Publication - Corporate report

Scottish Government consolidated accounts: 2018-2019

Published: 26 September 2019
Directorate: Financial Management Directorate
Topic: Money and tax, Public sector, Scottish Budget
ISBN: 9781839601996

Annual report of consolidated financial results of the Scottish Government, its Executive Agencies and the Crown Office, prepared in accordance with IFRS.

Supporting documents

Performance Report

About the Scottish Government

The Scottish Government is the devolved government for Scotland and has a range of responsibilities that include: the economy, education, health, justice, rural affairs, housing, environment, equal opportunities, consumer advocacy and advice, transport and taxation.

Some powers are reserved to the UK Government. These include: immigration, the constitution, foreign policy and defence. Further changes to the responsibilities devolved to the Scottish Government and Scottish Parliament have resulted from the Scotland Act 2012 and the Scotland Act 2016.

After a Scottish Parliamentary election, the First Minister is formally nominated by the Scottish Parliament and appointed by Her Majesty the Queen. The First Minister then appoints the Scottish Ministers to make up the Cabinet with the agreement of the Scottish Parliament and the approval of The Queen.

Scottish Cabinet Ministers and their responsibilities

The Cabinet is the main decision-making body of the Scottish Government. It is made up of the First Minister, all Cabinet Secretaries, the Minister for Parliamentary Business and the Permanent Secretary.

The First Minister appoints a Cabinet Secretary for each of the core portfolios described below, and additional Ministers to support the work of the Scottish Cabinet, and two Law Officers (Lord Advocate and Solicitor General for Scotland).

Nicola Sturgeon MSP
First Minister

Head of the Scottish Government: responsible for development, implementation and presentation of Government policy, constitutional affairs, and for promoting and representing Scotland.

Following the Scottish Parliamentary election on 5 May 2016, the First Minister announced a new Scottish Cabinet, identifying education and the economy as priorities, along with the reform and improvement of public services and the ability to respond to challenges such as climate change in the years to come. There was a cabinet reshuffle in June 2018 with the appointment of 5 new cabinet secretaries and 3 departures. The Cabinet and Ministers from June 2018, the remainder of the reporting period 2018-19 and still in place at the date of signing of these accounts, were as follows:

John Swinney MSP
Deputy First Minister and Cabinet Secretary for Education and Skills

Responsibilities include:

school standards, quality and improvement
school infrastructure & staffing
educational attainment, qualifications and closing the attainment gap
National Improvement Framework
teaching profession
behaviour and measures to combat bullying
modern languages and the Gaelic and Scots languages
Named Person
Skills Development Scotland
non-advanced vocational skills
historical abuse enquiry

Humza Yousaf MSP
Cabinet Secretary for Justice

Responsibilities include:

police
courts, sentencing
justice system and criminal law procedure
violence reduction
criminal justice social work, victims, witnesses, female offenders
human rights
prisons and prisoners
reducing reoffending
security
youth justice

Shirley-Anne Somerville MSP
Cabinet Secretary for Social Security and Older People

Responsibilities include:

welfare policy, social security
measures against poverty (with CSCLG)
Best Start Grant (replacing the UK Government's Sure Start Maternity Grant)
Funeral Expense Assistance (replacing the UK Government's Funeral Payment)
Carers Allowance (at which point we will stop paying Carers Allowance Supplement)
Young Carers Grant
Personal Independence Payments
Disability Living Allowance
Industrial Injuries Disablement Benefit
Attendance Allowance
Severe Disablement Allowance
Cold Weather Payments
Winter Fuel Payments

Derek Mackay MSP
Cabinet Secretary for Finance, Economy and Fair Work

Responsibilities include:

Scottish economy
Inclusive Growth
managing the public finances
fiscal policy and taxation
Scottish budget, budgetary monitoring and reporting
government procurement
efficient government
National Performance Framework
public bodies policy
Scottish Futures Trust
Scottish Enterprise - national enterprise agency
trade and inward investment
trade unions
public sector pay
Scottish National Investment Bank
Registers of Scotland

Roseanna Cunningham MSP
Cabinet Secretary for Environment, Climate Change and Land Reform

Responsibilities include:

climate change and environmental protection
biodiversity
Crown Estate
environmental and climate justice
flood prevention & coastal erosion
land use and land reform
animal welfare
wildlife crime
water quality and Scottish Water

Fergus Ewing MSP
Cabinet Secretary for The Rural Economy

Responsibilities include:

agriculture and crofting
fisheries and aquaculture
food and drink
Highlands & Islands Enterprise
South of Scotland Enterprise Agency
rural Scotland
animal health
forestry

Jeane Freeman MSP
Cabinet Secretary for Health and Sport

Responsibilities include:

NHS and its performance, staff and pay
Health care and social integration
patient services and patient safety
primary care, acute services elective centres Implementing the 2020 Vision, national clinical strategy, quality strategy and national service planning
allied Healthcare services
carers, adult care and support
child and maternal health
dentistry
medical records, health improvement and protection

Aileen Campbell MSP
Cabinet Secretary for Communities and Local Government

Responsibilities include:

social justice
tackling inequalities
measures against poverty (with CSSS)
community empowerment, devolution to communities and reform of local government
democratic renewal
third sector and social economy
advocacy and advice
religious and faith organisations

