Scottish Budget: draft budget 2018-2019

Annex F: Glossary

Annually Managed Expenditure ( AME) ( UK Funded)

A small number of programmes that, whilst they fall within the devolved responsibilities of the Scottish Government, continue to be funded annually by the UK Government on the basis of demand. These budgets are ring-fenced for specific purposes, principally NHS and Teachers’ pension payments and Student Loans, and cannot be deployed for any other purpose. This expenditure is generally less predictable and is not subject to multi-year limits.

Audit Scotland

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

Barnett Formula

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

Best Value

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

Block Grant Adjustment

After devolution of taxes through the Scotland Act and Fiscal Framework, the Scottish block grant continues to be calculated by the Barnett formula. But an adjustment to the block grant needs to be made to reflect that some of the budget is now funded by Scottish tax revenues that were previously retained by the UK Government. There are two steps to this. Firstly, an initial block grant deduction is made for each tax. This is to compensate the UK Government for the tax revenue which is now being retained by SG. Secondly, for each subsequent year the block grant adjustments ( BGAs) for each tax are grown or “indexed” to take account of changing tax revenue over time.

Budget Exchange

Until 2017-18 HM Treasury allowed the Scottish Government to carry forward any underspends against budget control limits through a budget exchange mechanism, up to a maximum of 0.6 per cent of the Resource budget and 1.5 per cent on the Capital budget. From 2017-18 the mechanism has been superseded by the Scotland Reserve.

Cash Terms

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

Common Agricultural Policy ( CAP)

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

Community Planning Partnerships ( CPP)

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

Convention of Scottish Local Authorities (Co SLA)

The Convention of Scottish Local Authorities is a membership organisation which represents the shared interests of Scotland’s 32 local authorities.

Cross-border Public Authorities

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

Consumer Prices Index ( CPI)

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

Depreciation

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

European Structural Funds

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

European System of Accounts 2010 ( ESA10)

European Union National Accounts classification rules.

Executive Agency

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

Financial Transactions

Financial Transactions are a form of capital budget allocated by HM Treasury to the Scottish Government which can only be used for the provision of loans or equity investment beyond the public sector and cannot be used to fund public services. Financial Transactions facilities have to be repaid to HM Treasury in future years.

Fiscal Framework

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

GDP Deflator

The GDP deflator is an index number which can be viewed as a measure of general inflation in the domestic economy.

Gini Coefficient

The Gini Coefficient is a commonly-used measure of income inequality. The higher the number, the greater the level of inequality.

Gross Domestic Product ( GDP)

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

Growth Accelerator( GA)

The Growth Accelerator is a funding mechanism based on the wider economic impact of infrastructure investment. Capital funding is internally invested, with funding then reimbursed by the Scottish Government over a set period following achievement of
pre-agreed key milestones and targets.

Land and Buildings Transaction Tax ( LBTT)

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

Local Government

The collective title for Scotland’s 32 local authorities.

Non-Departmental Public Body ( NDPB)

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

Non-Profit Distributing ( NPD)

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

Office for Budget Responsibility ( OBR)

The Office for Budget Responsibility was formed in May 2010 to provide independent assessments of public finances and the economy for each UK Budget and Spring Statement.

Prudential Regime

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

Real Terms

Any price or value adjusted for the effect of inflation. Real terms figures in the Draft Budget are calculated using the GDP deflators published by HM Treasury.

Regulatory Asset Base ( RAB)

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

Science, Technology, Engineering and Mathematics ( STEM)

The academic disciplines of science, technology, engineering and mathematics are often collectively described as STEM subjects.

Scotland Reserve

The Scotland Reserve arrangements apply from 2017-18 and enable the Scottish Government to smooth expenditure, manage tax volatility and determine the timing of expenditure within specified limits. The Scotland Reserve is separated between resource and capital and replaces the previous cash reserve. The Scotland Reserve is capped in aggregate at £700 million. Annual drawdowns from the reserve are limited to £250 million for resource and £100 million for capital. There are no annual limits for payments into the Scotland Reserve. The total annual drawdown limits will be temporarily waived in the face of a Scotland-specific economic shock.

Scottish Fiscal Commission ( SFC)

The Scottish Fiscal Commission was established as an independent non-Ministerial Department on 1 April 2017. Commissioners are accountable to, and give evidence to, the Scottish Parliament. The Commission is responsible for producing independent forecasts of: revenue from fully devolved taxes and non-savings non-dividend income tax; onshore GDP in Scotland; and devolved demand-led social security expenditure.

Scottish Futures Trust ( SFT)

The Scottish Futures Trust is the independent company established by the Scottish Government with the objective of maximising value for money across public infrastructure development.

Scottish Income Tax

Scottish Income Tax is a tax paid by Scottish taxpayers on all non-savings, non-dividend taxable income. The devolution of Scottish Income Tax commenced in April 2017.

Scottish Landfill Tax ( SLFT)

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

Tax Incremental Financing ( TIF)

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