Scottish Government Consolidated Accounts: year ended 31 March 2022

Notes to the Accounts

For the Year Ended 31 March 2022

1. Statement of Accounting Policies

In accordance with the accounts direction issued by Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000 these financial statements have been prepared in accordance with the 2021-22 Government Financial Reporting Manual (FReM). The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context.

The accounts are prepared using accounting policies, and, where necessary, estimation techniques, which are selected as the most appropriate for the purpose of giving a true and fair view in accordance with the principles set out in International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors. Changes in accounting policies which do not give rise to a prior year adjustment are reported in the relevant note.

The particular accounting policies adopted by the portfolios of the Scottish Government are described below. They have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting Convention and basis of consolidation

These accounts have been prepared under the historical cost convention modified to account for the revaluation of property, plant and equipment (PPE), intangible assets, and, where material, financial asset investments and inventories to fair value as determined by reference to their current costs.

These accounts reflect the consolidated assets and liabilities and the results for the year of all the entities within the Scottish Government accounting consolidation boundary. The structure of the Scottish Government and further information about the entities within the consolidation boundary is provided within the introduction of the Performance Report of these accounts.

The Executive Agencies detailed within the Performance Report mentioned above are reported within the Outturn Statements of their sponsoring portfolio.

1.2 Critical accounting judgements and key sources of estimation

The preparation of these accounts requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenditure. These assessments are based on historic and other factors that are believed to be reasonable, the results of which form the basis for making judgements. The estimates and underlying assumptions are reviewed on an ongoing basis.

Student Loan Valuations

The value of Student Loans is calculated using forecasting models which use data on the demographics of higher education and further education students to predict their likely lifetime earnings, and from this their loan repayments. The models depend on a complex set of assumptions, in particular about the trajectory of borrowers' earnings. The valuation of the student loan book is uncertain as it is highly dependent on macroeconomic circumstances and the estimate of graduate earnings as well as a number of other assumptions. The assumptions used in the repayment models are formally reviewed each year and the amounts provided reflect the estimate as at the year end.

1.3 Property, Plant and Equipment (PPE)

Recognition

All PPE assets will be accounted for as non-current assets unless they are deemed to be held-for-sale (see note 1.4 below), and will be accounted for under IAS 16 Property, Plant and Equipment.

Scottish Ministers hold the legal title or effective control over all land and buildings shown in the accounts.

Assets classified as under construction are recognised in the statement of financial position to the extent that money has been paid or a liability has been incurred.

Capitalisation

The minimum levels for capitalisation of a property, plant or equipment asset are land and buildings £10,000 and equipment and vehicles £5,000. Information and Communications Technology (ICT) systems are capitalised where the pooled value exceeds £1,000. Substantial improvements to leasehold properties are also capitalised. Furniture, fixtures and fittings are treated as current expenditure and are not capitalised. Any assets valued below these thresholds will be treated as expenditure in the year of purchase.

Valuation

Land and buildings have been stated at open market value for existing use or, under IAS 16 as adapted for the public sector, depreciated replacement cost for specialised buildings under a rolling 5-year programme of professional valuations and appropriate indices in intervening years. Vessels and aircraft are valued at depreciated replacement cost, and other plant and equipment assets are reported at depreciated historic cost.

Losses in value reflected in valuations are accounted for in accordance with IAS 36, Impairment of Assets as adapted by the FReM which states that impairment losses that arise from a clear consumption of economic benefit should be taken to the outturn statement. The balance on any revaluation reserve (up to the level of impairment) to which the impairment would have been charged under IAS 36 should be transferred to the general fund.

The road network is valued at depreciated replacement cost as it is deemed to be specialist in nature. The road pavement element is valued using agreed rates determined to identify the gross replacement cost of applicable types of road on the basis of new construction on a greenfield site. These rates are re-valued annually using indices to reflect current prices and are also updated when new construction costs become available as comparators to the costs previously identified for specific road types.

Structures are valued using agreed rates determined to identify the replacement cost of applicable types of structure on the basis of new construction on a greenfield site where these are available, but special structures, which tend to be one off by their nature, are valued using specific costs that are updated to current prices. Communications are valued using agreed rates determined to identify the replacement cost of applicable types of communication.

The indexation factors applied are:

• Road Pavement and Structures: Baxter Index, published quarterly by the Department of Business, Innovation and Skills
• Communications: Traffic Scotland provide new gross and calculated depreciated values each year
• Land: Land indices produced by the Valuation Office Agency (VOA)

Upwards movements in value are taken to the revaluation reserve. Downward movements in value are set off against any credit balance held in the revaluation reserve until the credit is exhausted and thereafter charged to the relevant portfolio outturn statement.

The trunking or detrunkings of roads from or to local authorities is treated as a transfer from or to other government departments. Roads and structures detrunked are effectively dealt with as disposals in accounting terms at nil consideration. Any associated profit or loss is processed through the general fund.

Subsequent Cost

Subsequent costs are only included in the asset's carrying amount or, where appropriate, recognised as a separate asset, when it is probable that future economic benefits associated with the item will flow to the Scottish Government and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the outturn statement during the financial period in which they are incurred.

1.4 Assets Held for Sale

A property is derecognised and held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when all of the following requirements are met:

• It is available for immediate sale in its present condition;
• A plan is in place, supported by management, and steps have been taken to actively market the asset and conclude a sale at a reasonable price in relation to its current fair value; and
• A sale is expected to be completed within 12 months.

Assets classified as held for sale are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. Assets classified as held for sale are not subject to depreciation or amortisation.

1.5 Donated Assets and European Union Grants

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, and SIC10 Government Assistance apply as interpreted by the FReM. Donated assets and grants received from the European Union for capital assets are capitalised at their valuation on receipt and this value is credited as income to the outturn statement. Subsequent revaluations are accounted for in the revaluation reserve, and impairments may be charged to the outturn statement.

1.6 Intangible Assets

In accordance with the FReM, Intangible assets are accounted for in line with the requirements of IAS 38 Intangible Assets, and are valued at depreciated replacement cost. Revaluations are carried out according to IAS 38 for assets over a valuation threshold.

Future economic benefit has been used as the criteria in assessing whether an intangible asset meets the definition and recognition criteria of IAS 38 Intangible Assets for assets that do not generate income. IAS 38 defines future economic benefit as, 'revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity.'

Intangible assets other than assets under development are amortised on a straight line basis over their estimated useful lives. Impairment reviews are carried out if there are any indicators that impairment should be considered. Intangible assets under development are not amortised.

1.7 Depreciation and Amortisation

Land is considered to have an indefinite life and is not depreciated.

Assets under construction are not depreciated.

For all other property, plant and equipment and intangible assets, depreciation or amortisation is charged at rates calculated to write off their valuation by equal instalments over their estimated useful lives which are normally in the following ranges:

• Dwellings and other buildings: 5 to 50 years (as per valuation)
• Vehicles: 3 to 10 years
• Vessels: 25 to 30 years
• Aircraft: 5 to 20 years
• Equipment: 3 to 15 years
• ICT systems: 3 to 10 years
• Internally developed software: 3 to 5 years
• Leasehold improvements: Over the shorter of asset life and lease term

1.8 Financial Instruments

The Scottish Government measures and presents financial instruments in accordance with IAS 32, IFRS 7, IFRS 13 and IFRS 9 as interpreted by the FReM.

IFRS 9 contains three principal classification categories for financial assets:

• amortised cost;
• fair value through other comprehensive income (FVOCI); and
• fair value through profit or loss (FVTPL).

The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial liabilities are classified and subsequently measured at amortised cost, except for:

• Financial liabilities at fair value through profit or loss, which is applied to derivatives and other financial liabilities designated as such at initial recognition
• Financial liabilities arising from the transfer of financial assets which did not qualify for de-recognition, whereby a financial liability is recognised for the consideration received for the transfer
• Financial guarantee contracts and loan commitments

The Scottish Government has classified its financial instruments as follows:

Financial Assets

• Cash and cash equivalents, trade receivables, short term loans, accrued income relating to EU funding, amounts receivable and shares will be classified as amortised cost. This will also include investment funds managed by third parties which will be reported separately.
• Student loans will be reported in the 'At fair value through profit & loss' category
• Shared equity loans advanced to private individuals will be reported in the 'At fair value through profit & loss' category.

Financial Liabilities

• Borrowings, trade payables, accruals, payables, bank overdrafts and financial guarantee contracts are classified as 'Other Liabilities'.
• Financial guarantee contracts are initially recognised at fair value. Under IFRS 9, financial guarantees are subsequently measured at the higher of the initial amount, less any subsequent amortisation where appropriate or of the credit loss allowance.

Financial instruments are initially measured at fair value with the exception of 'Shares held in and loans advanced to public sector bodies' which are held at historic cost, in the absence of an active market. The fair value of financial assets and liabilities is determined as follows:

• The fair value of cash and cash equivalents and current non-interest bearing monetary financial assets and financial liabilities approximate their carrying value, and
• The fair value of other non-current monetary financial assets and financial liabilities is based on market prices where a market exists, use of appropriate indices or has been determined by discounting expected cash flows by the current interest rate for financial assets and liabilities with similar risk profiles.

Financial instruments subsequent measurement depends on their classification:

• Fair value through the profit and loss is held at fair value with any changes going through the outturn statement.
• Financial assets and liabilities held at amortised cost are not revalued unless included in a fair value hedge accounting relationship. Any impairment losses go through the outturn statement.
• Shares which are held in public sector bodies and private sector bodies that do not have a quoted market price in an active market, and where the fair value cannot be reliably measured and reported at historic cost less impairment with any impairment losses going through the outturn statement. Otherwise they are held at fair value.

Financial assets

Financial assets include shares in nationalised industries and limited companies, loans issued to public bodies not consolidated in departmental accounts; loans made under the terms of the student loans scheme, loans to private companies, repayment and deferred loans relating to housing associations and investment funds. Such investments are generally reported as non-current assets. If an investment is held on a short-term basis, or a loan is due to be repaid within one year, it will be treated as a current asset.

Impairment of Financial assets

For all financial assets measured at amortised cost or at fair value through other comprehensive income (except equity instruments designated per the irrevocable election), lease receivables and contract assets, a loss allowance is recognised representing expected credit losses on the financial instruments.

A simplified approach to impairment has been adopted, in accordance with IFRS 9, and measures the loss allowance for trade receivables, contract assets and lease receivables at an amount equal to lifetime expected credit losses. For other financial assets, the loss allowance is measured at an amount equal to lifetime expected credit losses if the credit risk on the financial instrument has increased significantly since initial recognition (stage 2), and otherwise at an amount equal to 12-month expected credit losses (stage 1).

HM Treasury has ruled that central government bodies may not recognise stage 1 or stage 2 impairments against other government departments, their executive agencies, the Bank of England, Exchequer Funds, and Exchequer Funds' assets where repayment is ensured by primary legislation. Therefore loss allowances for stage 1 or stage 2 impairments against these bodies are not recognised.

For financial assets that have become credit impaired since initial recognition (stage 3), expected credit losses at the reporting date are measured as the difference between the asset's gross carrying amount and the present value of the estimated future cash flows discounted at the financial asset's original effective interest rate. Any adjustment is recognised in the Consolidated Statement of Comprehensive Net Expenditure as an impairment gain or loss.

Student Loans

Student loans are valued at fair value through profit and loss.

As there is currently no active market for student loans, the Scottish Government values the loans by using a valuation technique. This technique involves the gross value of the loans being reduced by an amount based on:

• Interest subsidy: This is the difference between the interest paid by students (lower of RPI and Bank of England Base Rate + 1% point) and the cost of capital on loans at the rate provided by HM Treasury. The interest subsidy is estimated to meet the cost of the interest over the life of the loan and is offset by the annual interest capitalised.
• Write off impairment: This is estimated to meet the future cost of loans that are not likely to be recovered mainly due to the death of the student, their income not reaching the income threshold, or not being able to trace the student. Each year, the future cost of bad debt is estimated based on a percentage of new loans issued during the financial year. This is offset by the actual debts written off by the Student Loan Company.

The estimates underpinning these adjustments are based on a model which holds data on the demographic and behavioural characteristics of students in order to predict their borrowing behaviour and estimate the likely repayments of student loans. Given the long term nature of both adjustments, the time value of money is significant, and they are discounted using the current HM Treasury discount rate.

There are significant uncertainties in assessing the actual likely costs and the impairment will be affected by the assumptions used.

These are formally reviewed by the Scottish Government each year and the amounts impaired reflect the Scottish Government's current best estimate.

Further details of the movements in the loan valuation can be found in note [10a], while disclosures relating to risk, required by IFRS 7, can be found in note [10f].

Embedded Derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit and loss.

Financial Guarantee Contracts

Financial guarantee contract require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. They are initially recognised at fair value.

Under IFRS 9, financial guarantees are subsequently measured at the higher of the initial amount, less any subsequent amortisation where appropriate or of the credit loss allowance.

The expected credit loss model calculates the allowance for credit losses by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability weighted outcomes.

Financial Transactions

Financial Transactions are a capital funding source from HM Treasury which can only be used to fund loans and equity investments that cross the public/private sector boundary. These have to be repaid to HM Treasury in the future through adjustments to baseline funding. A repayment profile has been agreed with HM Treasury which aligns receipts by the Scottish Government with repayment to HM Treasury. This is reviewed annually.

1.9 Inventories

Items that cannot or will not be used are written down to their net realisable value. Taking into account the high turnover of NHS stocks, the use of average purchase price is deemed to represent the lower of cost and net realisable value. Work in progress is valued at the cost of the direct materials plus the conversion costs incurred to bring the goods up to their present degree of completion.

1.10 Non-Profit Distributing (NPD)/ Public Private Partnerships (PPP) / Private Finance Initiatives (PFI)

NPD/PPP/PFI transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector. The Scottish Government currently uses the Non-Profit Distributing model in structuring its service concession arrangements. Previous administrations used the Public Private Partnership and Private Finance Initiative models. As payments made and assets held relating to these models will continue to be recorded in these accounts over the foreseeable future, the accounts refer to the three different service concession models in relevant disclosure.

Assets that are assessed to be on statement of financial position will be measured as follows:

• Where the contract is separable between the service element, the interest charge and the infrastructure asset, the asset will be measured as under IAS 17, Leases, with the service element and the interest charge recognised as incurred over the term of the concession arrangement; and
• Where there is a unitary payment stream that includes infrastructure and service elements that cannot be separated, the various elements will be separated using estimation techniques including obtaining information from the operator or using the fair value approach.

The grantor will recognise a liability for the capital value of the contract. That liability does not include the interest charge and service elements, which are expensed annually through the relevant portfolio outturn statement.

Assets should subsequently be measured consistently with other assets in their class using IAS 16, Property, Plant and Equipment, adopting an appropriate asset revaluation approach. Liabilities will be measured using the appropriate discount rate, taking account of the reduction arising from capital payments included in the unitary payment stream.

Any revenue received by the grantor is recognised in line with IFRS 15.

1.11 Revenue

Revenue is accounted for in accordance with IFRS 15, as directed by the FReM. Revenue is recognised when the amount can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met.

Operating income is income that relates directly to the operating activities of the Scottish Government. It includes fees and charges for services provided, on a full cost basis, to external customers, public repayment work and income from investments. It includes both income applied with limit as outlined by the Scottish Budget documents and income not applied. For income categorised as being applied with limit, any excess income over that approved is surrendered to the Scottish Consolidated Fund. Operating income is stated net of VAT.

Income is analysed in [Note 5] between that which, under the regime, is allowed to be offset against gross administrative costs in determining the outturn against the administration cost limit (income applied), and that operating income which is not (income not applied).

1.12 Grants

Grants payable or paid are recorded as expenditure in the period that the underlying event or activity giving entitlement to the grant occurs. Where necessary obligations in respect of grant schemes are recognised as liabilities.

In accordance with the Scottish Public Finance Manual, procedures are in place to ensure compliance with any conditions or provisions attached to any grant payments.

1.13 European Union Funds

Funds received from the European Union (EU), are treated as income and shown in the relevant Portfolio Outturn Statement. Expenditure in respect of grants or subsidy claims is recorded in the period that the underlying event or activity giving entitlement to the grant or subsidy claim occurs. Any related payable or receivable balances are reflected in the Statement of Financial Position.