Fiona Hyslop MSP
Cabinet Secretary for Culture, Tourism and External Affairs

Responsibilities include:

international relations
creative industries
culture and the arts
architecture and built heritage
broadcasting
tourism
co-ordination on bringing major events to Scotland
National Records and national identity

Michael Russell MSP
Cabinet Secretary for Government Business and Constitutional Relations

Responsibilities include:

The UK's exit from the European Union
Government and parliamentary business
Constitutional Relations and intra-governmental affairs

Michael Matheson MSP
Cabinet Secretary for Transport, Infrastructure and Connectivity

Responsibilities include:

transport and public transport
infrastructure investment policy
cities & City Deals

town centres

The Cabinet is supported by the following ministerial team, also appointed in June 2018:

Graeme Dey MSP: Minister for Parliamentary Business and Veterans
Kevin Stewart MSP: Minister for Local Government, Housing and Planning
Paul Wheelhouse MSP: Minister for Energy, Connectivity and the Islands
Ash Denham MSP: Minister for Community Safety
Maree Todd MSP: Minister for Children and Young People
Jamie Hepburn MSP: Minister for Business, Fair Work and Skills
Joe FitzPatrick MSP: Minister for Public Health, Sport and Wellbeing
Clare Haughey MSP: Minister for Mental Health
Ben Macpherson MSP: Minister for Europe, Migration and International Development
Christina McKelvie MSP: Minister for Older People and Equalities
Ivan McKee MSP: Minister for Trade, Investment and Innovation
Kate Forbes MSP: Minister for Public Finance and Digital Economy
Mairi Gougeon MSP: Minister for Rural Affairs and the Natural Environment
Richard Lochhead MSP: Minister for Further Education, Higher Education and Science

As noted above, the current Cabinet was appointed in June 2018, part way through the reporting period. Prior to that the Cabinet Secretaries were those reported in the 2017-18 accounts:

John Swinney: Deputy First Minister and Cabinet Secretary for Education and Skills
Derek Mackay: Cabinet Secretary for Finance and the Constitution
Keith Brown: Cabinet Secretary for Economy, Jobs and Fair Work
Roseanna Cunningham: Cabinet Secretary for Environment, Climate Change and Land Reform
Angela Constance: Cabinet Secretary for Communities, Social Security and Equalities
Shona Robison: Cabinet Secretary for Health & Sport
Michael Matheson: Cabinet Secretary for Justice
Fiona Hyslop: Cabinet Secretary for Culture, Tourism & External Affairs
Fergus Ewing: Cabinet Secretary for Rural Economy and Connectivity

Supported by:

Mark McDonald (until Nov 2017): Minister for Childcare and Early Years
Maree Todd (from Nov 2017): Minister for Childcare and Early Years
Shirley-Anne Somerville:Minister for Further Education, Higher Education and Science
Jamie Hepburn: Minister for Employability and Training
Joe Fitzpatrick: Minister for Parliamentary Business
Aileen Campbell: Minister for Public Health and Sport
Maureen Watt: Minister for Mental Health
Alasdair Allan: Minister for International Development and Europe
Kevin Stewart: Minister for Local Government and Housing
Jeane Freeman: Minister for Social Security
Annabelle Ewing: Minister for Community Safety and Legal Affairs
Paul Wheelhouse: Minister for Business, Innovation and Energy
Humza Yousaf: inister for Transport and the Islands
Michael Russell: Minister for UK Negotiations on Scotland's Place in Europe

Law Officers during 2018-19 (unchanged from 2017-18)

James Wolffe QC: Lord Advocate
Alison Di Rollo: Solicitor General

Further information on Cabinet and Ministerial responsibilities is available from the Scottish Parliament and Scottish Government websites, at parliament.scot and gov.scot respectively.

The Civil Service and Government Officials

The First Minister leads the Scottish Government, with the support of the Scottish Cabinet and Ministers. The civil service helps the government of the day develop and implement its policies as well as deliver public services. Civil servants are accountable to Ministers, who in turn are accountable to Parliament.

The Permanent Secretary leads the civil service in Scotland and supports the government in developing, implementing and communicating its policies; and is the principal policy adviser to the First Minister and Secretary to the Scottish Cabinet. The Permanent Secretary is also the Principal Accountable Officer with responsibility to ensure that the government's money and resources are used effectively and properly.

The government is structured into a number of directorates and their related public bodies. Directorates and agencies are managed by six Directors General (DGs).

Scottish Government Senior Management Team (Corporate Board)

The Scottish Government Senior Management Team are responsible for ensuring that the Scottish Government is organised and managed in the most effective way to support Ministers in the implementation of their policies. Further information on the management structure of the Scottish Government is available on the Scottish Government website at gov.scot.

The Non-Executive Directors bring an external perspective to the consideration of corporate management issues such as staffing, administration costs, monitoring of programme expenditure, training and development, accommodation strategy and relations with stakeholders. Janet Hamblin, non-executive director, is the Chair of the Scottish Government Audit and Assurance Committee.

