Scottish Budget: draft budget 2018-2019

Chapter 6: Finance and the Constitution

Portfolio Responsibilities

The Finance and the Constitution portfolio is central to the delivery of efficient, high quality, fair and flexible public services for people throughout Scotland. The portfolio is also central to the implementation of the new powers devolved in the Scotland Acts 2012 and 2016.

The portfolio includes Scotland’s devolved tax authority, Revenue Scotland, which operates as a non-Ministerial Department; the Scottish Fiscal Commission, the independent and official fiscal and economic forecaster which became a non-Ministerial Department in April 2017; and the Scottish Public Pensions Agency ( SPPA) which administers certain public sector pension schemes, including the Scottish teachers’ superannuation scheme and the NHS superannuation scheme.

The portfolio also has responsibility for Scottish Parliamentary and local government elections and for Scottish Procurement which provides shared procurement services across the public sector.

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

Our Priorities

In 2018-19 we will continue to use the additional powers over income tax provided by the Scotland Act 2016 to protect low-income taxpayers while supporting investment in public services and the Scottish economy.

SPPA continues to invest in its people and was once again awarded the gold award under the rebranded Re:markable standards. SPPA also works with a range of partners to promote career opportunities in the public sector, including the Developing the Young Workforce Team, which holds events in schools across the Scottish Borders.

Our procurement shared services support inclusive growth, delivering significant efficiency and value for money improvements and improving supplier access to public contracts. By using contracts creatively and ensuring that sustainability is firmly established, we will deliver broader social, environmental and economic benefits.

Small and medium-sized enterprises ( SMEs) are critically important to our economy. Participating in public contracts enables SMEs to grow while creating jobs, boosting training and apprenticeships and encouraging innovation. We will drive good procurement practice throughout the public sector, helping SMEs, third sector organisations and supported businesses to compete.

Our e-commerce systems bring suppliers and buyers together in a simple cost-effective way. They deliver a transparent procurement process from a single advertising portal, Public Contracts Scotland, with electronic invoice payments, thereby reducing bureaucracy and speeding up payments to suppliers.

Public procurement also promotes innovation in the provision of public services. Our Procurement Innovation Reference Group will boost business innovation by improving co-ordination and in 2018 we will pilot our innovation partnership process to help buyers design and develop innovative solutions for service delivery.

Procurement is also an enabler of a more inclusive society. Fair work practices and paying the Living Wage improve people’s lives and help build a fairer society. We are committed to promoting the Living Wage when buying goods, services and works. Our policy on paying the Living Wage to those delivering our public contracts also stems from our belief that organisations adopting fair work practices tend to deliver higher quality goods and services.

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

SFT’s independently validated Statement of Benefits shows that in 2016-17 £138 million of net benefits and savings had been secured, demonstrating good progress towards meeting the objective of securing £500 million to £750 million of benefits and savings during its second corporate plan period covering 2014-15 to 2018-19.

Finance and Constitution Priorities

In 2018-19 we will continue to fund the implementation and operation of the financial provisions in the Scotland Act 2016 and the ongoing operation of the powers devolved under the Scotland Act 2012.

Good communication is central to the Scottish Government’s ambition as an open and accessible government: it helps to build trust, shift attitudes and change behaviours. In 2018-19 we will again focus our public information and engagement resources on those areas which will make a tangible contribution towards delivering our Programme for Government.

SFT will continue to work to enhance value for money from infrastructure investment across the public sector in Scotland. This includes working in partnership with others to progress delivery of Scottish Government’s key policy commitments, including expansion of early learning and childcare and supporting the ‘Reaching 100%’ project to deliver access to superfast broadband to all residential and business premises by 2021, as well as supporting innovative and traditional ways of financing infrastructure investment.

The contribution of our procurement shared services in 2018-19 to delivering procurement reform across the public sector will include:

• planned delivery of £99 million of savings through Scottish Government-led procurement exercises;
• driving the implementation of the Procurement Reform (Scotland) Act 2014 and the new European Procurement Directives;
• ensuring that contracts for our large infrastructure projects include community benefit clauses, to achieve continued employment and training opportunities;
• provision of the suite of e-commerce shared services across the public sector, including the roll-out of e-invoicing and a newly contracted advertising portal; and
• implementing reform of the procurement of construction.

