Scottish Budget: 2023 to 2024

Chapter 3 Pre-Budget Scrutiny by Parliamentary Committees

This chapter details how the Scottish Budget 2023-24 has been informed by pre-budget scrutiny from Scottish Parliament committees. Following the publication of the Scottish Budget, each Cabinet Secretary or relevant Minister will provide a more detailed, written response to each committee on their pre-budget scrutiny reports. This will be provided within five parliamentary sitting days of the publication of this Budget.

The Scottish Government is grateful to all Committees and witnesses for the time taken to provide the detailed pre-budget scrutiny letters and reports.

Constitution, Europe, External Affairs and Culture Committee

The Constitution, Europe, External Affairs and Culture Committee focused its pre-budget report on culture budgets. The Cabinet Secretary for Constitution, External Affairs and Culture agreed with the Committee when he gave evidence in October 2022 about the challenges in the culture sector of a fragile recovery from the pandemic combined with rising costs of living and operating costs. The Scottish Government is exploring these challenges further in a series of roundtables with the culture sector across Scotland. Against the background of general pressure on Government spending, which the Committee report acknowledged, the Budget maintains funding for the culture sector into 2023-24. The Government will consider setting multi-year planning figures for cultural organisations within the increased fiscal challenges presented by the UK Government's Autumn Statement.

Criminal Justice Committee

The Criminal Justice Committee's pre-budget scrutiny focus was primarily on the possible implications of the proposed flat-cash settlement for the justice sector, as set out in the Resource Spending Review (RSR).

The Committee recognises the challenges facing public spending over the next few years, and the difficult decisions that will have to be made by the Scottish Government. However, they have highlighted that painful decisions would have to be made if the projected flat cash position for justice organisations was to be delivered, and hope that the options for cost-savings presented by justice organisations do not need to be realised. Additionally, the Committee recognises the need for further efficiency savings across the justice sector, within and between organisations.

The 2023-24 Justice budget delivers increased budgets for the Scottish Police Authority, the Scottish Fire and Rescue Service, the Scottish Prison Service, the Scottish Courts and Tribunal Service and for legal aid. This provides a stable basis from which to improve the delivery of justice public services, and to also enable collaboration and co-location opportunities to be further explored and taken forward to improve service delivery and to deliver greater efficiencies across the justice system.

COVID-19 Recovery Committee

The COVID-19 Recovery Committee focused its pre-budget letter on the how the Scottish Government intends to fund ongoing costs related to the Strategic Framework (for example, pandemic preparedness, vaccination, testing) and work to support the Covid Recovery Strategy in the 2023-24 Budget. The Scottish Government is clear that the priorities set out in the Covid Recovery Strategy remain relevant during the ongoing cost crisis. The Scottish Government is prioritising support for those who need most help and is focused on reducing inequalities. The Scottish Government welcomes the interim report of the Standing Committee on Pandemic Preparedness and is working with Public Health Scotland and partners across the Four Nations to ensure we maintain a suitable ongoing response.

Education, Children and Young People Committee

The Education, Children and Young People Committee raised a number of points in relation to the financing and viability of colleges and universities. The Scottish Government notes the points made by the Committee. We are considering the opportunity to provide colleges with additional financial flexibilities as part of our education reform programme. In respect of universities, these are autonomous institutions and, with the exception of controlled subjects, the Scottish Government does not direct individual institutions on the allocation of funded places across faculties and courses. We will continue to work with the Scottish Fiscal Commission (SFC) and universities on financial planning to support sustainability. The 2023-24 Budget increases the resources available to the College and University sectors.

The Committee also made a number of comments in regard to the delivery and evaluation of 1,140 hours of Early Learning and Childcare (ELC). The Scottish Government and the Convention of Scottish Local Authorities (COSLA) are undertaking a review of the overall process for setting sustainable rates in 2022-23. This is with the intention of learning lessons to identify where the process can be improved further to ensure that rates reflect the costs of delivering funded ELC and payment of the real Living Wage to staff. We will set out further information in spring 2023. In addition, our ELC Expansion Evaluation Strategy sets out how we will evaluate the intermediate outcomes of the ELC expansion at a national level, including delivering high-quality, flexible, accessible, and affordable ELC for all three and four-year-olds and eligible two-year-olds. It sets out measures and data sources that will be used to evaluate changes in the flexibility of funded ELC.