Directors General in 2018-19 were:

Leslie Evans: Permanent Secretary
Sarah Davidson: DG Organisational Development and Operations
Liz Ditchburn: DG Economy
Paul Gray: DG Health & Social Care (until 31 March 2019)
Malcolm Wright OBE: DG Health & Social Care (from 11 February 2019)
Paul Johnston: DG Education, Communities & Justice
Alyson Stafford CBE: DG Scottish Exchequer
Ken Thomson: DG Constitution & External Affairs

Directors serving as members of Corporate Board during 2018-19 were:

Barbara Allison: Director of Communications, Ministerial Support and Facilities
Nicky Richards: Director of People
Gordon Wales: Chief Financial Officer

Non-executive members of the Corporate Board during 2018-19 were:

Janet Hamblin
Linda McKay
Ronnie Hinds
Hugh McKay
Annie Gunner Logan

Register of Interests

Members of the Corporate Board whom held company directorships and other significant interests during 2018-19 were:

Staff:

Leslie Evans, Permanent Secretary: Member of Institute of Directors.
Sarah Davidson, Director General Organisational Development and Operations: Member of Advisory Board for Business in the Community Scotland (representing SG). Shares held with CO Funds.
Paul Johnston, Director General Education, Communities and Justice: Trustee of Bruntsfield Evangelical Church. Stocks and shares held with Virgin Money.
Alyson Stafford CBE, Director General Scottish Exchequer: Member of Institute of Chartered Accountants in Scotland, Chartered Institute of Public Finance and Accountancy and Institute of Chartered Accountants in England and Wales. Trust Investments with Origen Financial Services.
Malcolm Wright OBE, Director General Health and Social Care: Honorary Fellowship of the Royal College of General Practitioners, Fellow of the Royal Society of Arts, Honorary Fellowship of the Royal College of Physicians of Edinburgh and Winston Churchill Fellow.
Barbara Allison, Director of Communications, Ministerial Support and Facilities: Treasurer for Women of Scotland Luncheon and member of Board of Scottish Ballet. Judge on HR Network Awards Competition.
Nicola Richards, Director of People: Shares held with Hargreaves Lansdown and Fidelity.
Gordon Wales, Chief Financial Officer: Non-Executive Director and Chairman of Enjoy East Lothian Ltd. Shares held with Halifax PLC.

Non-Executive Directors:

Janet Hamblin: Partner of RSM; Member of the Education Board of Merchant Company of Edinburgh; Chair of Castle Rock Edinvar Housing Association Audit and Risk Committee.
Ronnie Hinds: Deputy Chair of the Accounts Commission for Scotland and Chair of the Local Government Boundary Commission for Scotland.
Hugh McKay: Non-Executive Director at Lloyds Development Capital; and Non-Executive Director - Trustee at The Chartered Bankers Institute (non-remunerated position).
Annie Gunner Logan: Director and Company Secretary at Coalition of Care and Support Providers in Scotland (CCPS).

SG2020 Transformation Programme

Over the next parliament the Scottish Government faces the biggest ever shift in responsibilities - raising taxes as well as spending them. To meet the challenges ahead, the organisation is committed to being:

Open

accessible, trusted, an engaged and credible partner;
clear about roles and expectations of others; and
valuing diversity and representative of the communities served.

Capable

world class in the approach to government, transforming Scotland by designing and delivering excellent public services and supporting ministers;
accountable, efficient and effective in performance and approach to tax-raising and spending;
competent, professional, inclusive, skilled and knowledgeable: an exemplar of fair work and an employer of choice; and
well-led with consistently good management of people and change.

Responsive

ambitious for Scotland and confident about improving outcomes;
focused on priorities, flexible and effective in matching resources and capabilities; and
designing better places, networks and systems.

More detailed information about the actions planned by the Scottish Government to meet the challenges ahead is provided in the publication of the Programme for Government^[1]

How the Scottish Budget is funded

There are a number of sources of funding to support the expenditure planned and approved by the Scottish Parliament in the Scottish Budget Act. The majority of the receipts reported in these accounts are transferred to bodies within the Scottish Consolidated Accounting Boundary from the Scottish Consolidated Fund.

The Scottish Consolidated Fund was set up following devolution in 1999 and received its statutory powers under the Scotland Act 1998. The Scottish Consolidated Fund receives, from the Office of the Secretary of State for Scotland, sums which have been voted by the UK Parliament for the purpose of "grant payable to the Fund". Funding is drawn down by the Scottish Government from the Scottish Consolidated Fund to support the spending plans laid out in the draft budget.

The primary receipts to the Scottish Consolidated Fund are from: the block grant from HM Treasury; receipts collected by HMRC on behalf of the Scottish Government under the provisions for Scottish Income Tax; Devolved taxes collected by Revenue Scotland which are currently Land and Buildings Transaction Tax and Landfill Tax; and borrowing.

The block grant from UK Government is allocated to the Secretary of State for Scotland through the approval of the UK Parliament, and forms part of the UK public expenditure control regime. This requires the Scottish Government to plan, monitor and report its spending against the control aggregates set by the UK Parliament and HM Treasury alongside those set by the Scottish Parliament.

The Scotland Act 2016 empowered the Scottish Parliament to set Scottish Income Tax rates and bands. During 2018-19, £12.2 billion in income tax revenues derived from Scottish Income Tax were assigned to the Scottish Administration and paid to the Scottish Consolidated Fund. Identification of Scottish taxpayers and administering the tax are matters for the UK Government and Her Majesty's Revenue and Customs (HMRC).