1.14 Foreign Exchange

Under the requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates and SIC 7 Introduction of the Euro, transactions which are denominated in a foreign currency are translated into sterling at the exchange rate ruling on the date of each transaction, except where rates do not fluctuate significantly, in which case an average rate for a period is used. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the outturn statement.

1.15 Leases

As directed by the FReM, IAS 17 Leases and SIC15 Operating Leases apply. Where substantially all the risks and rewards of ownership of a leased property are borne by the entity, it is recorded as a non-current asset and a corresponding payable recorded in respect of the debt due to the lessor, with the interest element of the finance lease payment charged to the outturn statement. Leases other than finance leases are treated as operating leases, and rentals payable in respect of operating leases will be charged to the outturn statement on a straight line basis over the term of the lease. The new standard for reporting leases, IFRS 16, is adopted from 1 April 2022.

1.16 Pensions

The Scottish Government as an employer

Present and past employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS) which is a defined benefit scheme and is unfunded. Portfolios, agencies and other bodies covered by the PCSPS recognise the expected cost of providing pensions for their employees on a systematic and rational basis over the period during which they benefit from their services by payment to the PCSPS of amounts calculated on an accruing basis (relevant disclosures are reported in the Remuneration and Staff Report). Liability for the payment of future benefits is a charge to the PCSPS. Separate scheme statements for the PCSPS as a whole are published.

The Scottish Government as a scheme administrator

Expenditure reported within Portfolio Outturn Statements includes grant in aid to bodies sponsored by the Scottish Government, which covers pension related expenditure in respect of pension schemes operated by the sponsored body for their eligible employees. The arrangements for these pension schemes are reported and explained in the annual accounts of the relevant bodies.

NHS Bodies

The NHS Bodies in Scotland participate in the National Health Service Superannuation Scheme for Scotland which is a notional defined benefit scheme where contributions are credited to the Exchequer and the balance in the account is deemed to be invested in a portfolio of Government securities. The pension cost is assessed every five years by the Government Actuary; details of the most recent actuarial valuation can be found in the separate statement of the Scottish Public Pensions Agency (SPPA).

Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to ill health. The full amount of the liability for the additional costs is charged to the outturn statement at the time the Board commits itself to the retirement, regardless of the method of payment.

1.17 Provisions

IAS 37 Provisions, Contingent Liabilities and Contingent Assets applies in full, and in these accounts provisions are made for legal or constructive obligations which are of uncertain timing or amount at the statement of financial position date on the basis of the best estimate of the expenditure required to settle the obligation. Where material, they have been discounted using the appropriate discount rate as prescribed by HM Treasury.

Student Loans

The provision is established to reflect the debt sale subsidy.

Early Departure Costs

The Scottish Government is required to meet the additional cost of benefits beyond the normal PCSPS benefits in respect of employees who retired early, prior to 2011. The Scottish Government provides in full for this cost when the early retirement programme has been announced and is binding.

CNORIS

CNORIS is a risk transfer and financing scheme for NHS Scotland, which was first established in 1999. Its primary objective is to provide cost-effective risk pooling and claims management arrangements for Scotland's NHS Health Boards and Special Health Boards.

NHS Boards are required to create a separate related, but distinct, provision recognising their respective shares of the total CNORIS national scheme liability. This is in addition to the recognition by NHS Boards of a provision for individual claims against their Board along with an associated debtor. The recognition of the separate provision is a technical accounting adjustment to more appropriately reflect the underlying substance of Boards' liabilities.

On consolidation into the Scottish Government accounts, the Scottish Government's CNORIS provision represents the national scheme liability.

NHS

In terms of accounting for the CNORIS scheme, NHS bodies provide for all claims notified to the NHS Central Legal Office (CLO) according to the value of the claim and the probability of settlement. Claims assessed as 'Category 3' are deemed most likely and provided for in full, those in 'Category 2' as 50% of the claim and those in 'Category 1' as nil. In conjunction with the CLO, Boards may take a different view on the appropriate level of provision for 'Category 2' claims, and may apply a different percentage in calculating the associated provision. The balance of the value of claims not provided for is disclosed as a contingent liability. This procedure is intended to estimate the amount considered to be the liability in respect of any claims outstanding.

1.18 Contingent Liabilities

Contingent liabilities include those required to be disclosed under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and other liabilities arising from indemnities and guarantees (which are not financial guarantee contracts) included for parliamentary reporting and accountability. Portfolios must seek the prior approval of Parliament, via the Finance Committee, before entering into any specific guarantee, indemnity or letter or statement of comfort unless it arises in the normal course of business or the sum of the risk is £1m or less.

1.19 Value Added Tax (VAT)

Most of the activities of the Scottish Government are outside the scope of VAT, and in general output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT.

1.20 Segmental Reporting

IFRS 8 Segmental Reporting requires operating segments to be identified on the basis of internal reports about components of the Scottish Government and its consolidated bodies that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and assess their performance. The Scottish Government reports segmental information within its outturn statements which are prepared on the basis of Ministerial portfolios.

1.21 Trade Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an estimate of likely impairment. Impairment of trade receivables is calculated through an expected credit loss model.

1.22 Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Balances are analysed between those held with the Government Banking Service and balances held in commercial banks.

1.23 Trade Payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.24 Short Term Employee Benefits

A liability and an expense is recognised for holiday days, holiday pay, bonuses and other short-term benefits when the employees render service that increases their entitlement to these benefits. As a result an accrual has been made for holidays earned but not taken.

1.25 New Accounting Standards

All new standards issued and amendments made to existing standards are reviewed by Financial Reporting and Advisory Board (FRAB) for subsequent inclusion in the FReM in force for the year in which the changes become applicable. The standards that are considered relevant to Scottish Government and the anticipated impact on the consolidated accounts are as follows:

IFRS 16 - Leases

This standard comes into effect for accounting periods beginning after 1 April 2022. The impact of IFRS 16 will be to remove distinction between finance and operating leases and all assets embedded within leases will be capitalised and recorded on the Statement of Financial Position. The FReM interprets and adapts IFRS 16 for the public sector context in several ways and these assets will be included on the statement of financial position from 1 April 2022, in accordance with the transition arrangements set out in IFRS 16 application guidance issued by HM Treasury in December 2020.

Under IFRS 16, lessees are required to recognise assets and liabilities for leases with a term of more than 12 months, unless the underlying asset is of low value. While no standard definition of 'low value' has been mandated across the consolidation boundary, NHS Scotland have elected to utilise the capitalisation threshold of £5,000 to determine the assets to be disclosed and other bodies will generally be using the capitalisation thresholds noted above in section 1.3.

The Scottish Government has assessed the impact that the application of IFRS 16 will have on the comprehensive net expenditure for the financial year ending 31 March. The figures below are for existing leases as at 31 March 2022 and for new leases starting during 2022-23.

SoCNE impacts IFRS 16	£000's
Depreciation expected 2022-23	85,579
Interest expense expected 2022-23	5,341
IAS 17 basis rental payments expected 2022-23	(83,735)
Increased Expenditure	7,185

IFRS 17 - Insurance Contracts

IFRS 17 replaces the previous standards on insurance contracts, IFRS 4. Under the IFRS 17 model, insurance contract liabilities will be calculated as the present value of future insurance cash flows with a provision for risk.

The Standard will been adapted and interpreted for the public sector context. One major difference from the private sector is that the implementation of IFRS 17 has been delayed from 1 January 2023 (its effective date in the private sector). The mandatory effective date of IFRS 17 in the public sector is not yet confirmed but is expected to be 1 April 2024.

The impact of IFRS 17 has not yet been determined but this will be assessed when further guidance is forthcoming from HM Treasury.

2. Cash and cash equivalents

	2021-22	2020-21
	£m	£m
Government Banking Service	1,019	659
Commercial banks and cash in hand	33	49
At 31 March	1,052	708
At 1 April	708	970
Net change in cash and cash equivalent balances	344	(262)
At 31 March	1,052	708

	Note	2021-22	2020-21
		Net	Net
The balance at 31 March includes:		£m	£m
Cash due to be paid to the Scottish Consolidated Fund	13	997	644
Consolidated Fund extra receipts received and due to be paid to the SCF	13	3	3
At 31 March		1,000	647

3. Note to the Cash Flow Statement

Adjustment to Operating Activities for Non-cash Transactions

	2021-22	2020-21
	£m	£m
Depreciation and Amortisation	648	485
Impairments/Write-backs	78	96
Total Capital Charges	726	581
Loss/(Profit) on disposal of property, plant and equipment	(15)	(7)
Capitalised interest - financial assets	(76)	(71)
Student loans fair value adjustment	(532)	412
Investment fair value adjustments	(173)	37
Income from donated asset additions	(5)	(15)
Auditor Fees	5	5
Unrealised exchange rate (gain)/loss	1	3
Acquisition of Shares	(130)	1
Other non-cash items - Health Boards	16	57
Other non-cash items	5	(1)
NHS Highland - movement in year in LG pension costs	(10)	13
NHS Board consolidation adjustments	110	(4)
Total	(78)	1,011

4. Note to the Cash Flow Statement - Working Capital

Movement in Working Capital

	Note	Opening Balance	Closing Balance	2021-22 Net Movement	2020-21 Net Movement
		£m	£m	£m	£m
Inventories	9	243	206
Net Decrease/(Increase)				37	(101)
Receivables and other assets
Due within one year	12	1,117	1,205	(88)	(66)
Due after more than one year	12	76	87	(11)	25
Assets Held for Sale	8	17	14	3	(7)
Less: Capital included in PPE		(24)	(25)	1	3
Less: Capital included in intangibles		-	-	-	-
Less: Capital included in investment		(1)	(1)	-	1
Less: Receivable from SCF	12	(60)	(200)	140	60
Less: General Fund receivable included above		(5)	(3)	(2)	4
Other Adjustment		(7)	4	(11)	22
Prior Year Adjustment		(7)	-	(7)	-
NHS boards consolidation adjustment		881	879	2	(15)
Total		1,987	1,960
Net Decrease/(Increase)				27	27
Payables and other liabilities
Due within one year	13	5,133	6,212	1,079	1,265
Due after more than one year	13	3,456	3,374	(82)	(122)
Less: Capital included in PPE		(241)	(158)	83	(53)
Less: Capital included in intangibles		(1)	(12)	(11)	1
Less: Capital included in Investment		(14)	(35)	(21)	(9)
Less: SCF corporate payable included in above	13	(634)	(995)	(361)	254
Less: Payable to SCF	13	(15)	(3)	12	12
Less: Bank Overdraft	13	(4)	(2)	2	(4)
Less: NLF payable included in above	13	(531)	(481)	50	33
Less: PFI Imputed Leases	13	(2,870)	(2,911)	(41)	66
Less: Financial Guarantees included in above	13	-		-	1
Other Adjustment		6	19	13	(9)
Prior Year Adjustment		5		(5)
NHS Board Consolidation Adjustment		144	174	30	11
Total		4,434	5,182
Net (Decrease)/Increase				748	1,446
Provisions
Due within one year	14	347	334	(13)	(818)
Due after more than one year	14	964	1,015	51	87
NHS Board Consolidation Adjustment		450	449	(1)	-
Total		1,761	1,798
Net (Decrease)/Increase				37	(731)
Total Net Movement				849	641

5. Outturn Income and Expenditure

5a. Operating income analysed by classification and activity, is as follows:

	Total Income	Income Not Applied	2021-22 Income Applied	Restated 2020-21 Income Applied
	£m	£m	£m	£m
Health and Social Care	1,012	-	1,012	706
Social Justice, Housing and Local Government	14	-	14	10
Finance and Economy	102	-	102	26
Education and Skills	97	-	97	83
Justice and Veterans	17	-	17	16
Net Zero, Energy and Transport	141	-	141	143
Rural Affairs and Islands	98	-	98	133
Deputy First Minister and Covid Recovery	-	-	-	-
Constitution, External Affairs and Culture	2	-	2	1
Crown Office and Procurator Fiscal Service	8	6	2	2
Total	1,491	6	1,485	1,120

5b. Income not applied

Income not applied includes amounts for surrender to the Scottish Consolidated Fund in accordance with the Scotland Act 1998 (Designation of Receipts) Order 2009 (as amended by Scotland Act 2012 and Scotland Act 2016) [referred to as Designation of Receipts Order].

The major items of income not applied are:	Cash received	Accrued	2021-22	2020-21
	£m	£m	£m	£m
Repayment of interest	-	-	-	-
Non-designated receipts - Proceeds of Crime and other	6	-	6	6
Total Income Not Applied	6	-	6	6

5c. Interest Receivable

All Interest receivable is external to the portfolio boundary and not from other portfolios. It is included within the Operating Outturn Statement as income applied, unless it is required to be surrendered to the Scottish Consolidated Fund under the requirements of the Designation of Receipts Order.

Programme Income:	Capitalised Interest	Voted Loans Interest	Other Interest	2021-22 Total Interest	Restated 2020-21 Total Interest
	£m	£m	£m	£m	£m
Social Justice, Housing and Local Government	-	-	1	1	1
Finance and Economy	-	-	-	-	1
Education and Skills	75	-	-	75	70
Net Zero, Energy and Transport	-	111	33	144	148
Total	75	111	34	220	220

All capitalised and voted loans interest in the table above is included within the associated portfolio outturn statement as income applied. There is no interest income that meets the definition of income not applied, in accordance with the Designation of Receipts Order. However, both the Voted Loans interest and National Loan Funds interest (£33m Other Interest within the Net Zero, Energy and Transport Portfolio) is due back to the Scottish Consolidated Fund. The Voted Loans interest is specifically excluded from the Designation of Receipts Order, whilst the National Loan Funds interest relates to pre-devolution loans and has a net nil effect on the net outturn of the Net Zero, Energy and Transport portfolio against the Scottish Water line.

5d. Interest Payable

	2021-22 Total	2020-21 Total
	£m	£m
Finance lease charges allocated in the year including on balance sheet PFI/PPP contracts	225	225
Other interest	-	3
Total	225	228

5e. Audit Fee

The consolidated audit fee for 2021-22 is £5m (Core Portfolios £1m). Part of the audit fee, including that of the Core Portfolios, is a notional charge, as noted in Note 3 - Notes to the Cash Flow. Other entities within the consolidation boundary pay fees.

The consolidated audit fee for 2020-21 was £5m (Core Portfolios £1m). There were no additional charges in relation to non-audit work undertaken by Audit Scotland.

5f. Operating Costs

Total operating costs for the Scottish Government are aligned with the portfolio budget that they support. The total operating costs for a portfolio are all the core Scottish Government staff and associated operating costs incurred by the portfolio, plus a share of the costs, such as accommodation, IT, legal services and HR, which cannot be readily attributed to a portfolio (corporate running costs).

Analysis of Net Operating Costs by Category

	2021-22	2020-21
	£m	£m
Staff Costs	567	512
Accommodation	43	35
Legal Costs	5	3
Travel & Subsistence	3	2
Training	3	2
IT Costs	31	32
Transport	1	1
Audit Fee	1	1
Other Office Costs	18	18
Operating Income	(53)	(19)
Total	619	587

Analysis of Net Operating Costs by Portfolio

	2021-22	Restated 2020-21
	£m	£m
Health and Social Care	119	123
Social Justice, Housing and Local Government	27	20
Finance and Economy	80	87
Education and Skills	47	40
Justice and Veterans	159	144
Net Zero, Energy and Transport	41	38
Rural Affairs and Islands	91	91
Deputy First Minister and Covid Recovery	35	27
Constitution, External Affairs and Culture	20	15
Crown Office and Procurator Fiscal Service	-	-
Total	619	585

(1) Crown Office and Procurator Fiscal Service is fully outwith core Scottish Government and is not subject to operating costs.