In 2018-19 we will also:

• cover Royal and Ceremonial events and tasks within Scotland;
• continue to support the Electoral Management Board to promote best practice and value for money in elections in Scotland; and
• provide funding for the Local Government Boundary Commission for Scotland.

Scottish Public Pensions Agency Priorities

In 2018-19 SPPA will:

• develop a target operating model to deliver customer service excellence and maximise operational efficiencies;
• participate in the first wave of a national Public Sector Cyber Catalyst programme and apply for ‘cyber essential plus’ designation to underpin the Agency’s major investment in a web-enabled pension and payroll administration system;
• work with stakeholders to implement the outcomes from the quadrennial actuarial valuations for the Scottish NHS, Teachers’, Police and Firefighters’ pension schemes; and
• work with local authority pension scheme administering authorities, actuaries and Scheme Advisory Boards on reviewing local authority triennial valuations, cost cap, actuarial factors and contribution rates.

Revenue Scotland Priorities

Revenue Scotland, the Scottish tax authority, is responsible for the collection and management of the devolved taxes, currently Land and Buildings Transaction Tax ( LBTT) and Scottish Landfill Tax ( SLfT). The tax revenue collected is invested in Scotland’s public services.

• In 2018-19 Revenue Scotland will:
• invest in its processes and technology and, through its People Strategy, continue to develop its staff to improve the organisation’s overall performance in collecting and managing the devolved taxes;
• become a Cyber Catalyst organisation in support of the National Cyber Resilience Plan, enhancing the cyber resilience of the tax authority and its suppliers through the cyber essentials accreditation scheme;
• implement improved processes which meet the expectations of the General Data Protection Regulations and help to consolidate information security and privacy at the core of its operations;
• build on existing work which maximises tax compliance and protects revenue against tax fraud and tax avoidance;
• continue to publish regular, accurate and accessible data on LBTT and SLfT collected; and
• continue to prepare for collecting and managing Air Departure Tax when it is introduced in Scotland.

Scottish Fiscal Commission Priorities

In 2018-19 the Scottish Fiscal Commission will:

• prepare and publish independent and official forecasts of revenue from fully devolved taxes, Scottish income tax and Non-Domestic Rates. The Commission will also prepare forecasts for demand-led social security expenditure and onshore Scottish Gross Domestic Product ( GDP); and
• produce annual forecast evaluation publications and publish occasional working papers on related subjects.

Spending Plans

Table 6.01: Finance and the Constitution Spending Plans (Level 2)

Level 2	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Scottish Public Pensions Agency	3,320.6	4,539.8	4,643.5
Finance and Constitution	52.4	142.4	140.3
Revenue Scotland	5.2	6.1	10.2
Scottish Fiscal Commission	1.0	1.7	1.6
Total Finance and the Constitution	3,379.2	4,690.0	4,795.6
of which:
Fiscal Resource	70.4	164.6	163.5
Non-cash	5.0	1.9	1.4
Capital	3.5	2.0	6.7
Financial Transactions	–	–	–
AME	3,300.3	4,521.5	4,624.0

Table 6.02: Finance and the Constitution Spending Plans (Level 2 Real Terms) at 2017-18 Prices

Level 2	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Scottish Public Pensions Agency	3,371.2	4,539.8	4,575.8
Finance and Constitution	53.2	142.4	138.3
Revenue Scotland	5.3	6.1	10.1
Scottish Fiscal Commission	1.0	1.7	1.6
Total Finance and the Constitution	3,430.7	4,690.0	4,725.7
of which:
Fiscal Resource	71.5	164.6	161.1
Non-cash	5.1	1.9	1.4
Capital	3.6	2.0	6.6
Financial Transactions	–	–	–
AME	3,350.6	4,521.5	4,556.6

Table 6.03: Scottish Public Pensions Agency Spending Plans (Level 3)

Level 3	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Agency Administration	16.8	16.3	17.1
IT Provision	3.5	2.0	2.4
Scottish Teachers’ Pension Scheme	1,208.3	1,554.6	1,582.4
NHS Pension Scheme	2,092.0	2,966.9	3,041.6
Total Scottish Public Pensions Agency	3,320.6	4,539.8	4,643.5
of which:
Fiscal Resource	11.8	14.4	15.7
Non-cash	5.0	1.9	1.4
Capital	3.5	2.0	2.4
AME	3,300.3	4,521.5	4,624.0