Economy and Fair Work Committee

Acknowledging the challenging economic circumstances, the Committee's pre-budget recommendations focus on the following areas: working with the Scottish Tourism Emergency Response Group (STERG) to identify how best to target support for the sector; protecting Visit Scotland's international promotional spend; prioritising skills development, particularly in engineering and wider manufacturing sectors, to incentivise workplace learning and take advantage of opportunities from the transition for Net Zero; using Enterprise funding to support sectors with a buoyant export potential to expand, with a focus on green energy transition support; revisiting employability spend decisions; and ensuring gender disaggregated data on women's business activity and procurement, providing a profile of the £50 million budget for the Women's Business Centre.

In relation to tourism, we will work together with our partners on support for the sector, transitioning from an emergency response group to a Tourism and Hospitality Industry Leadership Group (ILG), which will help drive recovery and sustainable growth across both sectors in the long term. Concerning international marketing, Visit Scotland will continue to show its expertise and creativity in exploring new and innovative models. The National Strategy for Economic Transformation (NSET) sets out the importance of a skilled workforce to business productivity and economic prosperity, and the Making Scotland's Future manufacturing programme brings together key stakeholders to deliver a more coherent approach to supporting the educational and skills needs of the sector. We have asked enterprise agencies to align their activity and budget with NSET priorities, including delivery of our export plan, which takes a targeted sector and country approach to raising Scotland's international exports. NSET also underlines our commitment to addressing structural barriers to entering and staying in the labour market, and we have maintained our existing investment in employability support. The decision to take £53 million as a saving from employability funding was not taken lightly, but in light of the challenging financial situation we sought to make the savings that we consider have the least impact on public services and on individuals during the cost crisis. Over £82 million in total has been made available (£59.433 million through No One Left Behind and £23.5 million through Fair Start Scotland), to ensure employability support remains in place for those who need it, including parents. Regarding women in business, we have commissioned entrepreneur Ana Stewart to deliver an independent review on widening access to entrepreneurship for women. Due to publish in the new year, the review will identify actions required to address the persistent gender gap in entrepreneurship.

Equalities, Human Rights and Civil Justice Committee

The Committee focused on human rights budgeting in this year's pre-budget scrutiny, and this was informed by a number of third sector equalities and human rights organisations and experts. Their main recommendations to Scottish Government aligned to core principles of human rights budgeting of transparency (including data), participation and accountability within the budget process itself along with a request for a commitment to demonstrate human rights obligations in the process.

The Committee also focused on how the budget process could be more accessible and how Scottish Government could engage with marginalised groups more effectively to promote participation in the budget process. They also asked how the Government shows the linkage between human rights obligations, equality and Fairer Scotland duties in policy and funding decisions.

The Scottish Government welcomes the recommendations from the Committee. The Scottish Government is in the process of exploring how we further embed human rights approaches into the policy making and budgeting system, including alignment to the Human Rights Bill. We agree that transparency, participation, and accountability are critical areas for effective human rights budgeting and within Annex A of the Equality and Fairer Scotland Budget Statement, published alongside this Budget, we lay out how these principles align to this Budget. Scottish Government will also shortly publish its response to the Equality and Human Rights Budget Advisory Group's recommendations, many of which correspond with the Committee's own recommendations.

Finance and Public Administration Committee

Recognising the challenging economic circumstances, the Committee focused its response on the impact of the cost-of-living crisis and public service reform on Scotland's public finances in 2023-24, whilst also exploring other areas of interest such as Net Zero targets, National Outcomes, and fiscal transparency.

The Scottish Government has made it a priority in this Budget to provide sustainable public services. We have made significant progress in applying the principles of the Christie Commission and this Budget details how we will continue to drive public service reform, creating person-centred public services and rationalising our public bodies.

The cost-of-living crisis we are currently experiencing has placed huge pressures upon the Budget. We have sought to ensure those hardest hit by the crisis are supported, through fair pay increases for public sector workers, especially the lowest paid; expanding the Scottish Child Payment, and increasing its value to £25, amongst other measures.

On climate change, the Scottish Government is committed to ensuring that it delivers a just transition to Net Zero. We recognise the need for greater transparency in consideration of climate change in the Scottish Budget and welcome the work of the Fraser of Allander Institute on this.

More broadly, the Scottish Government recognises the Committee's call for greater fiscal transparency in the Budget process and establishing clearer links between spending priorities and National Outcomes. We will continue to improve this through our corporate reporting, in year budget revisions and long-standing membership of the Open Government Partnership.

Health, Social Care and Sport Committee

The Committee recognises the significant financial and operational pressures facing health and social care in the face of the cost crisis, the ongoing effects of COVID-19 on health and workforce planning, and the importance of data and a whole system approach to drive innovation, reduce inequalities and improve outcomes.