Under devolved powers from the 2012 Scotland Act, 2018-19 was the fourth year in which devolved taxes in respect of Land and Buildings Transactions and Landfill Tax have been managed in Scotland. A total of £699 million has been collected, £5 million above the initial estimates, which has been managed within the in-year budget. The block grant has been adjusted to take account of these locally raised tax receipts.

Revenue Scotland was established by the Revenue Scotland and Tax Powers Act 2014 to administer and collect both fully devolved taxes. Revenue Scotland is responsible for preparing an account of the devolved taxes (The Devolved Taxes Account). The taxes collected by Revenue Scotland are paid to the Scottish Consolidated Fund. The Devolved Taxes Account and the Scottish Consolidated Fund Account are prepared and published separately and can be accessed online at revenue.scot and gov.scot.

From the 2016 Scotland Act, the Scotland Reserve, effective from 1 April 2017, provides the Scottish Government with a limited feature to manage the smoothing of all types of spending and to assist with the management of tax volatility and determine the timing of expenditure.

As further powers are devolved to Scotland, and the ability to use the existing fiscal levers to influence the funds available is increasing, the impact of accurate tax forecasting becomes greater. As a consequence, the institutional landscape of Scotland required a new body to support this growing fiscal responsibility and The Scottish Fiscal Commission was established in June 2014 as a non-statutory body to provide independent scrutiny of Scottish Government forecasts of receipts from taxes devolved to Scotland. By March 2016 the Scotland Act 2016^[2] devolving more fiscal powers to Scotland was passed, and the associated Fiscal Framework^[3] was agreed between the Scottish Government and UK Government. The Fiscal Framework changed the remit of the Scottish Fiscal Commission as reflected in the Scottish Fiscal Commission Act 2016^[4] which received Royal Assent on 14 April 2016. Further information about the Scottish Fiscal Commission can be found at fiscal.scot.

Further information can be found in the Scottish Budget: 2019-20^[5].

The total budget approved by the Scottish Parliament includes activities not included in these accounts. Note 21 to these accounts (page 131) provides a reconciliation to the total budget.

The fiscal activity of the Scottish Government is described in a suite of accounts information: the Scottish Consolidated Fund account, incorporating additional reporting on the use of borrowing powers and the related Devolved Taxes Account report on the funding available to the Scottish Government in the financial year; the Scottish Government Consolidated Accounts, the annual accounts of the other bodies within the Scottish Administration and of the bodies funded directly from the Scottish Budget together report on the use of resources authorised by the Scottish Parliament for the financial year.

Accounting Boundary

These accounts reflect the consolidated assets and liabilities and the results of all entities within the Scottish Government consolidation accounting boundary as required by and defined in the Government Financial Reporting Manual (FReM). This consists of ten internal Portfolios, supported by Administration, their Executive Agencies (each linked to a specific portfolio), the Crown Office and Procurator Fiscal Service and the NHS Bodies responsible for the planning, promotion, commissioning and the delivery of healthcare. The portfolio analysis in these accounts reflects the portfolios designated by the First Minister from 27 June 2018. The consolidation boundary includes the following:

Finance, Economy and Fair Work Portfolio

Executive Agencies:

Scottish Public Pensions Agency (https://pensions.gov.scot/)

Accountant in Bankruptcy (https://www.aib.gov.uk)

Health and Sport Portfolio

Other Consolidated Bodies:

The NHS Bodies in Scotland

Mental Welfare Commission (https://www.mwcscot.org.uk/)

Education and Skills Portfolio

Executive Agencies:

Disclosure Scotland (https://www.mygov.scot/organisations/disclosure-scotland)

Education Scotland (https://education.gov.scot)

Student Awards Agency Scotland (https://www.saas.gov.uk)

Justice Portfolio

Executive Agency: Scottish Prison Service (https://www.sps.gov.uk/)

Social Security and Older People Portfolio

Executive Agency: Social Security Scotland (https://www.socialsecurity.gov.scot/) (established 1 September 2018)

Environment, Climate Change and Land Reform Portfolio

Rural Economy Portfolio

Communities and Local Government Portfolio

Culture, Tourism and External Affairs Portfolio

Government Business and Constitutional Relations Portfolio

Transport, Infrastructure and Connectivity Portfolio

Executive Agency: Transport Scotland (https://www.transport.gov.scot/)

Other Consolidated Bodies:

The Crown Office and Procurator Fiscal Service (https://www.copfs.gov.uk/)

In addition to inclusion within these consolidated accounts, the executive agencies and other bodies detailed above also publish separate accounts providing greater detail about their income and expenditure and assets and liabilities. The accounts can be accessed at the websites noted above.

The Scottish Government is also the sole shareholder of Caledonian Maritime Assets Ltd, David MacBrayne Ltd, Highland and Islands Airports Limited, Scottish Futures Trust and Prestwick Holdco Limited, and sponsor of a number of executive, advisory and tribunal Non-Departmental Public Bodies. These bodies are regarded as related parties with which the Scottish Government has had various transactions during the year, but do not fall within the Scottish Government consolidation accounting boundary. Further details of Scottish Public Bodies are available on our website^[6].