5g. Analysis of Capital Charges by Portfolio

Analysis of Capital Charges by Portfolio

Portfolio	Depreciation/ Amortisation	Impairment/ Write back	2021-22 Total	Restated 2020-21 Total
	£m	£m	£m	£m
Health and Social Care	334	21	355	396
Social Justice, Housing and Local Government	22	-	22	12
Finance and Economy	17	55	72	35
Education and Skills	8	-	8	7
Justice and Veterans	42	1	43	40
Net Zero, Energy and Transport	176	-	176	40
Rural Affairs and Islands	44	-	44	46
Deputy First Minister and Covid Recovery	-	-	-	-
Constitution, External Affairs and Culture	-	-	-	-
Crown Office and Procurator Fiscal Service	5	1	6	5
Total Capital Charges	648	78	726	581

6. Property, Plant and Equipment

6a. Property, Plant and Equipment

Cost or valuation	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets Under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 April 2021	474	7,436	656	25,202	240	1,427	459	96	1,082	37,072
Additions	8	59	1	62	5	79	15	5	583	817
Adjustments	-	-	-	26	-	-	-	-	-	26
Transfers	-	159	2	121	10	89	39	1	(421)	-
Disposals	(2)	(4)	-	-	(14)	(61)	(35)	(6)	-	(122)
Revaluations to Revaluation Reserve	9	256*	40	2,725	15	(2)	(2)	-	-	3,041
Revaluations to Outturn Statement	(1)	(15)	-	-	(1)	-	-	-	(70)	(87)
Balance at 31 March 2022	488	7,891	699	28,136	255	1,532	476	96	1,174	40,747
Depreciation
As at 1 April 2021	-	296	13	4,445	142	930	361	77	-	6,264
Charged in year	-	219	23	175	18	95	34	4	-	568
Adjustments	-	-	-	14	-	-	-	-	-	14
Disposal	-	(3)	-	-	(14)	(61)	(35)	(5)	-	(118)
Revaluations to Revaluation Reserve	-	(155)*	(2)	451	11	(2)	(1)	-	-	302
Revaluations to Outturn Statement	-	(31)	-	-	-	1	1	-	-	(29)
Balance at 31 March 2022	-	326	34	5,085	157	963	360	76	-	7,001
Net book value at 31 March 2022	488	7,565	665	23,051	98	569	116	20	1,174	33,746
Net book value at 31 March 2021	474	7,140	643	20,757	98	497	98	19	1,082	30,808

* Increased estimates of remaining useful asset lives is processed as a reduction to the accumulated depreciation. The revaluation of buildings in 2021-22 results in a net upward movement.

Analysis of asset financing:	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets Under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Owned	481	5,073	575	19,770	90	552	116	20	1,170	27,847
Finance Leased	-	45	-	-	4	-	-	-	-	49
On balance sheet PFI	5	2,369	89	3,281	-	1	-	-	1	5,746
Donated	-	-	-	-	-	1	-	-	-	1
EU Grant	2	78	1	-	4	15	-	-	3	103
Net book value at 31 March 2022	488	7,565	665	23,051	98	569	116	20	1,174	33,746

Donated Asset Movement	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Additions	1	-	-	-	-	2	-	-	1	4
Disposals	-	-	-	-	-	-	-	-	-	-

1 (land holdings and land underlying buildings); 2 (excluding dwellings); 3 (including land)

Cost or valuation	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets Under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 April 2020	484	7,659	713	25,297	224	1,295	440	91	792	36,995
Additions	3	42	-	13	16	114	24	3	495	710
Adjustments	-	-	-	(86)	-	-	-	-	-	(86)
Transfers	1	106	2	39	2	77	9	3	(242)	(3)
Transfers (to)/from Assets Classified as Held for Sale	(10)	(2)	-	-	-	-	-	-	-	(12)
Transfer from loans	-	-	-	-	-	-	-	-	74	74
Disposals	(6)	(2)	(1)	-	(6)	(59)	(13)	(1)	-	(88)
Revaluations to Revaluation Reserve	3	(280)*	(58)	(61)	4	-	-	-	-	(392)
Revaluations to Outturn Statement	(1)	(87)	-	-	-	-	(1)	-	(37)	(126)
Balance at 31 March 2021	474	7,436	656	25,202	240	1,427	459	96	1,082	37,072
Depreciation
As at 1 April 2020	-	367	36	4,445	128	904	344	72	-	6,296
Charged in year	-	218	22	40	17	84	29	5	-	415
Adjustments	-	-	-	(11)	-	-	-	-	-	(11)
Transfers	-	-	-	-	-	-	-	-	-	-
Transfers outwith core portfolios	-	-	-	-	-	-	-	-	-	-
Transfers (to)/from Assets Classified as Held for Sale	-	-	-	-	-	-	-	-	-	-
Disposal	-	(1)	-	-	(6)	(58)	(13)	-	-	(78)
Reclassifications	-	-	-	-	-	-	-	-	-	-
Revaluations to Revaluation Reserve	-	(261)*	(45)	(29)	3	-	-	-	-	(332)
Revaluations to Outturn Statement	-	(27)				-	1	-	-	(26)
Balance at 31 March 2021	-	296	13	4,445	142	930	361	77	-	6,264
Net book value at 31 March 2021	474	7,140	643	20,757	98	497	98	19	1,082	30,808
Net book value at 31 March 2020	484	7,292	677	20,852	96	391	96	19	792	30,699

* Increased estimates of remaining useful asset lives is processed as a reduction to the accumulated depreciation. The revaluation of buildings in 2020-21 results in a net upward movement.

Analysis of asset financing:	Land1	Buildings2	Dwellings	Road Network 3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets Under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Owned	468	4,727	559	17,820	90	483	96	18	1,068	25,329
Finance Leased	-	44	-	-	5	-	-	-	-	49
On balance sheet PFI	5	2,302	83	2,937	-	1	-	1	-	5,329
Donated	1	67	-	-	3	15	1	-	14	101
EU Grant	-	-	-	-	-	-	-	-	-	-
Net book value at 31 March 2021	474	7,140	642	20,757	98	499	97	19	1,082	30,808

Donated Asset Movement	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Additions	-	-	-	-	-	2	-	-	12	14
Disposals	-	-	-	-	-	(1)	-	-	-	(1)

1 (land holdings and land underlying buildings); 2 (excluding dwellings); 3 (including land)

6b. Property, Plant and Equipment - NHS non-current assets included within note 6a

Cost or valuation	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 April 2021	349	6,794	24	-	117	1,375	367	88	410	9,524
Additions	8	41	-	-	3	74	10	3	379	518
Adjustments	-	-	-	-	-	-	-	-	-	-
Transfers	-	157	1	-	10	88	34	1	(292)	(1)
Transfers (to) assets classified held for sale	-	-	-	-	-	-	-	-	-	-
Disposals	(2)	(3)	-	-	(13)	(59)	(26)	(6)	-	(109)
Revaluations to Revaluation Reserve	6	216	-	-	-	(2)	(1)	-	-	219
Revaluations to Outturn Statement	(1)	(9)	-	-	(1)	-	-	-	(33)	(44)
At 31 March 2022	360	7,196	25	-	116	1,476	384	86	464	10,107
Depreciation
At 1 April 2021	-	251	1	-	60	891	302	69	-	1,574
Charged in year	-	193	1	-	13	93	23	4	-	327
Adjustments	-	-	-	-	-	-	-	-	-	-
Transfers	-	-	-	-	-	-	-	-	-	-
Transfers (to) assets classified held for sale	-	-	-	-	-	-	-	-	-	-
Disposal	-	(2)	-	-	(13)	(59)	(26)	(5)	-	(105)
Reclassifications	-	-	-	-	-	-	-	-	-	-
Revaluations to Revaluation Reserve	-	(155)	(1)	-	-	(2)	(1)	-	-	(159)
Revaluations to Outturn Statement	-	(28)	-	-	-	1	-	-	-	(27)
At 31 March 2022	-	259	1	-	60	924	298	68	-	1,610
Net book value at 31 March 2022	360	6,937	24	-	56	552	86	18	464	8,497
Net book value at 31 March 2021	349	6,543	23	-	57	484	65	19	410	7,950

Analysis of asset financing:	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Owned	353	4,495	24	-	56	536	85	18	459	6,026
Finance Leased	-	35	-	-	-	-	-	-	-	35
PFI included in Statement of Financial Position	5	2,329	-	-	-	1	1	-	2	2,338
Donated Asset	2	78	-	-	-	15	-	-	3	98
Net book value at 31 March 2022	360	6,937	24	-	56	552	86	18	464	8,497

Donated Asset Movement	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Additions	1	-	-	-	-	2	-	-	1	4
Disposals	-	-	-	-	-	-	-	-	-	-

1 (land holdings and land underlying buildings); 2 (excluding dwellings); 3 (including land)

Prior Year

Cost or valuation	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 April 2020	356	6,980	24	-	109	1,245	352	88	306	9,460
Additions	-	34	-	-	15	111	11	2	314	487
Transfers	1	104	1	-	-	76	8	3	(195)	(2)
Transfers (to) assets classified held for sale	(9)	(1)	-	-	-	-	-	-	-	(10)
Disposals	(2)	(2)	-	-	(6)	(57)	(3)	(1)	-	(71)
Revaluations to Revaluation Reserve	3	(234)	(1)	-	-	-	-	-	-	(232)
Revaluations to Outturn Statement	-	(87)	-	-	(1)	-	(1)	-	(15)	(104)
At 31 March 2021	349	6,794	24	-	117	1,375	367	92	410	9,528
Depreciation
At 1 April 2020	-	311	-	-	54	866	283	69	-	1,583
Charged in year	-	194	1	-	12	81	21	4	-	313
Transfers	-	-	-	-	-	-	-	-	-	-
Disposal	-	(1)	-	-	(6)	(57)	(3)	-	-	(67)
Revaluations to Revaluation Reserve	-	(226)	-	-	-	-	-	-	-	(226)
Revaluations to Outturn Statement	-	(27)	-		-	1	1	-	-	(25)
At 31 March 2021	-	251	1	-	60	891	302	73	-	1,578
Net book value at 31 March 2021	349	6,543	23	-	57	484	65	19	410	7,950
Net book value at 31 March 2020	356	6,669	24	-	55	379	69	19	306	7,877

Analysis of asset financing:	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Owned	343	4,187	23	-	57	468	64	18	396	5,556
Finance Leased	-	34	-	-	-	-	-	-	-	34
PFI included in Statement of Financial Position	5	2,254	-	-	-	1	1	1	-	2,262
Donated Asset	1	68	-	-	-	15	-	-	14	98
Net book value at 31 March 2021	349	6,543	23	-	57	484	65	19	410	7,950

Donated Asset Movement	Land1	Buildings2	Dwellings	Road Network3	Transport	Equipment	ICT Systems	Fixtures and fittings	Assets under Construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Additions	-	-	-	-	-	2	-	-	-	2
Disposals	-	-	-	-	-	(1)	-	-	-	(1)

1 (land holdings and land underlying buildings); 2 (excluding dwellings); 3 (including land)

6c. Property, Plant and Equipment Disclosures

	2021-22	2020-21
	£m	£m
Net book value of Property, Plant and Equipment	33,746	30,808
Total value of assets held under:
Finance Leases	48	49
Hire Purchase Contracts	-	-
PFI and PPP Contracts	5,747	5,329
Total	5,795	5,378
Total depreciation charged in respect of assets held under:
Finance leases	6	5
PFI and PPP contracts	55	49
Total	61	54

Valuations and Basis of Valuation

As part of the 5-year rolling programme for Scottish Government assets, 7 properties – (Old Governors House Edinburgh, Station Street Stranraer, 3 Cadzow Court Hamilton, Cotgreen Road Tweedbank, Royal Pavilion Ingliston, St Andrews House Edinburgh and Victoria Quay Edinburgh), underwent a formal desktop revaluation as at 31st March 2022. These valuations were on the basis of Existing Use Value (EUV).

Valuations were carried out by the Valuation Office Agency (VOA). These valuations were carried out in accordance with the professional standards of the Royal Institution of Chartered Surveyors: RICS Valuation - Global Standards and RICS UK National Supplement, commonly known together as the Red Book. In particular UK VPGA (Valuation Practice Guidance- Application) 5 addresses the valuation of central government assets for accounting purposes.

In addition to the land and buildings recorded in the core portfolios' accounts, the consolidated accounts reflect some land and buildings which are specialised operational properties and have been valued at their depreciated replacement cost. As noted in the relevant underlying agency accounts, the open market value of these properties would be significantly lower.

Individual NHS boards have their own revaluation schemes, details of which are available in the various NHS Board accounts. These schemes operate in accordance with Scottish Government policy on revaluation as set out in Note 1.3 to these accounts.

In line with prior years, indexation has been applied to assets valued at Depreciated Replacement Cost, using the RPI index as at 31 March 2022. The RPI index movement for the prior 12 months used for the financial year 2021-22 was 7.5 (2020-21: 1.2) and this high value has had a significant impact on the valuation of property and transport across the Consolidation. The impact on Scottish Government Assets in 2021-22 on the Net Book value was a total of £20m (2020-21: £4m) with the largest impact being against non-residential buildings (£12m, 2020-21: £2.5m) and Marine Scotland Vessels (£4m, 2020-21: £1m).

7. Intangible Assets

Cost or Valuation	Software Licenses	Information Technology Software	Assets under Development	Total
	£m	£m	£m	£m
As at 1 April 2021	165	528	76	769
Additions	3	5	133	141
Disposals	(2)	(21)	-	(23)
Transfers	4	9	(13)	-
Revaluations to Outturn Statement	-	-	(7)	(7)
Balance at 31 March 2022	170	521	189	880
Amortisation
As at 1 April 2021	149	330	-	479
Charged in year	7	75	-	82
Disposals	(2)	(21)		(23)
Transfers	(1)	1	-	-
Balance at 31 March 2022	153	385	-	538
Net book value at 31 March 2022	17	136	189	342
Net book value at 31 March 2021	16	198	76	290

Prior Year

Cost or Valuation	Software Licenses	Information Technology Software	Assets under Development	Total
	£m	£m	£m	£m
As at 1 April 2020	159	450	52	661
Additions	6	13	105	124
Disposals	(5)	(13)	(2)	(20)
Transfers	5	79	(79)	5
Revaluations	-	(1)	-	(1)
Balance at 31 March 2021	165	528	76	769
Amortisation
As at 1 April 2020	147	277	-	424
Charged in year	7	55	-	62
Disposals	(5)	(2)	-	(7)
Balance at 31 March 2021	149	330	-	479
Net book value at 31 March 2021	16	198	76	290
Net book value at 31 March 2020	12	173	52	237

8. Assets Classified as Held for Sale

The following assets have been presented for sale by the Scottish Government. The completion date for sale is expected to be within 12 months. Assets classified as held for sale are measured at the lower of their carrying amount immediately prior to their classification as held for sale and their fair value less costs to sell.

Assets classified as held for sale are not subject to depreciation or amortisation.

	Property Plant and Equipment	Intangible Assets	Investment Assets	Total
	£m	£m	£m	£m
As at 1 April 2021	17	-	-	17
Transfers from Non-Current Assets	1			1
Disposals	(4)			(4)
Fair Value Adjustment	-			-
Balance at 31 March 2022	14	-	-	14
Prior year
As at 1 April 2020	10	-	-	10
Transfers from Non-Current Assets	12	-	-	12
Disposals	(4)	-		(4)
Fair Value Adjustment	(1)	-	-	(1)
Balance at 31 March 2021	17	-	-	17

9. Inventories

	2021-22	2020-21
	£m	£m
NHS inventories	202	239
Other inventories	4	4
Total	206	243

10. Financial Assets

10a. Non-Current Financial Assets

	Interests in Nationalised Industries and Limited Companies	Voted Loans	NLF Loans	Student Loans	Housing Loans	Housing Shared equity Loans	Energy Related Loans	EU CAP Loans	Other Funds	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2021	51	3,658	481	3,630	365	1,227	222	-	211	9,845
Add element reported within current assets	-	80	50	165	18	-	2	25	11	351
Advances and Acquisitions
Acquisitions	141	-	-	-	-	-	-	-	-	141
Cash Advances	-	412	3	617	3	127	51	335	43	1,591
Capitalised interest	1	-	-	75	-	-	-	-	-	76
Transfers	-	-	-	-	-	-	2	-	(2)	-
Repayments and disposals	-	(96)	(51)	(216)	(7)	(97)	-	(342)	(43)	(852)
Fair Value Adjustment	-	-	-	323	-	115	-	-	2	440
Unwinding of discounted cash flow	-	-	-	208	81	-	(15)	-	8	282
Impairments	(3)	-	-	-	-	-	-	-	-	(3)
Write offs and adjustments	(12)	-	-	-	(1)	-	(1)	-	-	(14)
Balance at 31 March 2022	178	4,054	483	4,802	459	1,372	261	18	230	11,857
Loans repayable within 12 months transferred to current assets	-	(94)	(32)	(230)	(14)	-	-	(18)	(4)	(392)
Balance at 31 March 2022	178	3,960	451	4,572	445	1,372	261	0	226	11,465

In line with prior years, a discount rate has been applied to assets held at fair value using a discounted cash flow model, using the interest rates published by HM Treasury in their PES Paper dated 13 December 2021. The nominal interest rate used for Financial instruments for 2021-22 was 1.9% (2020-21: 3.7%). This reduction resulted in an increase in the fair value of loan books with a longer repayment profile, as reduced discount rate has resulted in an increased overall value of the loan books. The biggest impact was seen on the Student Loan book - see note 10e for further details.

