scottish Budget prioritises our work on recovery and renewal of our health and care services, with a sustained focus on tackling inequalities and ensuring that care is provided in a way that is both sustainable and best meets the needs of the people of Scotland.

We continue to work across the public sector and with third sector and other partners to ensure a joined up approach to care. As we lay the foundations for our National Care Service, this budget underpins our ongoing commitment to shifting the balance of spend toward mental health, and to primary, social and community care and recognises the importance of preventative spend in improving health outcomes. This is informed by our Preventative and Proactive Care Programme and our work to improve the data and evidence available for decision-making and targeted interventions, including our Equality Data Improvement Programme and leading-edge work to develop economic and ethico-legal framework for priority setting in Health and Social Care partnerships, that integrates economics, decision-analysis, ethics and law.

We will revisit the performance and financial assumptions underpinning the Medium-Term Health and Social Care Financial Framework, which considers the health and care system as a whole, and review the NHS allocation formula to ensure funding is distributed equitably across the country, to support provision of sustainable, equitable health services and a fairer, healthier Scotland.

The Scottish Government remains committed to preventative spend and our Resource Spending Review Framework, published alongside this Budget, sets out our intention to develop multi-year portfolio spending plans through the review in 2022.

Local Government, Housing and Planning Committee

The Committee’s report focuses predominantly on local government, and the critical role it has played in supporting our communities with the ongoing effects of the pandemic. The Scottish Government once again acknowledges that we would not have been able to get through the pandemic without local government and its employees.

The report calls on the Scottish Government to ensure that local government is funded to be able to meet the demands placed upon it – and this budget sees a real terms increase in the overall settlement available to local government for 2022-23. The Committee call for multi- year funding allocations for local government and we have today published our Spending Review Framework alongside this budget which sets out the next stage of this process.

Away from funding, the report covers a number of other topics including plans for a National Care Service, Community Wealth Building, levelling up, the Affordable Housing Programme and the Social Housing Net Zero Heat Fund. Scottish Government will respond to the Committee on these matters in more detail in our formal response letter but can confirm that this Budget delivers an increase to the Housing budget for 2022-23.

Rural Affairs, Islands and Natural Environment Committee

The Committee helpfully set out their planned approach to Budget scrutiny for the remainder of this Parliamentary session, confirming their planned approach to year-round scrutiny. The Scottish Government welcomes this, and the draft work plan for the Committee’s first year. The Committee’s initial interests are around the £30 million Programme for Government funding commitment for delivering the National Islands Plan and a fair, integrated, green and inclusive recovery. Their report also noted an interest in the upcoming National Islands Plan annual report and the Islands (Scotland) Act 2018.

The Scottish Government can confirm to the Committee that the expected publication date for the National Islands Plan Annual report will be 23 March 2022, and the expected date for the report on the Islands Act will be no later than 6 July 2022. During the 2021-22 financial year, we delivered £9.5 million of the £30 million Islands Programme through three key strands; the Islands Infrastructure Fund, the Island Communities Fund, and the Healthy Islands Fund. The funding allocation for the remaining financial years has been re-profiled to ‘backload’ funding in order to accommodate the long-term nature of the infrastructure projects that the Islands Programme will be supporting.

Social Justice and Social Security Committee

The Committee’s report is centred around the spend required in 2022-23 to achieve the 2023-24 Interim Child Poverty targets. The Committee call for the doubling of the Scottish Child Payment, and this budget confirms that we will increase this to £20 per week from April 2022. The report covers an ask to support families in receipt of Universal Credit whose children do not receive free school meals. This budget commits continued support for as many children and young people as possible through Bridging Payments, worth £520 in 2022, and we remain committed to delivering the Scottish Child Payment in full by the end of 2022, subject to the necessary data being received from DWP. The report also welcomes the expansion of high quality free early learning and child care for eligible families.

Going beyond child poverty, the Committee’s report also covers important issues like homelessness and support for carers, and Scottish Government can confirm that this budget includes £20.4 million to expand carer support under the Carers Act, bringing the total investment in the Act to £88.4 million per year. There is also an additional £5 million in the budget to enable more carers to access breaks from caring. We are also continuing to invest more than £350 million in 2022-23 in supporting eligible unpaid carers through Carer’s Allowance, Carer’s Allowance Supplement, and the Young Carer Grant.

The Committee also welcomed the Scottish Government’s investment in welfare rights advice, recognising how important these services can be to ensuring benefit take up and income maximisation. The Scottish Government have committed to investing £10 million over the course of this Parliament to increase clients’ access to advice services in accessible settings to maximise incomes, tackle the poverty penalty and improve wellbeing. £2.92 million of this is dedicated to expanding Welfare Advice and Health Partnerships over the next three years. The Committee report acknowledges that tackling poverty is a cross-government challenge. In 2020-21, the Scottish Government invested around £2.5 billion to support low income households, including nearly £1 billion to directly support children from across government portfolios.

Finally, the Committee’s report acknowledges that Adult Disability Payment is an investment in people with disabilities. This will be funded through the budget setting process in the normal way, noting that the Scottish Fiscal Commission expect this investment to rise to over £500 million per year by 2026-27.

Net Zero, Energy and Transport Committee

The Committee’s report covers a wide range of topics, including low carbon spend, climate change adaptation, the circular economy, biodiversity and natural infrastructure and transport. The Committee report notes the independent Climate Change Committee (CCC) conservative estimate that the costs of transitioning to Net Zero by 2045 could cost around 1per cent of GDP, and that across the UK there needs to be £50 billion of low carbon investment annually, with Scotland’s contribution to that is expected to be around £5 billion, with the majority of this coming from private investment.

Scotland is already in a good position with our Green Investment Portfolio aiming to reach £3 billion worth of market ready projects though we acknowledge that public finance alone will not be enough. Our Global Capital Investment Plan – published in March 2021 – seeks to achieve alignment between Scotland’s investment needs and the supply of internationally mobile capital.

The NZET Committee’s report asks a number of more detailed questions around Net Zero budgeting, which we will address in our response to them. The Committee also sought clarity over the detail and spending profile of the Just Transition Fund for the North East and Moray which will accelerate the just transition of the region by supporting the role of Aberdeen and the wider North East as one of Scotland’s centres of excellence for the transition to a Net Zero economy which we will respond to in our detailed response.

The NZET Committee raises the issue of naturally stored carbon being re-emitted as the climate adapts as an example of how we need to consider climate adaptation as part of our budget process. We have committed an extra £150 million over this Parliament to manage risks from flooding (in addition to continuing to provide £42 million annually to local authorities), with a further £12 million for coastal change adaptation. However, we accept that more needs to be done to build resilience as part of a just transition to being a Net Zero nation and we are seeking further Scotland-specific advice from the CCC.

The Committee welcomed Scottish Government’s ambitious 2025 targets around a circular economy, as well as welcoming the recent decarbonising heat in buildings strategy. We will pick up the Committee’s formal asks on these policy areas as part of our more detailed response. On transport, the Committee was focused on finding ways to encourage change towards low carbon, sustainable and active travel. Our £500 million investment over five years announced in Programme for Government 2020 for active travel infrastructure, access to bikes and behavioural change schemes shows a sustained commitment to active travel and will help promote mode-shift. The 2022-23 Scottish Budget will set out a significant uplift to £150 million to support the delivery of this commitment.