The financial statements of NHS Boards include NHS Endowment Funds. These Endowment Funds are Registered Charities with the Office of the Scottish Charity Regulator (OSCR) and they are also required by OSCR to prepare audited financial statements. NHS Endowment Funds are not part of the Scottish Government accounting boundary, and therefore they have not been included in Scottish Government consolidated accounts. These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The Scottish Government also routinely reports to Parliament each year on the Final Outturn for the Scottish Administration in an additional statement. This brings together the audited information from the bodies within the Scottish Administration to show this against the Budget limit authorised by the Scottish Parliament.

Performance Overview

The Budget Framework

The Scottish Government set out its spending plans for 2018-19 in December 2017 in The Draft Budget^[7]. Approval for a detailed budget for 2018-19 was given by the Parliament in March 2018 in the Budget (Scotland) Act 2018. The annual Budget is refined through in-year budget revisions, Parliamentary approval for which is given by statutory instrument.

The Scottish Government's Purpose

The Scottish Government's purpose is to focus government and public services on creating a more successful country with opportunities for all of Scotland to flourish, through increased wellbeing, and sustainable and inclusive economic growth.

The Programme for Government

Through the Programme for Government^[8] the plans for the year are set out, including the Bills to be introduced to the Scottish Parliament.

Exit from the EU

Following the referendum held on UK membership of the EU held in June 2016, in which the UK voted to leave the EU by 52% to 48%, the UK Government has given notice of intention to withdraw from the European Union - the triggering of article 50.

As negotiations between the UK government and the European Union around the settlement arrangements continue. It is not yet possible to fully quantify the impact of this decision on Scotland but the fluctuations in exchange rates and other economic features will inevitably be reflected in the financial performance reported in these and future accounts.

There remains a level of uncertainty on the impact of the referendum result on jobs and the economy in the medium to long-term.

The Scottish Government has been engaging with the UK Government to ensure that Scotland's fiscal interests are safeguarded as the UK leaves the European Union.

National Performance Framework

In June 2018 the First Minister launched the new National Performance Framework^[9] (NPF). Through this framework, the Government sets out:

Purpose

The framework is for all of Scotland. The Government aims to:

create a more successful country;
give opportunities to all people living in Scotland;
increase the wellbeing of people living in Scotland;
create sustainable and inclusive growth; and
reduce inequalities and give equal importance to economic, environmental and social progress.

Values

The values guide the Government's approach to:

treat all our people with kindness, dignity and compassion;
respect the rule of law; and
act in an open and transparent way.

National outcomes

To help achieve its purpose, the framework sets out 'national outcomes'.

These outcomes describe the kind of Scotland it aims to create.

The outcomes:

reflect the values and aspirations of the people of Scotland;
are aligned with the United Nations Sustainable Development Goals; and
help to track progress in reducing inequality.

These national outcomes are that people:

grow up loved, safe and respected so that they realise their full potential;
live in communities that are inclusive, empowered, resilient and safe;
are creative and their vibrant and diverse cultures are expressed and enjoyed widely;
have a globally competitive, entrepreneurial, inclusive and sustainable economy;
are well educated, skilled and able to contribute to society;
value, enjoy, protect and enhance their environment;
have thriving and innovative businesses, with quality jobs and fair work for everyone;
are healthy and active;
respect, protect and fulfil human rights and live free from discrimination;
are open, connected and make a positive contribution internationally; and
tackle poverty by sharing opportunities, wealth and power more equally.

National Indicators

The framework measures Scotland's progress against the national outcomes. To do this, it uses 'national indicators'.

These indicators give a measure of national wellbeing. They include a range of economic, social and environmental indicators.

More information about performance against outcomes can be found at National Indicator Performance^[10].

Performance Analysis

Performing for outcomes

As set out in the National Performance Framework (NPF) section of these accounts, the NPF is for all of Scotland, not just the Scottish Government, and the NPF website^[11] provides an overview of how Scotland is progressing towards our national outcomes through a range of social, environmental and economic indicators. Scotland's Wellbeing - Delivering the National Outcomes^[12], published in May 2019, is a report drawing together trends and data from the NPF national indicators and other sources. It provides a broad overview of key evidence sources on national performance, and highlights some of the challenges faced in improving wellbeing in Scotland.

In terms of Scottish Government performance, a range of performance information in a variety of forms, reflecting the breadth of Scottish Government activity, is published on the Scottish Government website^[13].