	Interests in Nationalised Industries and Limited Companies	Voted Loans	NLF Loans	Student Loans	Housing Loans	Housing Shared equity Loans	Energy Related Loans	EU CAP Loans	Other Funds	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2020	25	3,469	531	3,550	275	1,009	188	0	153	9,200
Add element reported within current assets	-	107	33	160	6	-	1	193	21	521
Advances and Acquisitions
Acquisitions	23	-	-	-	-	-	-	-	-	23
Cash Advances	-	356	-	631	126	256	40	344	111	1,864
Capitalised interest	-	-	-	70	-	-	-	-	1	71
Transfers	-	(74)	-	-	-	-	-	-	-	(74)
Fair value adjustment	-	(107)	(33)	(204)	(6)	(70)	(1)	(512)	(27)	(960)
Unwinding of discounted cash flow	-	-	-	(423)	-	32	(3)	-	(20)	(414)
Impairments	-	-	-	11	(14)	-	-	-	-	(3)
Write offs	3	-	-	-	(4)	-	(1)	-	(2)	(4)
Repayments and disposals	-	(13)	-	-	-	-	-	-	(15)	(28)
Balance at 31 March 2021	51	3,738	531	3,795	383	1,227	224	25	222	10,196
Loans repayable within 12 months transferred to current assets	-	(80)	(50)	(165)	(18)	-	(2)	(25)	(11)	(351)
Balance at 31 March 2021	51	3,658	481	3,630	365	1,227	222	-	211	9,845

10b. Interests in Nationalised Industries and Limited Companies

As at 31 March 2022, the Scottish Ministers are the sole shareholder in Caledonian Maritime Assets Limited, David MacBrayne Limited, Highlands and Islands Airports Limited, TS Prestwick Holdco Limited and Ferguson Marine (Port Glasgow) Holdings Limited. The Scottish Ministers hold the following investments:

• Caledonian Maritime Assets Limited: 1,500,000 ordinary shares of £10 each
• David MacBrayne Limited: 5,500,002 ordinary shares of £1 each
• Highlands and Islands Airport Limited: 50,000 ordinary shares of £1 each
• TS Prestwick Holdco Limited: 1 ordinary share of £1
• Scottish Rail Holdings: 1 ordinary share of £1
• Ferguson Marine (Port Glasgow) Holdings Limited: 1 ordinary share of £1

These organisations are operated and managed independently of the Scottish Government, and, therefore, do not fall within the consolidated portfolio accounting boundary. The companies each publish an individual annual report and accounts. The net assets and results of the aforementioned companies are summarised in the table below.

	TS Prestwick Holdco Ltd	Highlands and Islands Airports Ltd	Caledonian Maritime Assets Ltd	David MacBrayne Ltd	Ferguson Marine Ltd
	£m	£m	£m	£m	£m
Net Assets/(Liabilities) as at 31 March 2022	(15)	(36)	122	35	(14)
Turnover	35	17	43	227	54
Profit /(Loss) for the financial year	1	(3)	(12)	(2)	-

Results for TS Prestwick Holdco Ltd are from final published accounts

Results for Highlands and Islands Airports Ltd, Caledonian Maritime Assets Ltd, David MacBrayne Ltd, and Ferguson Marine Ltd are draft and subject to audit with final accounts yet to be published.

As at 31 March 2022 Scottish Rail Holdings was in effect a dormant company with only £41 of reserves. As noted below from 1 April 2022, the company's wholly owned subsidiary, ScotRail Trains Limited, acquired the ScotRail business operated until then by Abellio Scotrail Limited under a Franchise Agreement with the Scottish Ministers.

Caledonian Maritime Assets Limited

Following a restructure of the Caledonian MacBrayne group in 2006, Caledonian MacBrayne Limited became known as Caledonian Maritime Assets Limited (CMAL) and CalMac Ferries Limited (CFL) was incorporated. CFL took over operation of the Clyde & Hebrides Ferry Services as successor to Caledonian MacBrayne Limited. CMAL retained ownership of all vessels and ports, which it leases to the operator of the Clyde & Hebrides Ferry services (currently CFL). CMAL remains wholly owned by Scottish Ministers.

David MacBrayne Limited

Scottish Ministers previously owned 2 shares of £1 in a dormant company, David MacBrayne Limited. In the course of the restructuring of the Caledonian MacBrayne group in 2006, Scottish Ministers' shareholding in David MacBrayne Limited was increased by 5,500,000 shares to 5,500,002 ordinary shares of £1. David MacBrayne Limited is now the holding company for the ferry operating companies CalMac Ferries Limited and Argyll Ferries Limited.

Highlands and Islands Airport Limited (HIAL)

Scottish Ministers are the sole shareholders in HIAL. The company's purpose is to maintain the safe operation of its airports to support economic and social development in the Highland and Islands. HIAL currently operates 11 airports; 10 in the Highlands and Islands and also Dundee, which it assumed responsibility for in December 2007 and now operates via a wholly owned subsidiary company, Dundee Airport Limited.

TS Prestwick Holdco Limited

In 2013 Transport Scotland purchased the entire share capital of Prestwick Aviation Holdings Limited, the holding company of subsidiaries who own and operate Glasgow Prestwick Airport, through a company set up for this specific purpose – TS Prestwick Holdco Limited. Subsequently Transport Scotland advanced loan funding to the group to cover the cash deficit arising from its operating deficit and capital expenditure.

Scottish Rail Holdings Limited

Two arm's length companies have been created during 2021-22 in line with transition of ScotRail services into Scottish Government ownership and control. Scottish Rail Holdings Ltd (SRH) and ScotRail Trains Ltd (SRT). Scottish Ministers are the sole shareholder of SRH, which is the holding company of ScotRail Trains Ltd (SRT) which took over the operation of Scotrail services on 1 April 2022. SRH is responsible for providing oversight and managing the provision of rail passenger services by SRT under the terms of a Grant Agreement.

Ferguson Marine

In December 2019 the Ferguson Marine shipyard was brought into public ownership. This followed over two years of support from the Scottish Government to find a resolution to the difficulties at Ferguson Marine and the Scottish Government's priorities still remain the completion of the two public sector ferries, protecting jobs, and securing a long-term future for the yard. Scottish Ministers hold 1 £1 share in Ferguson Marine (Port Glasgow) Holdings Limited.

Further information on the background to the company being taken into public ownership can be found on the Scottish Government website at Ferguson Marine: documents.

Scottish National Investment Bank

As per the financial memorandum between the Scottish Government and the Scottish National Investment Bank plc, the Scottish Government receives shares in return for capital provided to the Bank for onward investment. The valuation of SNIB's underlying investments is used as a proxy for valuation of Scottish Government's investment in SNIB In line with this requirement, a share certificate was issued on 14 March 2022 to the value of £126m, reflecting the investment made by the Bank during 2021-22 up to the end of February. Additional share certificates were issued on 31 October 2022 including £3m reflecting the investments made by the bank during March 2022.

10c. Other Interests

The Scottish Ministers hold an interest in the following organisations:

Student Loan Company (SLC)

The Student Loan Company is a non-departmental public body which administers the payment and collection of loans to UK students. When it was set up in 1990, it was wholly owned by the Secretary of State for Education and Skills (now the Department for Education) and the Secretary of State for Scotland. From 1 July 1999, the student support function was transferred to the Scottish Ministers with respect to students ordinarily resident in Scotland. Following a restructuring the Scottish Ministers hold 1 share with a nominal value of £0.50 (5% of the equity) in the SLC.

Scottish Futures Trust Ltd (SFT)

The Scottish Futures Trust was set up in September 2008 to work collaboratively across the public sector to secure improved value for money in infrastructure procurement, and is working jointly with local authorities, NHS Boards and other public bodies to deliver benefits in cost effective asset procurement and management. The SFT is a limited company owned by the Scottish Ministers with share capital of £100, £2 of which has been issued and is held by the Scottish Ministers.

Scottish Health Innovations Ltd

Scottish Health Innovations Ltd is a company that works in partnership with NHS Scotland to protect and develop healthcare innovations. The company is limited by guarantee with three members: the Scottish Ministers, the National Waiting Times Centre, and NHS Tayside.

Burntisland Fabrications

Over recent financial years the Scottish Government advanced loans on a commercial basis to BiFab. As a result of the conversion of these loans to equity the Scottish Government now holds a 32.4% stake in the company. As part of year end processes the Scottish Government valued its equity holding at £nil (2020-21: £nil).

10d. Loans

The loans issued and reported as Financial Assets within these accounts have been valued reflecting current market expectations regarding discounted future cash flows. Under IFRS 13, these valuations have been classed as level 3 unobservable inputs, as there is no active market for the investments.

Voted Loans

The Scottish Ministers have provided total loans from voted provision of £3m to crofters for building purposes and £3,657m to Scottish Water for their capital investment programmes and £166m via Transport Scotland to CMAL for the procurement of new shipping and the HIAL to renew and improve commercial airport infrastructure.

In year £357m of advances were provided to Scottish Water (2020-21 £354m of advances) and £37m of advances to CMAL (2020-21: £2m).

During 2020-21 the contracts for the completion of vessels 801/802 by Ferguson Marine were restructured to implement a contractual relationship which reflected the commitment from Scottish Ministers to fund the completion and delivery of the two ferry vessels. The Scottish Government entered into new contracts with Ferguson Marine which replaced the original contracts between CMAL and the shipyard. This reorganisation resulted in the vessels being transferred onto the Scottish Government's balance sheet as Assets Under Construction at a valuation of £74m and a write-off of 13m of the voted loans originally issued in connection with 801/802.

National Loans Fund

Prior to 1 July 1999, the Secretary of State loaned money to Scottish Enterprise, Scottish Homes and the three Water Authorities (now Scottish Water), from the National Loans Fund. At 1 July 1999, the right to the sums outstanding was transferred to the Scottish Ministers who must pay the repayments and interest to the Secretary of State for Scotland via the Scottish Consolidated Fund. The loans to Scottish Enterprise and Scottish Homes have since been repaid. The NLF loans remaining are with Scottish Water.

Scottish Water's 2021-22 annual report and accounts.

Student Loans

Loans made under the terms of the student loans scheme are administered by the Student Loans Company Limited, a company owned jointly by the Scottish Ministers and the Department for Education. These loans are accounted for on the basis of the loan balances of students domiciled in Scotland and adjusted for fair value and impairment. Further details on student loan valuation are in note 10f.

The Student Loans Company annual report and accounts.

Housing Loans

Housing Loans include repayment and deferred loans, for the build or purchase of residential properties, including the delivery of affordable housing. The fair value estimation technique for the loans relates to the underlying property valuations using the Nationwide Pricing Index method, where applicable.

Information on current purchase schemes.

The main Housing loan schemes are:

Charitable Bonds

The Charitable Bond model means the Scottish Government can make an ethical investment in affordable housing in the form of loans to social housing providers for up to 15 years, repaid at the end of the term. As at 31 March 2021 a total of £211m (31 March 2021: £175m) was held in Charitable Bond schemes after fair value adjustments. No investments were made by the Scottish Government in Charitable Bonds in 2021-22 (2020-21: £40m advances).

Mid Market Rented Housing

Mid-market rent (MMR) is a type of affordable housing where rents are lower than in the private market, but higher than social housing. The Scottish Government supports the delivery of MMR through the mainstream grant-funded Affordable Housing Supply Programme, as well as enable innovative funding solutions that build on the success of Scottish Government-supported schemes, such as the National Housing Trust initiative (NHT) and the Local Affordable Rented Housing Trust (LAR).

During 2021-22 £nil was advanced (2020-21: £30m) through MMR schemes. As at 31 March 2022 a total of £45m (31 March 2021: £35m) was held on MMR schemes after fair value adjustment.

Housing Infrastructure Funds

As part of the More Homes Scotland approach, and linked to the delivery of 50,000 affordable homes by 2021, the Scottish Government launched a five-year Housing Infrastructure Fund (HIF) in February 2016. HIF will support the delivery of housing through financial assistance. While all types and tenures of housing are eligible for HIF support, priority will be given to those projects delivering affordable and private rented housing within the five-year period ending 31 March 2021.

£0.5m was advanced during 2021-22 (2020-21: £4m). As at 31 March 2022 a total of £21m (31 March 2021: £22.5m) was held on HIF funds.

Rent to Buy

Aimed at rural communities, the Rent to Buy Scheme (RTBS) aims to help people who wish to become home owners by allowing them to rent a home for up to 5 years whilst saving up for a deposit.

As at 31 March 2022 a total of £4m (31 March 2021: £4m) was held on RTBS funds.

Shared Equity Housing Loans

Shared Equity Housing loans include Shared Equity Housing and Deferred Financial Commitment Loans. The fair value estimation technique for the loans relates to the underlying property valuations using the Nationwide Pricing Index method.

Shared Equity Stakes

The Scottish Government owns shared Equity stakes, purchased from 1 April 2008. These are not loans but equity stakes and have no payment schedules. They are repaid when the purchaser decides to sell the property.

As at 31 March 2022 £75m was held (31 March 2021: £51m) after fair value adjustments.

Shared Equity Schemes

The Open Market Shared Equity (OMSE) and New Supply Shared Equity (NSSE) schemes are available across Scotland. They are open to first-time buyers in particular priority access groups. OMSE is for purchases off the open market, whilst NSSE is for purchases from local councils and housing associations. They help first time buyers to purchase a property without having to fund its entire cost. Buyers will pay for the biggest share which is usually between 60% and 90% of the home's cost. The Scottish Government holds the remaining share under a shared equity agreement.

£44m was advanced in year (2020-21: £35m) and £43m repayments were made (2020-21: £31m). As at 31 March 2022 a total of £344m (31 March 2021: £343m) was held on OMSE and NSSE funds after fair value adjustments.

Help to Buy

The Help to Buy (Scotland) scheme helps with the purchase of new-build homes without the need for a large deposit. With the Affordable New Build and Smaller Developers Schemes, the buyer will pay a minimum of at least 85% of the home's total purchase price and the Scottish Government will hold the remaining % share under a shared equity agreement.

£19m was advanced in year (2020-21: £20m) and £49m repayments were made (2020-21: £38m). As at 31 March 2022 a total of £522m (31 March 2021: £399m) was held on both Help To Buy funds after fair value adjustments.

First Home Fund

Launched in December 2019, the First Home Fund is a £200 million shared equity pilot scheme to provide first-time buyers with up to £25,000 to help them buy a property that meets their needs and is located in the area where they want to live. It is open to all first-time buyers in Scotland and can be used to help buy both new build and existing properties.

£64m was advanced in year (2020-21: £192m). As at 31 March 2022 a total of £280m (31 March 2021: £200m) was held after fair value adjustments.

Energy Related Loans

The Scottish Government provides funding to Salix Finance Limited and the Energy Saving Trust (EST) to deliver programmes relating to energy efficiency which include the issue of loans.

Salix provides loans to the public sector to improve their energy efficiency and reduce their carbon emissions. At 31 March 2022 £23m (31 March 2021: £28m) was held as loan funds.

EST administer and manage funds on behalf of the Scottish Government which provide loans to save energy and reduce carbon dioxide emissions. In year £4m (2020-21 £2.5m) of advances were made. At 31 March 2022 £75m (2020-21 restated: £73m) was held as loan funds.

Through the Home Energy Efficiency Programme (HEEPs) loans are available to help homeowners make energy and money saving improvements to their home. £6m of advances were made in year (2020-21: £2m). At 31 March 2022 £36m (31 March 2021: £28m) was held on HEEPs loans.

The Renewable Energy Investment Fund (REIF) is delivered through Scottish Enterprise and Highlands and Islands Enterprise. REIF provides funding to commercial and community renewable energy projects across Scotland. In 2021-22 £nil (2020-21 £7m) of advances were made. At 31 March 2022 £15m (31 March 2021: £15m) was held as loan funds.