The 2023-24 Scottish Budget continues to prioritise investment in health and social care, supporting services in the immediate, and providing continued investment in our prevention and reform agendas to improve population health and ensure that the right care is provided at the right time now, and in years to come.

Supporting and developing the people who deliver these services is central to this programme of investment and reform, with continued focus on our commitments to Fair Work and pay, and our aim of ensuring that Scotland continues to be the best place for health and social care workers.

It is recognised that collaboration and data are key to delivering integrated, innovative, and evidence-based health and care solutions that can transform outcomes, unlock the full potential of our workforce, and support a modern and sustainable health service that can better face both current and future pressures.

This includes our work with Public Health Scotland to explore better ways to embed the consideration of health issues into decision-making at national and local level, with clear evidence of impact to support implementation and appropriate monitoring and evaluation tools. Our Accelerated National Innovation Adoption (ANIA) pathway supports a 'once for Scotland' approach to the identification, assessment, and accelerated deployment of innovative technology, and work to improve data collection and sharing across services (including the development of a Data Strategy for Health and Care and implementation of our Workforce Strategy), support service planning and enables flexible service delivery and more agile ways of working.

Alongside service reform, work to update the Medium-Term Health and Social Care Financial Framework is progressing. This will set out the scale of the challenge, along with the next steps in the financial arrangements for our health and care services. As part of this, co-ordinated local and national cost reduction measures will be implemented, including the Covid Cost Improvement, Sustainability and Value and Choices programmes, to address financial pressures across the system and to support delivery of financially, socially, and environmentally sustainable services.

Local Government Housing and Planning Committee

The Committee noted the Scottish Government's commitment to working with partners to deliver 110,000 affordable homes by 2032, 70% of which will be available for social rent and 10% will be in remote, rural and island communities. The Committee was aware of the serious challenges facing the housing sector in Scotland and recognised that there are issues outwith the control of the Scottish Government, which are impacting on the deliverability of more homes. The Scottish Government fully recognises this is a challenging time for the construction sector. The Affordable Housing Supply Programme continues to operate a flexible grant funding system. This means applicants should request the grant they require to make a project viable, and this will then be assessed to establish value for money.

The Committee also noted increased concerns around funding to meet the Scottish Government's affordable housing target and recognised that alternative financing models could make the delivery of the programme a more realistic prospect. The Scottish Government welcomes the Committee's focus on innovative finance and attracting investment to support the affordable housing sector. The recent relaunch of the Charitable Bond programme is one innovative way to offer funding to social landlords so that they can deliver as many homes as possible. The programme gives social landlords access to funding that they cannot receive elsewhere, and reinvests the interest paid on the loans – further increasing housing supply. The increase in Financial Transactions funding in the affordable programme in 2023-24 will help to offer more opportunities in this area.

The Committee also questioned the financial capacity of social landlords to invest in decarbonising their existing stock in addition to developing new homes without affecting the affordability of tenants' rents. The Scottish Government is aware of the potential tensions between new supply and the retrofit agenda and has committed £3.5 billion towards the delivery of affordable housing this parliament to ensure as much certainty as possible. We are also engaging with the sector via the social housing resilience group on a wide range of issues including those associated with the retrofit agenda.

The Committee also noted concerns from stakeholders about the extreme challenges being faced in meeting the target in remote, rural and island areas where costs of development can be considerably higher. The Scottish Government continues to progress work on the development of the Remote, Rural and Islands Housing action plan to be published in Spring 2023 and has undertaken to ensure the Committee is kept well sighted on this work as it progresses.

Underpinning the Scottish Government's Housing to 2040 approach a Strategic Board comprising of Scottish Ministers, the COSLA Wellbeing Spokesperson and senior stakeholders from the housing sector will meet for the first time in early 2023 and will play a key role in ensuring our work is joined up and collaborative to achieve the Housing to 2040 vision.

Net Zero, Energy and Transport (NZET) Committee

The Committee's pre-budget scrutiny report covers a wide range of topics including the Fair Fares review, bus travel, electric vehicle charging, the Committee's energy price rises enquiry, energy including hydrogen, environmental regulators, and the Joint Budget Review.

The NZET Committee report welcomed the Fair Fares review of charges for public transport use in Scotland which is intended to ensure a sustainable and integrated approach to public transport fares that supports the long-term viability of our public transport system. The Committee also had a number of questions specifically in relation to bus travel including support for operators, local authority bus run services and the bus partnership scheme which we will address in our full response to them. The Scottish Government have a number of long-term policies to support the bus sector, encourage further modal shift, and to prevent vulnerable services being lost to the public.