Some of the deliverables enabled by Scottish Government funding this year include:

Established Social Security Scotland: since it opened, the Agency has supported over 91,000 people, providing £190 million in support in 2018-19;
Increased early learning and childcare: 20,000 children accessed expanded funded early learning and childcare in the 2018-19 school year, including more than 2,000 eligible 2 year olds;
Invested in education: once the 117 new schools funded as part of the £1.8 billion Schools for the Future programme are complete they will benefit 60,000 pupils. £182 million of funding through the Scottish Attainment Challenge and Pupil Equity funding has provided additional funding for schools and local authorities to help them tackle the poverty related attainment gap and increase support for families;
Passed fuel poverty legislation: this sets a target date of 2040 to address the root causes of fuel poverty;
Provided access to free sanitary products: this has utilised £8.8 million of funding to provide access to free sanitary products across Scotland's schools, universities, colleges and across wider communities;
Improved provisions for the victims of crime: the Victims Taskforce was established, which will focus on improving the experience of victims and witnesses. The passage of the Vulnerable Witness (Criminal Evidence) Bill will expand the opportunity for child and other vulnerable witnesses to provide pre-recorded evidence;
Continued to shift the share of the frontline NHS budget dedicated to mental health and to primary, community, and social care. Committed £50 million to improve perinatal and infant mental healthcare and £5 million to support the work and recommendations of the new CAMHS taskforce;
Pursued greener transport: more than 1,500 new electric vehicle charge points have been installed and, working with Glasgow City Council, Scotland's first Low Emission Zone has been introduced;
Promoting Fair Work: a Fair Work Action Plan was published, setting out plans to deliver on fair work across Scotland. The devolved employment support service - Fair Start Scotland - is being delivered and the first steps to creating a new employability system have been taken; and
Improving Scotland's housing provision: Over half of the 2021 target of 50,000 affordable homes, including 35,000 for social rent, have been delivered.

For this year's accounts, an initial step towards better demonstrating how money that is provided to the Government is spent on progressing toward the longer term outcomes contained within the NPF, is presented below. This signposts to existing performance reporting on some areas of major spend within each portfolio.

This does not provide a complete picture of performance reporting, but it is a step towards the longer-term aim of better linking spend and outcomes. Due to the timing of publications, the majority of the performance reports signposted below refer to the previous financial year (2017-2018).

Performance Reports by Portfolio

Health and Sport Portfolio:

Communities and Local Government Portfolio:

Education and Skills:

Justice:

Transport Infrastructure and Connectivity:

Transport Scotland Annual Report and Accounts

Finance Economy and Fair Work:

Environment Climate Change and Land Reform:

Culture, Tourism and External Affairs:

Social Security and Older People:

Rural Economy:

Crown Office and Procurator Fiscal Service:

The Crown Office and Procurator Fiscal Service Statistics

Government Business and Constitutional Relations:

Freedom of Information performance and response time

Outturn against Budget

These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The annual budget authorised by the Scottish Parliament is the budget for the wider Scottish Administration and includes the funding of activities which are not within the Scottish Government, and therefore outside the required accounting boundary of these accounts. There are also some differences between the HMT required budgeting rules and the government financial reporting accounting requirements that have to be accommodated in any comparison. These accounts therefore compare the actual outturn to the budget, both stated on the same accounting basis. There is a reconciliation and explanation of the budget reflected in the accounts with that shown in the annual budget documents provided in Note 21.

As described above, spending plans for financial year 2018-19 were set out in Scottish Budget: Draft Budget 2018-19 published in December 2017. After consideration by the Scottish Parliament Finance and Constitution Committee and other Committees, these plans were presented in the Budget Bill introduced in January 2018 and received Royal Assent as the Budget (Scotland) Act 2018 in March 2018. Parliamentary approval for the in-year revisions to the plans set out in the Budget (Scotland) Act was granted in the Autumn Budget Revision made in November 2018 and Spring Budget Revision, made in March 2019.

The budget of £36,915 million reported in these accounts is net of adjustments to reflect those activities not included in the accounting boundary as described above. This is made up of an operating budget of £35,109 million and a capital budget of £1,806 million.

The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of £34,601 million resulting in an underspend of £508 million, of which £255 million relates to amounts for student loan impairments budgeted in 2018-19 but charged against previous years. The Net Capital Outturn for the year was £1,536 million resulting in an underspend of £270 million. Total underspend of £778 million, adjusted to £523 million to exclude the element relating to prior year charges represents approximately 1.42 per cent of the total budget. An explanation of the major variances is included in these accounts in the portfolio outturn statements. Of the total outturn of £36,137 million, £10,705 million (30 per cent) is funding to local government.

Under the current devolution settlement, the Scottish Parliament is not allowed to overspend its budget. As a consequence, the Scottish Government consistently adopted a position of controlling public expenditure to ensure we live within the budget caps that apply, but remain able to carry forward some spending power resources for use in a future year.

The provisional outturn announcement made by the Cabinet Secretary for Finance and the Constitution in June 2019 indicated that the fiscal cash budget in 2018-19 would be underspent by £449 million. The announcement reported the position in terms of Scottish Government expenditure against totals as set by HM Treasury. The two sets of outturn information are not strictly comparable. The scope of what is included in these accounts is determined by the requirements of the Government's Financial Reporting Manual (FReM) and covers elements that are not included in the HM Treasury figures.

Statement of Financial Position

The primary purpose of these accounts is to reflect the use of resources. The Statement of Financial Position reflects the assets held and liabilities arising from the spending plans which support policy choices. Assets are held not for their income generation capability or their inherent value but for their service potential or as a direct consequence of particular policies, for example providing healthcare in hospitals and the provision of funding to students in the form of loans. Similarly, liabilities arise as a consequence of the timing of commitments relating to spending and policy choices.