Transport Scotland provides funding to the Energy Savings Trust to fund energy efficient transport initiatives, including the Electric Vehicle Loan and electric Taxi support, the Low Carbon Transport Business Loan and eBike loan support. In 2021-22 £45m (2020-21 £27m) of advances were made. At 31 March 2022 £141m (2020-21: £96m) was held as loan funds.

Further information on the loans provided through the Energy Savings Trust.

EU CAP Loans

From 2015-16, a Scottish Government national loans scheme was put in place to provide support to the farming economy. In year advances of £335m (2020-21: £344m) were made with repayments of £342m (2020-21: £512m).

Other Funds

Social Investment Scotland administer and manage the Scottish Investment Fund on behalf of the Scottish Government, the fund was set up to provide loans to build capacity, capability and financial sustainability in the third sector. As at 31 March 2022 £16m (2020-21: £16m) was held as loan funds.

The Scottish Government and the European Regional Development Funds, have established the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) Fund. This fund is a JESSICA (Joint Venture Support for Sustainable Investment in City Areas) Urban Development Fund (£57m; 2020-21: £44m) that helps fund regeneration and energy efficient projects within targeted areas of Scotland.

Over the past 5 years, the Scottish Government has provided £10m to the Scottish Futures Trust for use in their oversight of the Non Profit Distributing (NPD) programme. SFT's pipeline of NPD projects is delivered through two channels – very large projects such as major roads or large hospitals, procured directly by the public sector organisations through the NPD programme, with smaller Design, Build, Finance and Maintain (DBFM) projects delivered via the Scotland-wide hub initiative in partnership with local authorities, health boards and other public bodies.

The Scottish Government has provided £10m, over a 20 to 25 year period, to three of the National Performing Companies (Scottish Ballet, Scottish Opera and the National Theatre of Scotland). These related to capital projects and business support, including the new Rockvilla creation centre and an extension to the Theatre Royal, both in Glasgow. No further loans were advanced in 2021-22 (£3m was advanced to Royal Scottish National Opera in 2020-21). As at 31 March 2022 £11m (2020-21: £11m) was held as the loan balance.

Scottish Enterprise administer and manage Digital Development Loans on behalf of the Scottish Government. Digital development loans are provided to companies who wish to improve their digital capabilities and capacity. During the year £4m (2020-21: £4m) advances were made. At 31 March 2022 £7.5m (2020-21: £5m) was held as loan funds.

The Scottish Growth Scheme is a package of financial support of up to £500 million for Scottish businesses. It is backed by the Scottish Government and aims to help businesses grow. £16m was provided to the fund managers in year for distribution (2020-21: £15m). As at 31 March 2022 £51m (2020-21: £34m) was held as loan funds.

Building Scotland Fund (BSF) is a precursor to the Scottish National Investment Bank. It focuses on housing, modern industrial and commercial property and business-led research and development projects. The BSF intends to invest £150 million over financial years 2019 to 2021 by making loans and acquiring equity. In year £4m (2020-21: £5m) of advances were made and £16m of repayments were received (2020-21: £1m). As at 31 March 2022 £5m (2020-21: £16m) was held as loan funds.

The Registered Social Landlords (RSL) Fire Safety Loan scheme was introduced to cover the cost of buying and installing smoke, heat and carbon monoxide alarms to meet new standards. The scheme is now closed to applications. As at 31 March 2022 £8m (2020-21: £11m) was held as loan funds.

In 2021-22, the Scottish Government provided commercial loans of £nil (2020-21: £4.5m) to private companies. In 2020-21 this related solely to a loan provided to Burntisland Fabrications Limited, this is disclosed within Other Funds within Note 10a and was fully written off in year.

In 2020-21, the Scottish Government provided Covid support loans totalling £95m. No further advances were provided during 2021-22. The larger loan funds within this were:

• Housing – House builders fund - £18 million of advances
• Communities – Third Sector Growth Fund - £32.5 million of advances
• Sport - Football / Rugby clubs - £30 million of advances
• Health - Ayrshire Hospice - £8 million of advances

The fair value balances on these funds at 31 March 2022 is:

• Housing – House builders fund - £8 million
• Communities – Third Sector Growth Fund - £32.5 million
• Sport - Football / Rugby clubs - £21 million
• Health - Ayrshire Hospice - £5 million

10e. Student Loan Valuation

Student loans are valued in accordance with IFRS 9, and are recognised at fair value through the Statement of Comprehensive Net Expenditure (SOCNE). The value at any time is dependent upon macroeconomic conditions, forecast over the long term 30 year repayment profile as well as a number of other complex assumptions, forecast over the long term 30 year repayment profile.

The estimated value is determined at using a discounted cash flow model known as the Stochastic Earnings Path (StEP) model. This model is used across the devolved administrations and is managed by the UK Department for Education (DfE) using various data sources on higher education students in order to predict their likely repayments of loans. There is a standard cycle and process for the production of valuation and modelling information: for the financial year-end reporting, and for mid-year forecasting and adjusting budgets as necessary for the Scottish and UK Government fiscal events.

Forecasting Model background

The StEP model uses information from two sub-models, an earnings model and a repayments model, to predict outcomes for student borrowers. The earnings model calculates earnings "paths" for individual borrowers after graduation and the repayment model takes these earnings paths, and applies a number of repayment rules to generate the repayments. The earnings model uses input variables such as course level, domicile and subject studied to estimate earnings in future years. The repayment model uses macroeconomic forecasts such as RPI, interest rates and earnings growth to predict the repayments in line with each earnings "path".

The StEP model uses a regression-based approach with earnings history as a predictor of future earnings, along with age, gender and qualification level to give a more accurate estimate.

The model is long-term in nature and depends on a complex set of assumptions, particularly, the latest Office of Budgetary Responsibility (OBR) long-term and medium-term forecasts for RPI, Bank of England base rate and earnings growth. These forecasts are generally updated twice per year.

Key inputs to the model include:

• Student Loans Company data – used for borrower characteristics, loan amounts and for derivation of earnings and employment models and income distribution in early career stages. Also used in frictional adjustments, such as part-year employment models.
• British Household Panel Survey (BHPS) data – used for derivation of earnings and employment models and income distributions, especially later career stage earnings and steady state models.
• Labour Force Survey data – to convert income percentiles to cash amounts, regarded as more reliable than cash values from BHPS due to large sample sizes.
• Destinations of Leavers from Higher Education survey – used in the graduate age adjustment, taking into account different earnings profiles of mature and typical age borrowers in early career stages.
• Office of National Statistics life tables – data on deaths.
• UCAS – forecasts of student numbers which come via another model within Higher Education.
• HESA data – course lengths and drop outs.
• OBR macroeconomic forecasts – forecasts of earnings growth, Bank of England base rates, and RPI.

When the model is received by the Scottish devolved administration, further work is required to tailor the content of each model to the circumstances only relevant to the Scottish loan policy.

The information as at 31 March 2022 was prepared using the OBR Economic and Fiscal outlook (published 23 March 2022) For further information on this economic scenario see the OBR website.

Forecasting Model updates

Due to the variety of information sources, the complexity of information requirements, and the independence of each variable from one another, it is not feasible to conduct forecasts with significant frequency. For this reason, it is the policy of Scottish Government to only conduct a full impairment review twice per year, in line with the OBR Economic and Fiscal Outlook, as detailed above.

Impact of Repayment Threshold Policy Changes

The information as at 31 March 2022 factors in the changes to repayment thresholds for Scottish students. From April 2021, Scottish students who have received loan funding from 1998 onwards will be moved from a Plan 1 to a Plan 4 loan. The result of this is students will now only have to make repayments once their annual salary is in excess of £25,000 per year. Under Plan 1, the threshold is currently set at £19,390 per year. The StEP model has captured the effect of the reduced recovery expectations.

10f. Student Loan Valuation (continued)

Sensitivity Analysis

As described above, there are a number of variables used in the model, and adjusting any of these variables will have an impact on the overall valuation. Each of these variables can be adjusted independently of the others, resulting in a large number of combinations, so the choice of alternative scenarios is extensive. We have chosen the parameters carefully to reflect what we believe to be the most accurate position at the reporting date, but we recognise that adjusting these variables will have an impact on the valuation.

Additional analysis of the key variables has applied, in-turn, a 1 percentage point increase and decrease to the 2021-22 inflation (RPI), earnings growth and interest (Bank of England base) rate parameters set by the OBR in their March 2022 Economic and Fiscal Outlook report. Whilst the effects of these changes have been examined independently of each other, this is highly unlikely in reality; therefore the sensitivity analysis presented is theoretic in nature.

As described above, the STEP model used for loan valuation is managed by the UK Department for Education and the Scottish Government has only limited opportunity to explore the impact of varying the underlying assumptions. Due to the complexities of the underlying assumptions, it is impracticable to calculate the impact of more variations to the assumptions. It is possible that changes in the assumptions made could lead to material changes in the student loans valuation

The table below shows the main results of the sensitivity analysis and how each test compared to the April 2022 RAB* charge.

Table 1: Sensitivity analysis results

April 2022 RAB Charge	Test	RAB charge for each test	Change on April 2022 RAB charge (percentage point)
21.4%	1. RPI +1 percentage point	22.1%	+0.7 percentage points
	2. RPI -1 percentage point	20.6%	-0.8 percentage points
	3. Earnings Growth +1 percentage point	20.8%	-0.6 percentage points
	4. Earnings Growth -1 percentage point	21.9%	+0.5 percentage points
	5. Bank of England rate +1 percentage point	21.3%	-0.1 percentage points
	6. Bank of England rate -1 percentage point	21.6%	+0.2 percentage point

*a Resource Accounting and Budgeting (RAB) charge is the estimated cost to government of borrowing to support the current year issues of loans based on future loan write-offs and interest subsidies in net present value terms. These costs are expressed as a proportion of the initial loan outlay for the year in question. The RAB charge is the percentage of any current year issued loans that the Scottish Government do not expect to be paid back.

Impact of Model on Current Student Loans Valuation

Outputs from the StEP model, including the RAB charge, are fundamental to the calculation of the current value of student loans.

Since valuation at 31 March 2021, both RPI and Bank of England base rate have shifted in response to economic conditions; RPI has increased from 1.5% to 9.0% and the Bank of England base rate has increased from 0.1% to 0.75%.

As inferred by the above sensitivity analysis, these movements have caused sizeable changes to the RAB charge and other outputs therefore resulting in a material adjustment to fair value.

The continued volatility of these rates, and the significance of the impact of such changes, means that year on year, material adjustments to fair value are not unexpected.

Although the continued volatility of these rates is recognised, Spring/Summer 2022 has seen greater changes in economic conditions that expected. Since 31 March 2022, there has been substantial movement in the RPI and Bank of England base rate which now sit at 12.6% and 2.2% respectively (September 2022). The change in RPI, Bank of England base rate and earnings growth indices will individually affect the RAB charge – with the RPI impact on the RAB charge either partially or fully counteracted by the Bank of England base rate and earnings growth impact – however we are unable to predict the magnitude of change on the RAB charge caused by each determinant.

The changes will affect the carrying value of the Student Loan book, however the impact will only be realised when the StEP model results are produced in Autumn/Winter 2022. Therefore a post balance sheet adjustment has not been made, but an acknowledgement that there will be a greater than anticipated movement in the carrying value through 2022-23.

For further information on these rate changes, see Office of National Statistics and Bank of England websites:

RPI All Items: Percentage change over 12 months: Jan 1987=100 - Office for National Statistics (ons.gov.uk)

Bank Rate history and data | Bank of England Database

11. Financial Instruments

The Scottish Government measures and presents financial instruments in accordance with International Accounting Standard (IAS) 32, International Financial Reporting Standard (IFRS) 7 and IFRS 9 as interpreted by the Financial Reporting Manual. IFRS 7, Financial Instruments: Disclosures, requires disclosure of the role that financial instruments have played during the period in creating or changing the risks that an entity faces in its activities. The Scottish Government is not exposed to the degree of financial risk faced by business entities because of the largely non-trading nature of its activities and the way that government is financed. Moreover, financial instruments play a much more limited role in creating or changing risk than would be typical of the listed companies to which IFRS 7 mainly applies. Financial assets and liabilities are generated by day to day operational activities and are not held to change the risks facing the Organisation in undertaking its activities.

Liquidity Risk

The Scottish Parliament makes provision for the use of resources by the Scottish Government, for revenue and capital purposes, in a Budget Act for each financial year. Resources and accruing resources may be used only for the purposes specified and up to the amounts specified in the Budget Act. The Act also specifies an overall cash authorisation to operate for the financial year. The Scottish Government is not, therefore, exposed to significant liquidity risks.

A maturity profile of the carrying amount of financial liabilities is presented below. This analysis satisfies the disclosure requirements of International Financial Reporting Standard 7, Financial Instruments: Disclosures (IFRS 7). The maturity profile for NLF loans is matched by the corresponding profile for the related fixed asset investments. The amounts disclosed are undiscounted cash flows as per IFRS 7.

Maturity Profile

Financial Liabilities	<1yr	1 - 2 yrs	2 - 5 yrs	>5yrs	2021-22 Total	2020-21 Total
	£m	£m	£m	£m	£m	£m
Trade payables	987	-	-	-	987	856
Accruals	2,179	2	-	-	2,181	2,065
Other payables	1,124	38	-	-	1,162	747
NLF loans	32	94	142	212	480	531
Accrued Interest due on NLF Loans	6	-	-	-	6	7
Balances Payable to SCF	3	-	-	-	3	3
Corporate balance with SCF	997	-	-	-	997	644
PFI Imputed finance leases	106	114	386	2,303	2,909	2,990
Lease payables	3	2	5	13	23	25
Bank overdraft	2	-	-	-	2	4
Other financial liabilities	1	50	-	-	51	38
Total	5,440	300	533	2,528	8,801	7,910

Credit risk

Credit risk is the risk that a third party will default on its obligations. The maximum exposure to credit risk at the balance sheet date in relation to each class of financial asset is the carrying amount of those assets net of any impairment. No collateral is held as security.

Cash at bank is held with major UK banks. The credit risk associated with cash at bank is considered to be low.

The only area where the Scottish Government has significant concentrations of credit risk is on student loans. The Scottish Government has a statutory obligation to issue student loans and seek repayments in line with legislation. The Scottish Government is not permitted to withhold loans on the basis of poor credit rating nor is it able to seek collateral. The Scottish Government is therefore exposed to the risk that some student loans will not be repaid, although this is partly mitigated by the fact that most repayments are collected by Her Majesty's Revenue and Customs as part of the tax collection process. In addition this risk is mitigated through the valuation of student loans at fair value.

Market risks

There are a number of areas where the Scottish Government is exposed to potential market risk. These relate to interest rates, foreign currency risk and housing market risks.

Interest Rate Risk

65% (2020-21: 68%) of the Scottish Government's financial assets and 100% (2020-21:100%) of its financial liabilities carry nil or fixed rates of interest and it is not therefore exposed to significant interest rate risk. The portion of the Scottish Government's financial assets that carry a floating rate of interest relates in the main to student loans.

Foreign Currency Risk

Within payables, the Scottish Government has a balance that is subject to exchange rate fluctuations. This relates to advances received from the European Commission (EC) for the 2014-20 European Structural Funds (ESF) programme. The year end balance of £36.5m is the sterling equivalent of €41.5m translated at the accounting date (using the official EU exchange rate as at 31 March 2022).

Where there are other transactions denominated in Euros the exchange rate is managed within the programmes.

The Scottish Government has no other significant exposure to foreign currency risk.

Housing Market Risk

The Scottish Government engages in a number of shared equity housing schemes, and is exposed to the risk of potential falls in the value of the housing market. The current investment in such schemes is £1,372m (2020-21: £1,243m).