The Committee sought detail on the funding and longer-term plans for electric vehicle charging. The Scottish Government has invested over £65 million in a comprehensive public charging network and is now focused on ensuring the expansion is well co-ordinated and builds on its success to date. Based on the most recent statistics published by UK government, by population, Scotland continues to have the most public chargers outside of London and the most rapid chargers anywhere in the UK.

The NZET Committee asked a number of questions in relation to energy, including the Scottish Government's response to its Energy Price Rise report that will be addressed fully in the response. The Scottish Government is already providing significant support for households which will help to mitigate the impacts of the cost crisis. By the end of March 2023, we will have invested around £3 billion in a range of measures for households. This includes supporting energy bills through measures such as the Fuel Insecurity Fund. We are committed to tackling fuel poverty – not least by delivering on our Fuel Poverty and Heat in Buildings strategies, which will help make homes warmer, greener, and cheaper to run. The Committee also had questions on funding for hydrogen and carbon capture and storage which we will address in our response to them. The final Hydrogen Action Plan is planned to December 2022.

The Committee sought assurance that our environmental regulators NatureScot and the Scottish Environmental Protection Agency have sufficient resources to carry out their core functions effectively. The Scottish Government will continue to provide funding in the Budget to support our regulators for deliver their objectives for the people of Scotland.

Finally, the Committee had a question in relation to the Joint Budget Review publication. The proposed Final Report of the Scottish Government and Parliament's Joint Budget Review Working Group include recommendations to conclude the work of the Joint Budget Review, alongside actions the Scottish Government would take, informed by research undertaken by the Fraser of Allander Institute, to enhance scrutiny and transparency in the consideration of climate change in the Scottish Budget. The proposed Final Report was submitted to the Committee convenor on 18 November 2022.

Rural Affairs, Islands and Natural Environment Committee

The Committee's report covered a number of topics, with a clear focus of its pre-budget scrutiny on the Islands Plan and associated Islands Programme funding; particularly on the extent to which the Scottish Government's islands programme could support population growth on those islands deemed vulnerable to depopulation. More specifically, the Committee agreed to concentrate on the £4.45 million capital funding package for financial year 2022-23. During pre-budget scrutiny the Committee took a range of evidence from stakeholders including the Scottish Futures Trust and Local Authorities, with a focus on three key elements of the Islands Programme: the competitive model used to deliver the funding, the timescales in which the Islands Programme operates and the membership of the Islands Programme Investment Panel.

The Committee provided a number of recommendations with the overall aim of streamlining the Islands Programme to reduce the resource burden placed on local authorities. The Scottish Government welcomes the Committee's considerations and confirms that it will continue to work closely with stakeholders to ensure that the process for funding is as streamlined as possible.

Social Justice and Social Security Committee

The Committee's report focuses on whether the Scottish Government has taken a human rights-based approach to its budget decisions.

It stresses the importance of data in supporting policy development, to ensure there are no unintended consequences on people's rights and protected characteristics, and that this, along with the underpinning methodology, should be transparent to stakeholders, to enable greater participation and increase accountability. The Committee would like to see these principles reflected in the Equality and Fairer Scotland Budget Statement (EFSBS) and to see the linkages between spending, equalities and human rights analysis, and National Outcomes. The Scottish Government is committed to transparency around the public finances and the budget process. The Scottish Budget is driven by our commitment to contributing to the delivery of the National Outcomes, and the EFSBS provides information on how we have taken human rights principles into account when developing the associated budget. We recognise that more could be done to develop our approach and our data to support human rights budgeting and are working towards improvements. We note the responses of stakeholders around this issue.

The Committee notes the impact of the cost crisis, including interaction with UK funding decisions, and is keen to explore whether the Scottish Government is doing enough within its devolved powers, both at budget setting and through in-year adjustments, to protect basic human rights, describing poverty as a 'rights violation'. The Scottish Government is already providing significant support for households which will help to mitigate the impacts of the cost crisis. By the end of March 2023, we will have invested around £3 billion in a range of measures for households. The Scottish Child Payment has been further expanded to eligible six to fifteen-year-olds and increased in value to £25 per child per week. On 2 November 2022, the Deputy First Minister presented the Scottish Government's Emergency Budget Review, which reflects a number of difficult decisions that have been necessary in order to prioritise help for those who need it most and protect essential public services. The Committee expects all Scottish Benefits to be uprated in line with September Consumer Prices Index.

The Committee is concerned about the impact of funding reductions and uncertainty on the third sector, calling for multi-year funding. Adopting Fairer Funding practice is something we intend to progress in the next financial year. The Scottish Government will continue to work with the sector to tackle the barriers it continues to face.