The Consolidated Statement of Financial Position, (page 78) is one of the primary financial statements in the Consolidated Accounts. It summarises what is owned and owed by the Scottish Government. This shows taxpayers' equity - an accounting measurement of the amount invested by taxpayers that has continuing public benefit. It shows how much of this has arisen from the application of revenues (including the Scottish Block Grant) and that which has resulted through changes over time in the value of physical assets.

It is important to note that the consolidated accounts bring together the "balance sheets" of bodies that are significant in their own right. Detailed financial and narrative information on the major items, for example the road network, is available in the accounts and related reports of the relevant body - Transport Scotland; similarly, information about NHS bodies is in the detailed accounts for each body; the Student Awards Agency also provides separate reporting around student loans i.e. the loans are not within SAAS' accounts but they do provide information about their administration, and the loans themselves are reported within these consolidated accounts.

The Statement of Financial Position includes:

items which are owned, have already been funded from revenues and will provide continuing economic benefit in future periods. These increase taxpayers' equity;
items which are owed and expected to require to be funded from future revenues. These decrease taxpayers' equity;
items owed to the Scottish Government; and
an analysis between amounts that will release or require funding within a year and those which will be carried into future years.

Assets and liabilities

Physical assets are the highest value group of assets in the Consolidated Accounts with a value of £30,463 million at 31 March 2019, of which 67 per cent (£20,545 million) relates specifically to the road network. The Consolidated Accounts provide details of changes in the year. There were additions of £560 million that resulted from capital investment, offset by disposals and the net effect of depreciation and revaluations.

Most physical assets are valued by professional valuers in line with recognised methodologies. This provides an assessment of the continuing benefit they provide in financial terms. Where these assets have been funded by traditional means through capital then there are no continuing liabilities relating to them (maintenance and repair costs will arise). Those funded through other means (such as Public Finance Initiatives, Non Profit Distributing Projects and Scottish Government borrowed funds) also lead to liabilities representing the amounts that will require to be met from future budgets. Only physical assets that are deemed surplus and 'held for sale' (£17 million) will release resources previously invested for future use.

Financial assets include loans made directly to other organisations and individuals, investment funds used to deliver development programmes and investments in nationalised industries plus fully or part owned companies. These assets are of continuing benefit to the Scottish Government, and have the potential over time to release the resources currently invested for future use - including reinvestment, in accordance with the terms of the loan or other investment made.

Where Scottish Ministers decide to make investments directly through the Scottish Government, Accountable Officers must ensure that appropriate diligence and consideration is carried out before any commitment is made to invest in accordance with the detailed guidance in the Scottish Public Finance Manual^[14], support specific economic objectives and are in line with the outcomes set out in the National Performance Framework.

Such investments are exceptional in nature and investment is in accordance with Scottish Ministers' purpose of achieving a commercial outcome; this means that the investment should be able to demonstrate a potential return commensurate with the risk associated with the proposal.

For the purposes of assessing the valuation of such investment for accounting purposes, IFRS 9 applies an "expected credit loss model". This is not a write-off of those investments or a prediction of loss but a measure of the risk in the investment which means that the assessment for accounts purposes has to take a prudent view of whether a positive outcome can yet be substantiated.

Burntisland Fabrications Limited (BiFab): Over the past two financial years the Scottish Government has advanced loans on a commercial basis to BiFab totalling £37.4 million. Of this total £37.4 million was convertible to equity in the company and as a result of the conversion of these loans the Scottish Government now holds a 32.4% stake in the company. As part of year end processes the Scottish Government commissioned a formal valuation of its equity holding which resulted in a valuation of £2.0 million. While this valuation is significantly lower than the sums advanced, Scottish Ministers' investment in, and commitment to, BiFab is a long term one, and they remain of the view that BiFab will have a prosperous future as a key business in Scottish renewables sector supply chain. We continue to work collaboratively with BiFab's majority shareholder and board of directors, together with other stakeholders, in pursuit of a strong future pipeline of works for BiFab to deliver economic benefit and increased skilled employment opportunities.

Ferguson Marine Engineering Limited: On 16 August 2019 Ferguson Marine shipyard in Port Glasgow was placed in administration. The Scottish Government reached an agreement with the Administrator to run operations at the yard to provide continuity of employment and continue work on the vessels under construction, whilst the marketing process by the Administrator is undertaken. This intervention by Scottish Ministers and the previous loans of £15 million and £30 million to the company underlines their confidence for a long-term future for the yard and its employees. The approach taken to impairment, with impairment of 100%, is a prudent one and reflects instead the current administration process.

Lochaber: In December 2016 the Scottish Government entered into a 25-year financial guarantee relating to the hydro plant and aluminium smelter at Lochaber. This involved guaranteeing the power purchase obligations of the smelter if the business does not fulfil its obligations to pay for contracted power. The guaranteed annual amounts vary between £14m and £32m over the life of the contract. The Scottish Government receives an annual fee in return for the guarantee. The carrying value of this financial asset in the accounts was reduced to nil as a result of the implementation of the new accounting standard.

The Consolidated Accounts show that the largest financial assets are voted loans of £3,083 million that have been made to Scottish Water, to finance its capital investment programmes (an increase of £288 million from 31 March 2018), and student loans valued at £3,459 million (an decrease of £232 million from 31 March 2018). The latter are made under the terms of the student loans scheme, administered by the Student Loans Company Limited.