Categories of financial assets and financial liabilities

The Scottish Government has the following categories of financial assets and financial liabilities:

Financial Assets	Note	Fair Value through Profit and Loss	Loans and receivables	Shares held in or loans advanced to the public sector	2021-22	2020-21
		Note a	Note b	Note c	Total	Total Restated
		£m	£m	£m	£m	£m
Voted loans	10	-	480	3,574	4,054	3,738
NLF loans	10	-	-	483	483	531
Housing loans	10	-	459	-	459	383
Shared Equity Housing loans	10	1,372	-	-	1,372	1,227
Energy related loans	10	-	261	-	261	224
EU CAP funds	10	-	18	-	18	25
Other Funds	10	-	230	-	230	222
Student loans	10	4,802	-	-	4,802	3,795
Interests in nationalised industries	10	-	-	178	178	51
Trade receivables	12	-	67	-	67	69
Accrued income	12	-	358	-	358	331
Interest receivable	12	-	25	-	25	26
Amounts receivable from the SCF	12	-	200	-	200	60
Other receivables	12	-	111	-	111	90
Corporate balance with the SCF	12	-	2	-	2	4
Cash and cash equivalents	2	-	1,052	-	1,052	708
Total		6,174	3,263	4,235	13,672	11,484

Note: As not all current assets are financial instruments, the above tables exclude VAT £93m (2020-21: £87m) and prepayments £655m (2020-21: £468m) which are included in the associated asset notes.

Financial Liabilities	Note	Fair Value through Profit and Loss	All other financial liabilities	Shares held in or loans advanced to the public sector	2021-22	2020-21
		Note a	Note d	Note c	Total	Total
		£m	£m	£m	£m	£m
Trade payables	13	-	987	-	987	856
Accruals	13	-	2,181	-	2,181	2,065
Other payables	13	-	1,162	-	1,162	747
NLF loans	13	-	-	480	480	531
Accrued Interest due on NLF Loans	13	-	-	6	6	7
Balances payable to the SCF	13	-	3	-	3	3
Corporate balance with SCF	13	-	997	-	997	644
PFI Imputed finance leases	13	-	2,909	-	2,909	2,990
Lease payables	13	-	23	-	23	25
Bank overdraft	13	-	2	-	2	4
Other financial liabilities	13	-	51	-	51	38
Total		-	8,315	486	8,801	7,910

Note: As not all liabilities are financial instruments, the above tables exclude deferred income £78m (2020-21: £116m), other tax and social security £184m (2020-21: £174m), superannuation payable £157m (2020-21:£148m) and employee benefit accrual £249m (2020-21: £204m) included in the associated liabilities note (note 13). The finance leases are disclosed at the discounted cash flow value.

Note a: Assets and liabilities held at fair value through the profit and loss are measured at fair value with gains or losses being accounted for through the outturn statement.

Note b: Loans and receivables are measured at amortised cost using the effective interest methods, and any impairment losses go through the outturn statement. Disposal may give rise to a gain or loss, which is recognised through the outturn statement.

Note c: Shares in the public sector are held at historic cost less impairment and any impairment losses go to the outturn statement. Loans advanced to the public sector or due to the NLF are measured in the same manner as in note (b)

The fair value of financial instruments is equivalent to the carrying value disclosed in the financial statements. No financial assets and financial liabilities have been offset and presented net in these accounts.

12. Receivables and Other Assets

Amounts falling due within one year:

	2021-22	2020-21 restated
	£m	£m
Trade receivables	67	68
VAT	93	87
Other receivables	102	88
Prepayments and accrued income	595	596
Benefit Overpayments	3	8
Accrued income relating to EU funding	118	180
Interest receivable	25	26
Balances receivable from SCF	200	60
Corporate balance with the SCF	2	4
Balance as at 31 March	1,205	1,117

Amounts falling due after more than one year:

	2021-22	2020-21
	£m	£m
Benefit Overpayments	18	8
Other receivables	9	2
Prepayments and accrued income	60	66
Balance as at 31 March	87	76
Total balance as at 31 March	1,292	1,193

Trade Receivables are shown net of impairments as follows:

	2021-22	2020-21 Restated
	£m	£m
Amounts falling due within one year:
At 1 April	23	22
Charge for the year	22	10
Unused amount released	(1)	(7)
Utilised during the year	8	(2)
At 31 March	52	23

The impairment of Trade Receivables is mainly driven from NHS Trusts. The Prior year restatement has been made to separate the disclosure of the impairment against Trade Receivables and Other Receivables.

Other Receivables are shown net of impairments as follows:

	2021-22	2020-21 Restated
	£m	£m
Amounts falling due within one year:
At 1 April	3	3
Charge for the year	1	-
Unused amount released	-	-
Utilised during the year	-	-
At 31 March	4	3
Amounts falling due after more than one year:
At 1 April	17	17
Charge for the year	-	-
Unused amount released	-	-
Utilised during the year	(2)	-
At 31 March	15	17

The impairment of Other Receivables is mainly driven from Social Security Scotland and relates to the impairment against Benefit Overpayments. Benefit overpayments arise where a change of circumstances has been processed after that change of circumstances took place, or where client error or fraud have been identified.

The Prior year restatement has been made to separate the disclosure of the impairment against Trade Receivables and Other Receivables and to correct an administrative error in the prior year that overstated the impairment against Benefit Overpayments within the consolidated accounts by £15m.

13. Payables and Other Liabilities

Amounts falling due within one year:

	2021-22	Restated 2020-21
	£m	£m
Payables and other current liabilities
Trade payables	987	829
Other taxation and social security	183	174
Superannuation payable	157	148
Other payables	1,124	775
Deferred income and accruals	2,495	2,303
Benefits Payable	118	96
Accrued interest due on NLF loans	6	7
Finance leases	2	2
PFI imputed finance leases	105	98
PFI deferred residual interest	-	-
Corporate balance with the SCF	997	644
Balances payable to the SCF	3	3
	6,177	5,079
Other financial liabilities
Current instalments on NLF loans	32	50
Bank overdraft	2	4
Other financial liabilities	1	-
	35	54
Total current liabilities	6,212	5,133

The balance payable to the SCF includes amounts due on income not applied of £1m (2019-20: £3m).

The prior year figures have been restated to ensure the accurate disclosure of Benefits Payable. There is also a small reduction in the Trade Payables balance.

Amounts falling due after more than one year:

	2021-22	2020-21
	£m	£m
Payables and other non-current liabilities
Other payables	38	15
Deferred income and accruals	12	7
Finance leases	21	23
PFI imputed finance leases	2,804	2,892
	2,875	2,937
Other financial liabilities
Instalments due on NLF loans	448	481
Other financial liabilities	51	38
	499	519
Total non-current payables and other financial liabilities	3,374	3,456

Redress Scotland

The Redress for Survivors (Historical Child Abuse in Care) (Scotland) Bill was passed in Parliament in March 2021 and received Royal Assent on 23 April 2021. The Act provides for the functions of Redress Scotland and for Scottish Ministers to make arrangements for the establishment and operation of the redress scheme. The scheme, opened in December 2021, allows for individuals to submit applications and the new independent body, Redress Scotland, will considers applications and makes determinations, which may include an offer of a redress payment to be made by the Scottish Government. For more information about the scheme.

Organisations that were responsible for the care of children at the time of the abuse have been asked to participate in Scotland's Redress Scheme, and to make fair and meaningful financial contributions to redress payments for survivors. For further information on the contributors to the Redress scheme.

As at 31 March 2022 the deferred income balance above included the following balances, reflecting the contributions received from organisations that have not yet been utilised, reflecting the contributions received from organisations that have not yet been utilised:

	£'000
Aberlour	100
Daughter's of Charity	2,940
Barnardo's	150
Sisters of Nazareth	250
Salesians of Don Bosco	75
Sight Scotland	-
Poor Servants of Mother of God	30
Rossie Young People's Trust	50
CoSLA	60
Save the Children	30
	3,685

14. Provisions for liabilities and charges

	Student Loans Sale Subsidy	Early Departure Costs	NHS Clinical and Medical Negligence	SPS Prisoner Compensation	Other Provisions	Total 2021-22	Total 2020-21
	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 April	27	140	563	-	234	964	877
Add: element reported as due within one year	3	11	254	1	78	347	1,165
Balance as at 1 April	30	151	817	1	312	1,311	2,042
Provided for in year	1	8	104	1	51	165	281
Provisions not required written back	-	(5)	-	-	(52)	(57)	(26)
Provisions utilised in year	(5)	(11)	(20)	(1)	(37)	(74)	(991)
Discount amortised	3	1	-	-	-	4	5
Balance as at 31 March	29	144	901	1	274	1,349	1,311
Payable within one year	(3)	(12)	(226)	(1)	(92)	(334)	(347)
Balance as at 31 March	26	132	675	-	182	1,015	964

Analysis of expected timing of any resulting outflows of economic benefits

	Student Loans Sale Subsidy	Early Departure Costs	NHS Clinical and Medical Negligence	SPS Prisoner Compensation	Other Provisions	Total 2021-22	Total 2020-21
	£m	£m	£m	£m	£m	£m	£m
Payable in 1 year	3	11	226	1	92	333	348
Payable between 2 - 5 yrs	20	35	461	-	78	594	576
Payable between 6-10 yrs	6	35	52	-	46	139	145
Thereafter	-	63	162	-	58	283	242
Total as at 31 March	29	144	901	1	274	1,349	1,311

Student loans

The debt sale subsidy is the additional cost to the Scottish Government of government subsidies contractually due to the purchaser of the debts beyond the costs that the government would have incurred had the debts remained in the public sector. The debt sale subsidy provision is estimated to meet the cost of this subsidy over the expected life of loans sold. The utilisation of this provision is dependent on the timing of the repayment of the loans which is uncertain.

Early Departure Provisions

This provision is based on an estimate of exposure to potential payments in respect of employees leaving service prior to reaching normal retirement age. For the NHS, Boards meet the additional costs of benefits in respect of employees retiring early by paying the required amounts annually to the NHS Superannuation Scheme for Scotland over the period between early departure and the normal retirement date. Amounts are provided for in full when the early retirement programme becomes binding by establishing a provision for the estimated payments, as discounted by the applicable Treasury discount rate.

NHS Clinical and Medical Negligence

Included within provisions is an amount of £901m (2020-21: £817m) which relates to clinical and medical negligence costs. Following the accounting review undertaken in 2014-15, on consolidation, the Scottish Government's CNORIS provision represents the national liability and the Boards' accounting for individual claims is removed.

In 2021-22 £104m (2020-21: £48m) of estimated settlement value of medical and clinical negligence claims were added to the provision.

In 2021-22 £20m (2020-21: £37m) in claims were settled.

SPS Prisoner Compensation

This provision is based on an estimate of exposure to potential prisoner compensation claims; further information can be found within the Scottish Prison Service annual accounts, found within https://www.sps.gov.uk/Corporate/Publications/Publications.aspx

Other Provisions

Other provisions include NHS balances of £41m (2020-21: £52m). The NHS balances relate to various Health Boards and Bodies and include: provision for non-medical legal liabilities, employer and third party costs, provision for future development costs, dilapidations, and a variety of other smaller provisions.

Also included within other provisions are Transport Scotland balances of £28m (2020-21: £30m) including £25m relating to land & property acquisition (2020-21: £26m) and £3m (2020-21: £3m) relating to road claims.

The land & property acquisition provisions relate primarily to estimates made of the likely compensation payable in respect of planning blight, discretionary and compulsory acquisition of property from owners arising from physical construction of a road or rail scheme. When land is acquired by Compulsory Purchase Order, it is not known when compensation settlements will be made. A provision for the estimated total cost of land acquired is created when it is expected that a general vesting declaration will be published in the near future. It may take several years from the announcement of a scheme to completion and final settlement of all liabilities. The estimates provided by the Valuation Office Agency are reviewed bi-annually.

Included within other provisions are Scottish Prison Service balances of £14m (2020-21: £13m) relating to Injury Benefits. The Injury Benefits provision include estimates of amounts payable to former employees for loss of earnings under the Civil Service Injury Benefit Scheme.

Included within other Provisions are Crown Office balances of £24m (2020-21: £16m) relating to litigation.

As a result of the suspension of the European Social Fund, the Scottish Government moved to a simplified model for recovery in respect of this programme, which is based on a unit cost for employment counselling. EC auditors have agreed that this approach is robust and all claims to date have been accepted on this basis. There is a risk of financial loss in respect of this programme. Current financial forecasts estimate an under-recovery for the Scottish Government with a provision of £43m (2020-21: £29m) for further future financial losses. This estimate is the difference between the total amount approved and paid to Lead Partners within the programme, and the amount currently considered reclaimable from the EC due to the alternative model and methodology agreed with the EC. Work is ongoing throughout the Programme period to assess the value and likelihood of the financial risk as it crystallises.

Historic cases against the Scottish Government for compensation relating to the contraction of silicosis from former stonemasons employed by the predecessors of Historic Scotland have resulted in a provision recognised in the accounts of £4m (2020-21: £1m)

In December 2016, the Scottish Government entered into a 25-year guarantee relating to the hydro plant and aluminium smelter at Lochaber. This involved the Government guaranteeing the power purchase obligations of the smelter if the business does not fulfil its obligations to pay for contracted power. The Government's potential exposure to default payments and review of a provision valuation in line with new accounting standards in 2018-19 resulted in a new provision of £33m. This has been reviewed and revalued at £114m as at 31 March 2022 (2020-21: £161m). The valuation is calculated using the requirements of IFRS 9 for Financial Guarantee Contracts. This includes consideration of the comprehensive security package the Scottish Government received in exchange for the provision of the guarantee, consisting of the Smelter, the Hydro power station, extensive land holdings and a series of other protections. See the accounting policies note for further information on the requirements of IFRS 9.

15. Capital Commitments

Property, plant and equipment	2021-22	Restated 2020-21
	£m	£m
Contracted capital commitments for which no provision has been made	1,548	1,389
Total	1,548	1,389
Intangible assets
Contracted capital commitments for which no provision has been made	26	57
Total	26	57
Total Commitments	1,574	1,446

2021-22 property, plant and equipment commitments includes:

• Transport Scotland balances for future payments of £1,118m (2020-21: £860m) in respect of major road schemes currently under construction. The main works contracts have been awarded and the loans agreed.
• A number of capital projects being undertaken by NHS Boards of £359m (2020-21: £358m);
• Scottish Prison Services balances of £19m for the construction of the Women's National Facility and 2 Community Custody Units (20-21 restated £65m) as well as various upgrades across the prison estate.
• £6m of capital commitments for Social Security Scotland (2020-21: £12m) including £3m (2020-21: £8.5m) for Angus Husband House
• £37m (2020-21: £81m) in relation to the building of boats (800 & 801).

2021-22 intangible asset commitments includes:

• £7m (2020-21: £43m) for the development of Social Security Digital Portals;
• £5m for Social Security Scotland for IT infrastructure (2020-21: £5m);
• £nil Digital Planning commitment (2020-21: £3m);
• £nil (2020-21: £6m) to complete the CAP Futures project.
• £10m (2020-21: £nil) for the Shared Services Programme with regard to transformation of its corporate services to a single, integrated cloud ERP solution

16. Commitments under Leases

16a. Operating Leases

Total future minimum lease payments under operating leases are given in the tables below for each of the following periods:

Obligations under operating leases comprise:

Land	2021-22	2020-21
	£m	£m
Within one year	9	9
Between two and five years (inclusive)	19	21
After five years	22	20
Total	50	50
Buildings
Within one year	50	44
Between two and five years (inclusive)	144	129
After five years	186	157
Total	380	330
Other Commitments
Within one year	23	21
Between two and five years (inclusive)	28	22
After five years	14	11
Total	65	54

16b. Finance Leases

Total future minimum lease payments under finance leases are given in the tables below for each of the following periods:

Obligations under finance leases comprise:

Land	2021-22	2020-21
	£m	£m
Within one year	-	-
Between two and five years (inclusive)	-	-
After five years	1	1
Total	1	1
Less the interest element	-	-
Total	1	1

Buildings	2021-22	2020-21
	£m	£m
Within one year	5	5
Between two and five years (inclusive)	19	20
After five years	45	52
Total	69	77
Less the interest element	(48)	(54)
Total	21	23
Other Commitments
Within one year	-	-
Between two and five years (inclusive)	-	1
After five years	-	-
Total	-	1
Less the interest element		-
Total	-	1

This total net obligation under finance leases is analysed in Note 11.

16c. Commitments Under Leases

Within the Scottish Government core estate, the main leasing arrangements are entered into on the basis of Market Rent, often incorporating an initial rent-free period. Subsequent rent reviews are calculated on the basis of (i) the market rental value or (ii) the passing rental if the Market Rent is less than the passing rental at the time of the rent review (i.e. upwards only). The Scottish Government have some properties where the rent at review is calculated by reference to the Retail Prices Index or some other index (often also upwards only).