What the Scottish Public Pensions Agency budget does

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

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

Table 6.04: Revenue Scotland Spending Plans (Level 3)

Level 3	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Total Revenue Scotland	5.2	6.1	10.2
of which:
Fiscal Resource	5.2	6.1	5.9
Non-cash	–	–	–
Capital	–	–	4.3

What the Revenue Scotland budget does

Revenue Scotland’s budget provides for the administration of the two devolved taxes – Land and Buildings Transaction Tax and Scottish Landfill Tax – and the preparation for Air Departure Tax when it is introduced in Scotland. The budget supports investment in staff, processes and technology to build on the organisation’s performance in collecting and managing the devolved taxes. The capital provision will support the renewal of Revenue Scotland’s digital tax administration system.

Table 6.05: Scottish Fiscal Commission Spending Plans (Level 3)

Level 3	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Scottish Fiscal Commission	1.0	1.7	1.6
of which:
Fiscal Resource	1.0	1.7	1.6
Non-cash	–	–	–
Capital	–	–	–

What the Scottish Fiscal Commission budget does

From 1 April 2017 the Scottish Fiscal Commission became responsible for producing independent and official fiscal and economic forecasts for Scotland to help inform the Scottish Budget process. The Commission will produce forecasts of revenue from fully devolved taxes and non-savings non-dividend income tax receipts, onshore GDP in Scotland, and devolved demand-led social security expenditure.

The Scottish Fiscal Commission is a non-Ministerial Department which is structurally and operationally independent of the Scottish Government. Commissioners are accountable to, and give evidence to, the Scottish Parliament as required.

Table 6.06: Finance and Constitution Spending Plans (Level 3)

Level 3	2016-17 Budget £m	2017-18 Budget £m	2018-19 Draft Budget £m
Public Information and Engagement	2.8	2.8	2.8
Procurement Shared Services	18.4	16.8	16.8
Scottish Futures Trust	4.7	4.7	4.5
Royal and Ceremonial	0.3	0.3	0.6
Scottish Parliamentary Elections	9.6	0.6	0.2
Local Government Elections	0.4	1.0	0.4
Local Government Boundary Commission	–	0.2	0.4
Scotland Acts – Tax implementation and management	16.2	12.0	8.6
Scotland Act 2016 non-tax implementation	–	80.0	75.0
Capital Borrowing Repayment	–	24.0	31.0
Total Finance and Constitution	52.4	142.4	140.3
of which:
Fiscal Resource	52.4	142.4	140.3
Non-cash	–	–	–
Capital	–	–	–

What the Finance and Constitution budget does

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

The budget funds the Scottish Government’s public information and engagement activities.

Under the Fiscal Framework, the UK Government agreed to provide a contribution towards the costs which the Scottish Government will incur in developing its existing, or establishing new, operations required to support the devolution of further powers under the Scotland Act 2016. The agreed sums are a £200 million non-baselined transfer towards ‘one-off’ implementation costs and a £66 million baselined transfer each year towards the annual running costs of those operations.

The first tranche of funding – £100 million for implementation and £22 million for running costs – formed part of the Scottish Government’s budget in 2017-18. The second tranche of funding – £100 million for implementation and £37 million for running costs – will form part of the Scottish Government’s budget in 2018-19. Further discussions will take place in 2018 to agree the timetable for transferring the remaining funding for administration costs in future years.

During 2018-19, the Cabinet Secretary for Finance and the Constitution will agree with Cabinet Secretaries detailed allocations of those funds to portfolios responsible for implementing new powers. Some initial allocations have been made to support ongoing activity relating to the transfer of powers, and £75 million is included in the Finance and the Constitution portfolio for this purpose.

Other associated transfers to fund the transfer of powers set out in the 2016 Act where activity has already commenced are reflected in the appropriate portfolio chapters.

The £31 million budget to cover capital borrowing repayments reflects our estimated repayment costs for planned borrowing in 2017-18, although final figures for this commitment will not be settled until the end of 2017-18.

The budget covers the costs of the Scottish Futures Trust in its work to improve the efficiency and effectiveness of infrastructure investment in Scotland.

The budget provides funding in relation to Royal and Ceremonial events and tasks within Scotland, Scottish Parliamentary and local government elections, and the Local Government Boundary Commission for Scotland.

The Scottish Government’s procurement shared services support the delivery of procurement reform across the public sector.