The total value of taxpayers' equity, reported in the Statement of Financial Position, is £33,293 million at 31 March 2019, an increase of £687 million (2.1 per cent) from 31 March 2018.

The elements of the Statement of Financial Position are measured and disclosed in accordance with accounting standards and notes to the accounts provide analysis and explanation. More detailed information on the Statements of Financial Position of the individual entities included within these consolidated accounts can also be found in the entity's published accounts by following the links provided on page 14 above.

Pensions

The SG consolidated accounts include as expenditure the employers' contributions payable for the financial year. Staff in the Core Scottish Government, Executive Agencies and Crown and Procurator Fiscal Service are members of the Principal Civil Service Pension Scheme (PCSPS). There is no pension liability in respect of the PCSPS within the SG consolidated accounts, because it is a UK scheme, administered by the Cabinet Office and it is not possible to identify the "Scottish share" of the underlying assets and liabilities of the scheme. The Cabinet Office produces separate pension scheme accounts, covering all members across the UK.

Staff in the NHS consolidated bodies can choose between the PCSPS and the NHS Superannuation Scheme for Scotland, which is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The NHS scheme is administered by the Scottish Public Pensions Agency and annual scheme accounts are produced.

The liabilities to be met over time are not met from investments but paid out each year from the funding of the relevant schemes. The NHS scheme is funded within the Scottish Administration in the Scottish Budget; the PCSPS is dealt with through the UK annual process.

Capital Borrowing

Under Section 32 of the Scotland Act 2012, as amended by Scotland Act 2016 Section 20, additional borrowing powers were conferred on Scottish Ministers with effect from 1 April 2015. Any sums borrowed and repaid under these provisions must do so via the Scottish Consolidated Fund and hence be reflected in those accounts. The first exercise of the borrowing powers took place in 2017-18 where £450 million (the maximum available) has been drawn down to the Scottish Consolidated Fund from the National Loans Fund. This was followed by borrowing of further £250 million in 2018-19.

The repayment of borrowing outstanding as at 31 March 2019 is scheduled as follows:

	£m	£m	£m
	Principal	Interest	Total
<1 year	26.3	10.4	36.7
1 - 5 years	157.8	38.0	195.8
>5 years	508.8	78.2	587.0
			0
Total	692.9	126.6	819.5

An arrangement was agreed with HM Treasury for notional borrowing in 2015-16 and 2016-17 to meet the budget implications of the classification decision related to the introduction of The European System of National and Regional Accounts (ESA10) which required the capital value of a small number of NPD projects to be budgeted for in the years of asset construction. This required the notional amounts borrowed to be recorded against the Scottish Government's borrowing cap in each of these years, however no actual borrowing was undertaken.

Payment Policy

The Scottish Government policy requires that all suppliers' invoices not in dispute are paid within the terms of the relevant contract. The Scottish Government aims to pay 100% of invoices, including disputed invoices once the dispute has been settled, on time in these terms.

The Scottish Government has a 10-day target for paying bills to businesses in Scotland. This aspiration is above and beyond our contractual commitment to pay suppliers within 30 days. Paying supplier bills within ten working days is seen as a key objective, and an important expression of the Scottish Government's commitment to supporting business.

For financial year 2018-19, the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service made 99.0% of all payments within 10 days (2017-18: 98.2%). The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 99.3% of payments within 10 days (2017-18: 98.8%). The NHS bodies in Scotland made 82.6% of all payments within 10 days (2017-18: 82.9%).

The payment performance of the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service for 2018-19 was 99.7% (2017-18: 99.5%) of all transactions settled within the terms of its contractual 30 day payment policy. The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 99.7% (2017-18: 99.7%) of all payments within the terms of its contractual 30 day payment policy. The NHS bodies in Scotland made 92.5% (2017-18: 92.7%) of all payments within the terms of their contractual 30 day payment policy.

Sustainability and Environmental Reporting

The Scottish Government recognises that it has a responsibility to achieve the best results in terms of meeting sustainability criteria., and has set ambitious targets for improving the environmental performance of our estate.

The Scottish Government has developed guidance for central government and the wider public sector on the preparation of sustainability reports to complement Annual Reports and Accounts. The guidance is intended to form a key element of a sustainability reporting framework for the Scottish public sector (referred to as the Scottish Sustainability Reporting Framework). The Framework will aim to inform best-practice across the public sector and demonstrate a coherent approach which meets statutory and non-statutory sustainability reporting requirements in the most cost effective and least burdensome manner to help drive improvements in sustainability performance.

The guidance relates specifically to information to be included in Scottish Public Sector Sustainability Reports^[15] intended to complement Annual Reports and Accounts and expected to be consistent with the reporting requirements flowing from the Climate Change (Scotland) Act 2009 and the principles for sustainability reporting contained in HM Treasury guidance.

The Scottish Government's current reporting on sustainability is focused on the environmental aspects of sustainability; it currently publishes an annual report^[16] on environmental performance against a range of targets in respect of the core estate including emissions from energy use, waste arisings and recycling rates, transport & travel emissions, water consumption and biodiversity.

The Scottish Government annually publishes a Climate Change Duties report^[17].

Principal Accountable Officer
23 September 2019

Contact

Email: alison.douglas@gov.scot

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