The ground lease covering the land at Saughton House and the Logie Weir Fish Counter are the only properties which have terms of renewal. All other leases have no terms of renewal or purchase options.

17. Other Financial Commitments

17a. Other Commitments

The payments to which the Scottish Government is committed analysed by the period during which the commitment expires are as follows:

	2021-22	2020-21
	£m	£m
Payable in 1 year	1,461	1,577
Payable between 2 - 5 years	1,517	3,144
Payable in more than 5 years	4,955	-
Total	7,933	4,721

Other financial commitments payable within one year include: £9m (2020-21: £1.5m) in relation to hosting the UCI World Cycling Championships; £6m (2020-21: £5m) for Festival UK 2022; £10m (2020-21: £nil) for Scottish Land Fund - National Lottery Community Fund (3 month termination period); £4m (2020-21: £nil) for Department of Work and Pensions (DWP) recharges; £4m in relation to Advocacy contract.

Other Financial Commitments payable within 2 to 5 years include: £14m (2020-21: £23m) to host the 2023 UCI World Cycling Championships; £2m (2020-21: £5m) in relation to hosting the Scottish Open;

Other financial commitments held by Transport Scotland include:

• £671m (2020-21: £671m) to Network Rail in relation to the Operation, Maintenance, Renewal (OMR) and Enhancement of the rail infrastructure in Scotland payable in 1 year; £692m (2020-21: £739m) payable in 2-5 years and £2,528m (2020-21: £2,146m) payable in more than 5 years
• £684m for Scotrail Holdings (2020-21: £792m due to Abellio Scotrail) payable in 1 year; £728m (2020-21: £nil payable to Abellio) payable in 2-5 years and £2,310m (£nil payable to Abellio) payable in more than 5 years.
• £29m (2020-21: £27m) to Serco Caledonian Sleeper under the Franchise Agreements payable in 1 year; £30m (2020-21: £29m) payable in 2-5 years and £96m (2020-21: £82m) payable in more than 5 years.

For further details on the responsibilities for rail see the Transport Scotland annual report and accounts.

Other Financial commitments held by Scottish Forestry include:

• £37m for the Forestry Grant Scheme - SDRP 2014-2020 (2020-21: £38.5m) payable in 1 year and £40m (2020-21: £41m) payable in 2-5 years; and
• £3m for Rural Priorities SDRP 2007-2013 (2020-21: £2m) payable in 1 year and £9m (2020-21: £12m) payable in 2-5 years.

For further details on the Forestry Grant and the Rural Priorities commitments, which arose from the Scottish Rural Development Plans, see the Scottish Forestry annual report and accounts.

17b. Guarantees, Indemnities and Letters of Comfort

The Scottish Government entered into the following guarantees, indemnities or provided letters of comfort. None of these is a contingent liability within the meaning of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, since the likelihood of a transfer of economic benefit in settlement is too remote. They are included for parliamentary reporting and accountability purposes.

Only guarantees and indemnities above the threshold of £2.5m, which have to be reported and authorised by the Scottish Parliament in accordance with the written agreement between the Finance Committee and the Scottish Government, are included in the consolidated annual accounts.

Guarantees

Guarantee to Lothian Pension Fund in relation to the admission of Scottish Futures Trust Ltd, Scottish Homes Pension Fund, Scottish Legal Complaints Commission, Scottish Agricultural College and Scotland's Learning Partnership.

Guarantees for 10 local government pension schemes, as a result of Visit Scotland taking on the staff from the local area tourist boards.

Guarantee to Fife Council in relation to the admission of The Scottish Agricultural College to the LG Pension Fund.

Guarantee to Dumfries and Galloway Council in relation to the admission of The Scottish Agricultural College to the LG Pension Fund.

Guarantee to Highlands and Islands Enterprise in relation to their pension scheme.

Guarantee to Strathclyde Pension Fund in relation to admission of Scottish Canals.

Guarantees to Shetland Council Pension Fund; Orkney Islands Council Pension Scheme and Highland Pension Fund

Indemnities

At the beginning of the year there was an existing indemnity relating to objects lent under the National Heritage Act 1980 and the National Heritage (Scotland) Act 1985. The year-end balance depends on new acquisitions and the number of exhibitions that these pieces are included in during the financial year, and at 31 March this was £1,839m (2020-21: £1,277m).

Existing indemnity for local museums and galleries dependent on the number of new acquisitions and number of exhibitions that these pieces were included in during the financial year, valued at £22m (2020-21: £17m) at 31 March.

18. Commitments under Service Concession Arrangements

Non-Profit Distributing (NPD), Public Private Partnerships (PPP) and Private Finance Initiative (PFI) transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector.

A transaction is deemed to be 'on balance sheet' (i.e. included in Statement of Financial Position) when:

• the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them and at what price; and
• the grantor controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the agreement.

Where the transaction is deemed to be 'on balance sheet', the substance of that contract is that the Scottish Government has a finance lease, with the asset being recognised as a fixed asset in the Scottish Government's Statement of Financial Position.

18a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position

Description of Schemes

Further details of the individual contracts, including estimated capital value, can be found in the individual accounts of the NHS bodies in Scotland, Scottish Prison Service and Transport Scotland.

Health Bodies

NHS Ayrshire

Woodland View shares a site in Irvine with the Ayrshire Central Hospital. The building is financed through a Non-Profit Distributing (NPD) model and reached practical completion and handover on the 1st April 2016. The building provides a Mental Health and Frail Elderly Inpatient facility for Ayrshire. The 25 year contract commenced on the 1st April 2016 and will be completed on the 31st March 2041. At the end of the contract/concession period, the building will revert back to NHS ownership.

East Ayrshire Community Hospital East Ayrshire Community Hospital (EACH) is situated in the town of Cumnock. The facility provides Inpatient Beds, Elderly Mental Ill and GP Acute, there are also day facilities for Frail Elderly Ill and Outpatient Clinics (including AHPs). The 25 year contract commenced in August 2000 and was due to be completed in August 2025.

On 7 May 2021, the Health Board purchased all the shares in Cumnock Holdings SPV, which built and owns East Ayrshire Community Hospital under the Private Finance Initiative. The purchase price was £12 million. There are no future PFI obligations due to this buyout.

Ayrshire Maternity Unit (AMU) is adjoined to University Hospital Crosshouse in Kilmarnock. The facility provides Area Midwifery services for in-patients, day patients and out-patients. The 30 year contract commenced in July 2006 and will be completed in July 2036. At the end of the contract/concession period the building is available to transfer to the NHS at no additional cost.

NHS Dumfries & Galloway

The Board has one contract financed under a Public Finance Initiative (PFI) and one under the Non Profit Distributing (NPD). The NPD funding model was developed and introduced as an alternative to, and has since superseded, the traditional PFI model in Scotland.

Dumfries and Galloway Maternity and Day Surgery Unit - The previous maternity and day surgery unit in Dumfries is included on the balance sheet (land and buildings) as a PFI at a valuation of £6m as at 31 March 2022. The contract ends in January 2032 however following the successful migration of these services to the new DGRI, the future planning arrangements for this building are now underway. This building is now referred to as Mountainhall.

Dumfries and Galloway District General Hospital – The Boards new District General Hospital DGRI is funded under NPD. The land and buildings are included on the balance sheet at a valuation of £212m as at 31 March 2022 and the contract ends in September 2042.

NHS Fife

NHS Fife hold 2 PFI contracts, which are both held as non-current assets of NHS Fife Board and the liabilities to pay for the properties are accounted for as finance lease obligations.

Fife St Andrews Community Hospital and Health Centre - St Andrew's Community Hospital Contract started 31st July 2009. Contract ends 30th July 2039. In accordance with HM Treasury application of IFRIC 12 principles the property is a non-current asset of NHS Fife Board and that the liability to pay for the property is, in substance, a finance lease obligation.

Fife Victoria Hospital - Victoria Hospital Contract started 28th October 2011. Contract ends 27th October 2041. In accordance with HM Treasury application of IFRIC 12 principles the property is a non-current asset of NHS Fife Board and that the liability to pay for the property is, in substance, a finance lease obligation.

NHS Forth Valley

Clackmannanshire Community Healthcare Centre (CCHC) - CCHC is a service concession for the development and right of use of Community Health Facilities(incorporating a Health Centre Building including accommodation for 3 GP Practices, Associated Clinical Services and accommodation for local Health and Social Work Teams, a Mental Health Resource Centre, a Day Therapy Unit and 45 Inpatient Beds) and provision of services, including maintenance of the facility, under a Project Agreement. Certain facilities management services such as cleaning are provided by the Board. Services commencement date was 18th May 2009 and the contract term ends in July 2037. The payment mechanism is incorporated in the Project Agreement and subject to annual adjustment for inflation in line with the Retail Price Index (RPI) and risk sharing arrangements around usage and price of utilities (gas, electricity and fuel oil). At the end of the agreement the asset will revert to the ownership of the Board. There were no significant changes to the contract in the year.

Forth Valley Royal Hospital (FVRH) - FVRH is a service concession for the NHS Forth Valley development and right of use of an Acute Hospital for Forth Valley (Forth Valley Royal Hospital (FVRH)) and associated provision of services including provision of facilities management services such as patient catering, portering, cleaning and maintenance. Services Commencement (handover of the facility to the Board) was in three phases May 2010, August 2010 and April 2011 and the accounting treatment is on-balance sheet. The duration of the agreement is for 30 years from practical completion to the end of the financial year in which the 30th anniversary occurs. The payment mechanism is incorporated in the Project Agreement and subject to annual adjustment for inflation in line with the Retail Price Index (RPI) and risk sharing arrangements around volumes of patient catering supplied and usage and price of utilities (gas, electricity and fuel oil). At the end of the agreement the asset will revert to the ownership of the Board. There were no significant changes to the contract in the year.

Stirling Health and Care Village (SCV) - SCV is a service concession for the development and right of use of Community Health and Care facilities which will bring together on one site a range of health, local authority and other partner organisation's services. These services include a 116 bed integrated care hub, accommodation for 3 GP practices, associated clinical services and accommodation for Minor Injuries Unit, Diagnostics, Community Nursing, GP Out of Hours and an ambulance station and workshop. Soft Facilities will be provided by the Board including some hard FM services. The facility will be delivered under the Hub initiative and the contract agreement is for 25 years ending in October 2044. The payment mechanism is incorporated in the project agreement and subject to annual adjustment in line with the Retail Price Index (RPI).

NHS Grampian

Aberdeen Health and Community Care Village - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Aberdeen Health and Community Care Village effective 14th November 2013. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Forres Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Forres Health Centre effective 9 August 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Woodside Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Woodside Health Centre effective 28 June 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Inverurie Centres - Service Concession agreements with HUB North of Scotland Ltd for occupancy of the Inverurie Health and Community Care Hub effective 16 January 2018, Fosterhill Health Centre effective 8 May 2018 and the Inverurie Health and Community Care Hub effective 23 July 2018. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

NHS Greater Glasgow

Larkfield Unit – The Day Hospital Elderly Care Facility contract commenced with Quayle Munro Ltd on 1 November 2000 for a period of 25 years. The estimated capital value at commencement of the contract was £9m.

Southern General Hospital – The Elderly Bed Facility contract commenced with Carillion Private Finance on 1 April 2001 for a period of 28 years. The estimated capital value at commencement of the contract was £11m.

Gartnavel Royal Hospital – The Mental Health Facility contract commenced with Robertson Capital Projects Ltd on 1 October 2007 for a period of 30 years. The estimated capital value at commencement of the contract was £18m.

Stobhill Rowanbank Clinic – The Mental Health Secure Care Centre contract commenced with Quayle Munro Ltd on 1 May 2007 for a period of 35 years. The estimated capital value at commencement of the contract was £19m.

Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £79m.

Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre 60 bed extension. PFI contract commenced with Glasgow Healthcare Facilities Ltd on 25 February 2011 for a period of 30 years. Estimated capital value at commencement was £16m.

Victoria Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £99m.

Gorbals Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 6 November 2018 for a period of 25 years. Estimated capital value at commencement £13.5m.

Eastwood Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 3 June 2016 for a period of 25 years. Estimated capital value at commencement was £9m.

Maryhill Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 15 July 2016 for a period of 25 years. Estimated capital value at commencement was £12.5m.

Inverclyde Orchardview - HUB contract commenced with HUB West Scotland Project Co. on 17 July 2017 for a period of 25 years. Estimated capital value at commencement was £8.5m

Woodside Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 15 May 2019 for a period of 25 years. Estimated capital value at commencement £18m.

Appin Ward (Stobhill Mental Health Facility) - HUB contract commenced with HUB West Scotland Project Co. on 28 August 2020 for a period of 25 years. Estimated capital value at commencement £5m.

Elgin Ward (Stobhill Mental Health Facility) - HUB contract commenced with HUB West Scotland Project Co. on 28 August 2020 for a period of 25 years. Estimated capital value at commencement £5m.

Greenock Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 22 January 2021 for a period of 25 years. Estimated capital value at commencement £21m.

Clydebank Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 22 January 2021 for a period of 23 years and 9 months. Estimated capital value at commencement £20m.

NHS Highland

New Craigs -New Craigs start date July 2000 ending June 2025. The Scheme is a replacement for the Craig Dunain Hospital, Inverness and provides In Patients facilities for adults with Mental Health needs or Learning Disability. There is a twenty five year contract with an original estimated capital value of £14.5m.

Easter Ross - Easter Ross start date February 2005 ending January 2030. This scheme is the redevelopment of County Hospital, Invergordon into a Primary Care Centre and combines a community hospital and a health centre, integrating primary and community care into one community health resource. There is a 25 year contract with an original estimated capital value of £8.8 million and the PFI property will revert to the board at the end of the contract.

Mid Argyll Community Hospital and Integrated Care Centre, Lochgilphead. We finance the development of the Mid Argyll Community Hospital and Integrated Care Centre in Lochgilphead by way of a PFI scheme. The period of the contract runs from June 2006 to May 2036 at which point the ownership of the asset will be transferred to the Board. The original estimated capital value of the project is £19m.

Tain Health Centre - A service concession agreement with HUB North of Scotland Ltd for occupancy of the Tain Health Centre effective 24th May 2014. Under the terms of the agreement NHS Highland have a legal commitment to occupy the building for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs. The ownership of the asset will transfer to the Board at the end of the 25 year agreement.

NHS Lanarkshire

Hairmyres Hospital - The provision of a large general hospital. The period of contract is 26 March 2001 to 30 June 2031. The estimated capital value is £73m at 31 March 2022. The hospital services are provided under a contract between Lanarkshire Health Board and Prospect Healthcare (Hairmyres) Limited, with hard and soft facilities management services being supplied under a subcontract to ISS Mediclean Limited.

Wishaw Hospital - The provision of a large general hospital. The period of contract is 28 May 2001 to 30 November 2028. The estimated capital value is £156m at 31 March 2022. The hospital and services are provided under a contract between Lanarkshire Health Board and Summit Healthcare (Wishaw) Limited, with hard and soft facilities management services being supplied under a subcontract to SERCO health Limited.

Stonehouse Hospital - The provision of a small community hospital. The period of contract is 1 May 2004 to 30 April 2034. The estimated capital value is £4m at 31 March 2022. The hospital is provided under a contract between Lanarkshire Health Board and Stonehouse Hospitals Limited, with the service arrangements provided internally by Lanarkshire Health Board.

Lanarkshire Hub Projects - The provision of three community Health Centres in East Kilbride, Kilsyth and Wishaw under the Scottish Future Trust Hubco leased model. These new facilities opened in 2015-16 and are provided by HUB South West Scotland under a 25 year contract. The Hubco provides the centres and is responsible for lifecycle and hard facilities management services which are delivered under a subcontract with Graham Facilities Management ltd. The current estimated capital value of these facilities is £44m at 31 March 2022.

NHS Lothian

Royal Infirmary of Edinburgh - An Acute Teaching hospital. The contract started 1 November 2001 and will end 30 June 2053.

Ellens Glen - Service provides a 60 bedded facility for frail elderly and dementia patients. The contract started 1 November 1999 and will end 1 November 2029.

Findlay House - Service provides a 60 bedded facility for frail elderly and dementia patients in the grounds of the Eastern General Hospital. The contract started 13 June 2003 and will end 12 June 2033.

Tippethill - Service provides a 60 bedded facility for frail elderly and dementia patients at Whitburn. The contract started 6 September 2000 and will end 5 September 2025.

Royal Edinburgh Hospital Phase 1 - Service provides 185 beds for both mental health services and a national acquired brain injury service.

Bathgate Primary Care Centre - Service provides a Primary Care Centre which accommodates 3 GP Practices and the CHP's community activities in the locality. The contract started 1 October 2001 and will end 30 September 2026.

Midlothian Community Hospital - This hospital provides 88 beds for frail elderly and dementia patients, outpatient clinics and a number of CHP led community activities. The contract started 1 September 2010 and will end 31 August 2040.

Allermuir Health Centre - An integrated primary care facility, combining General Practice and NHS community health services in the Firhill area of Edinburgh. The contract started on 25 September 2017 and will end on 24 September 2042.

Blackburn Partnership Centre - This facility includes health and social care services as well as community services for local residents. The contract started on 22 September 2017 and will end on 21 September 2042.

Pennywell All Care Centre - A joint development between NHS Lothian and the City of Edinburgh Council, providing health and social care services for the local community. The contract started on 23 October 2017 and will end on 22 October 2042.

Royal East Lothian Community Hospital phases 1 and 2 - The project brings together services previously provided in Roodlands and Herdmanflat Hospitals and also supports patients previously in Haddington and Crookston Care Homes and Midlothian Community Hospital. The contract started on 10 February 2017 (Phase 1) and 23 February 2018 (Phase 2) and will end on 30 August 2044.

Royal Hospital for Children and Young People Edinburgh & Department for Clinical Neurosciences - This a new hospital for children and young people, integrating the department of clinical neurosciences into the same new build.

NHS Orkney

Balfour Hospital -The accounting treatment reflects the nature of the contract, which is a Non Profit Distribution (NPD) scheme with a funding variant. As agreed in the business case this asset is on the public sector Balance Sheet as a Fixed Asset. During 2019/20 the New Hospital and Healthcare Facility was recognised on Statement of Financial Position at Fair Value. NHS Orkney will make Annual Service Payments over the 25 year period of the contract which will be charged to the Statement of Comprehensive Net Expenditure as they are incurred. Ownership of the New Hospital and Healthcare Facility will pass to NHS Orkney at the end of the 25 year period. The Annual Service Payments made in 2021-22 totalled £2m.

NHS Tayside

The Carseview Centre - Located on the Ninewells Hospital site in Dundee the centre provides in-patient facilities for Adult Psychiatry and Learning Disability. The contract commenced 11 June 2001 and will be completed 11 June 2026, when NHS Tayside may negotiate a further contract or purchase the facility.

The Susan Carnegie Clinic - The Mental Health NPDO Phase 1 is located on the Stracathro Hospital site in Brechin and provides in-patient facilities and a day hospital for Psychiatry of Old Age. The contract start date was 2 December 2011 and the end date will be 17 May 2042, when NHS Tayside will become owners of the facility.

Murray Royal Hospital - Mental Health facilities - The Mental Health NPDO Phase 2 is located on the Murray Royal Hospital site in Perth and provides in-patient, day-patient and out-patient facilities for NHS Tayside's General Adult Psychiatry, Psychiatry of Old Age and Low Secure Forensic services, as well as a regional in-patient unit providing Medium Secure Forensic services for patients from the North of Scotland Health Boards. The contract start date was 1 June 2012 and the end date will be 17 May 2042, when NHS Tayside will become owners of the property.

Whitehills Community Resource Centre - Covers Forfar, Kirriemuir and the surrounding area in conjunction with Angus Council and Lippen Care. The contract commenced 21 March 2005 and will be completed 21 March 2030, when NHS Tayside will become owners of the facility.

NHS Scotland Pharmaceuticals 'Specials' Service (NHSSPSS) - Facility is located on the Ninewells Hospital site, Dundee, and is an NHS manufacturing facility for the supply of unlicensed medicines. The contract start date was 15 March 2019, and the end date will be 14 December 2043, when NHS Tayside will become owners of the facility.

National Services Scotland

Jack Copland Centre - The National Centre for the processing and testing of blood, tissues and cells for patients in Scotland by the Scottish National Blood Transfusion Service (SNBTS).

Transport Scotland

M6/(74) - This Design-Build-Finance-Operate (DBFO) contract covers the design, construction and financing of 28.3km of new motorway, as well as the operation and maintenance of 90km of existing motorway. Payments are made under a shadow toll regime. The toll period began in July 1997 and expires in July 2027.

M77 Fenwick to Malletsheugh - The contract is a Public Private Partnership (PPP) entered into with East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing and operation of 15km of motorway and 9km local road to the A726 trunk road. Payments are made under a shadow toll regime. The toll period began in April 2005 and expires in April 2035.

M80 - The contract covers the design, build and financing of approximately 18 km of motorway and associated roads, junctions, structures and associated works and their on-going maintenance for a period of 30 years. Unitary charge payments commenced in September 2011 and will cease in September 2041.

M8, M73, M74 Improvements - Project involves upgrades to the A8 Baillieston to Newhouse, completion of the M8 between Glasgow and Edinburgh, and included improvements to the M74 Raith Interchange and the widening of other key sections of the M8, M73 and M74. The NPD contract also incorporates the management, operation and maintenance of this section of the motorway for the 30 years. The new improvements opened to traffic in April 2017. The unitary charge payments are committed and will cease in 2047.

Aberdeen Western Peripheral Road/Balmedie and Tipperty - The project involves the construction of a new dual carriageway around the City of Aberdeen and upgrades the road between Balmedie and Tipperty to dual carriageway. The NPD contract also incorporates the management, operation and maintenance of these roads for the next 30 years. The unitary charge payments become committed in phases from Autumn 2016 and will cease in 2048. The final phase of the project opened to traffic in February 2019.

Scottish Prison Service

HMP Kilmarnock - The contract covers the design, construction, financing and operation of a prison HMP Kilmarnock. The contract commenced March 1999 for a period of 25 years. The capital liability is now nil, however, payments for the service element continue to the end of the contract.

HMP Addiewell - The contract covers the design, construction, financing and operation of HMP Addiewell. The contract commenced December 2008 for a period of 25 years.

Court Custody and Prisoner Escort Service - This service concession arrangement covers a service let for 8 years with an option to extend for a further 4 years. The contract commenced in January 2019.

18b. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position

Under IFRIC 12 the asset is treated as an asset of the Scottish Government and included in the Scottish Government's accounts as a non current asset. The liability to pay for the property is in substance a finance lease obligation. Contractual payments therefore comprise two elements: imputed finance lease charges and service charges. The imputed finance lease obligation is as follows:

Gross Minimum Lease Payments	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2021-22 Total	2020-21 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	202	66	115	383	301
Due within 2 to 5 years	814	228	461	1,503	607
Due after 5 years	2,350	331	1,563	4,244	1,938
Total	3,366	625	2,139	6,130	2,846

Interest Element	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2021-22 Total	2020-21 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	140	4	55	199	227
Due within 2 to 5 years	506	14	221	741	701
Due after 5 years	1,001	11	751	1,763	1,849
Total	1,647	29	1,027	2,703	2,777

Present Value of Minimum Lease Payments	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2021-22 Total	2020-21 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	62	62	60	184	360
Due within 2 to 5 years	307	214	239	760	674
Due after 5 years	1,350	320	813	2,483	2,291
Total	1,719	596	1,112	3,427	3,325

Service elements due in future periods, included above	NHS Bodies in Scotland	Scottish Prison Service	Transport Scotland	2021-22 Total	2020-21 Total
	£m	£m	£m	£m	£m
Rentals due within 1 year	79	55	38	172	186
Due within 2 to 5 years	333	186	138	657	578
Due after 5 years	1,303	266	1,091	2,660	2,815
Total	1,715	507	1,267	3,489	3,579

18c. Contingent rents

IAS 17 Leases defines contingent rents as "that portion of lease payment that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (e.g. percentage of future sales, amount of future use, future price indices, and future market rates of interest)".

Contingent rents recognised as an expense in the period were £35m (2020-21: £31m).

19. Contingent Assets/Liabilities disclosed under IAS 37

19a. Contingent Assets disclosed under IAS 37: Provisions, Contingent Liabilities and Contingent Assets

The definition of a contingent Asset under IAS 37: Provisions, Contingent Liabilities and Contingent Assets is a possible asset, arising from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity's control.

NHS Employer's Liability estimated at £3m (2020-21: £2m).

Grants repayable as a result of sales of Housing Association Properties to tenants or as a result of conditions of grant being breached. Grants become repayable when conditions of grant cease to be met. It is not possible to predict the level of activity in future years.

Repayments of grant from the Open Market Shared Equity Scheme which allows people on low income to buy a share in a property, the balance being owned by a housing association and funded by grant from the Scottish Government. If the property is sold or an increased share is purchased by the owner, the grant becomes repayable. It is not possible to estimate the level of future receipts.

19b. Contingent Liabilities disclosed under IAS 37: Provisions, Contingent Liabilities and Contingent Assets

The definition of a contingent Liability under IAS 37: Provisions, Contingent Liabilities and Contingent Assets is:

• a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entity's control; or
• a present obligation that arises from past events but is not recognised because it is not probable that a transfer of economic benefits will be required to settle the obligation; or
• the amount of the obligation cannot be measured with sufficient reliability.

Only contingent liabilities above the threshold of £2.5m, which have to be reported and authorised by the Scottish Parliament in accordance with the Scottish Public Finance Manual, are included in the consolidated annual accounts.

NHS related

Clinical and Medical compensation payments of £457m (2020-21: £394m).

NHS Employer's Liability estimated at £5m (2020-21: £4m).

Housing related

The Mortgage Indemnity New Home Scheme (MI New Home) allows credit-worthy borrowers, locked out of the market by high deposit requirements, access to 90% to 95% LTV mortgages. The scheme is supported by a SG guarantee which sits behind cash indemnities set aside by participating house builders (for each house sold under the scheme). The guarantee valued at £2m (2020-21: £7m) can only be called upon once the indemnities are exhausted and lasts for 7 years. The guarantee scheme ended for applicants in 2015, therefore the potential calls on this scheme will end in December 2022.

National Housing Trust (NHT) guarantees of £1.5m (2020-21: £4m) which the Scottish Government are committed to giving but are not active until construction has been completed. The risk of a call on the guarantee has significantly lowered with a number of developments leaving the NHT. We do not expect a call on the guarantee in the near future but we are monitoring each development closely through the Scottish Futures Trust to understand if tenants are continuing to pay their rent and thereby allow the loan debt to be serviced. This situation is subject to change.

As part of the Winchburgh Housing Development there is a potential liability in relation to loan repayments for the construction of Winchburgh Primary School. The housing development is due to pay the council as houses are sold. The Scottish Government have entered into an arrangement to cover final costs if the developer cannot pay which can be called upon after 31 March 2026. Current value of potential liability is £15m (2020-21: £15m).

Justice related

Claims against former independent Conveyancing and Executory Practitioners in Scotland. This is a contingent liability relating to an agreement to meet any valid claims arising from the acts or omissions of past independent conveyancing and executory practitioners, as defined by the Law Reform (Miscellaneous Provisions) Scotland Act 1990. The amount and timing of any outlay is uncertain.

COPFS has been subjected to several civil and damages claims. COPFS is opposing these claims but continues to review each case individually for liabilities that may arise as the legal process progresses. The value of these claims has yet to be finalised.

Rural related

The Supreme Court found that an element of the Agricultural Holdings Act 2003 breached the European Convention of Human Rights -Art 1 P1. Remedial legislation was enacted to resolve this and a small group of tenant farmers have taken SG to Court of Session seeking compensation for breach of their rights arising from the Remedial legislation. The court has issued initial judgement but litigation is still live and more court activity is required to resolve. The amount and timing of any outlay is uncertain.

EU CAP audits can result in future disallowances and a number of audits are in progress relating to CAP for scheme years 2015, 2016, 2017, 2018 and 2019. The level of late payment penalties from the EC to the UK member state and the split of penalties attributed to administrations are still to be formally concluded for CAP Pillar 1 scheme year 2015. With regard to the schemes from 2016 to 2019 the Scottish Government are in regular communication with the Rural Payments Agency over the current state of analysis and potential level of payments. However the amount and final timing of any outlay in relation to these two items is uncertain.

Benefit Underpayments

Social Security Scotland acknowledges that administrative errors by its staff (official error) and that of the Department for Work and Pensions under Agency Agreements will sometimes result in the underpayment of benefit. Where underpayments relating to official error are identified, we pay arrears in full at the earliest opportunity.

Due to limitations in data the liability for benefit underpayments cannot currently be quantified and so a contingent liability exists for underpayments not yet identified and corrected.

Redress Scotland

The Redress for Survivors (Historical Child Abuse in Care) (Scotland) Bill was passed in Parliament in March 2021 and received Royal Assent on 23 April 2021. Scotland's Redress Scheme went live in December 2021. The Act established Redress Scotland as an independent body and made provision for the functions of Redress Scotland and of Scottish Ministers in relation to the redress scheme.

Individuals who apply to the scheme complete and submit an application form, together with supporting information, to Scottish Government who review the application prior to any submission to Redress Scotland. Redress Scotland convene a panel to consider each application. The panel make decisions using the statutory assessment framework and the applicant will choose whether to accept the terms.

In relation to the applications received under Scotland's Redress Scheme up to 31 March 2022, which have not yet concluded, there is a potential maximum liability of £74million. Some of this may be covered by the contributions received from associated organisations (see note 13 Deferred Income). This would not all be payable in the next 12 months due to the time required to process each application, taking into consideration the workload of the Panel at Redress Scotland and because applicant's have a six month period to consider the offer of redress before choosing whether to accept and receive payment. A more accurate liability associated with these applications is not possible to calculate as given the nature of the scheme there is no reason to assume that the level and nature of previous applications will be a reasonable basis for future applications.

The full liability over the course of the scheme is unknown, as the total number of applications is not known and the distribution of the nature and level of individual payments awarded is not possible to predict. However the Scottish Government is committed to giving financial redress to all survivors, regardless of the financial contributions received from contributing organisations.

Decommissioning of offshore renewable energy installations

Functions under the Energy Act 2016 in relation to decommissioning offshore renewable energy installations in Scottish waters transferred to Scottish Ministers on 1st April 2017. This also means that the Scottish Government is now the funder of last resort in cases where the developers/owners cannot meet their decommissioning obligations. As the size of the Scottish portfolio of offshore energy projects grow so does the cumulative value of the decommissioning obligations and contingent liability. The value of the contingent liability to date has been reviewed in line with guidance issued by the Department of Business, Energy and Industrial Strategy entitled 'Decommissioning of offshore renewable energy installations: guidance notes for industry' published in March 2019.

The value of the contingent liability to date relates to 5 constructed and operational projects

Projects with approved decommissioning programmes and approved financial securities:

• Neart na Gaoithe Offshore Wind Farm (NNG) (Fife) (£98m)

Projects with decommissioning programmes and approved financial securities still to be approved:

• Beatrice Offshore Wind Farm (c. £100m) (constructed);
• Hywind Energy Park (Aberdeenshire) (c. £20m) (constructed);
• Aberdeen Bay Wind Farm, also known as European Offshore Wind Deployment Centre (Aberdeenshire) (c. £20m) (constructed);
• Moray East Offshore Wind Farm (Aberdeenshire) (c.£235m) (partially constructed);
• Kincardine Offshore Floating Wind Farm (Aberdeenshire) (c. £20m) (constructed)
• Seagreen Offshore Wind Farm (c. £100m) (partially constructed

Other

The Scottish Government occupies a number of leased properties which have dilapidations clauses in the leases. These properties are maintained in excellent order, but there is a potential liability to reinstate the internal layout of these buildings to their original floor plans. These costs will be subject to negotiation and the monetary impact is not reliably estimable.

In certain circumstances (e.g. late termination of contracts) a payment of up to 13m Swiss Francs (£11m at 31 March 2022 exchange rates; £10m at 31 March 2021 exchange rates) would be due to the UCI (the Union Cycliste Internationale) in relation to the UCI Cycling World Championships to be hosted in Scotland in 2023.

As part of Transport Scotland's normal course of business, the Forestry Commission grants the right to use a forestry track as an emergency diversion route on the A83 Rest and Be Thankful on the understanding that Transport Scotland has the liability for any incidents that may occur whilst the track is being used for this purpose. The potential obligation is estimated at £5m (£2020-21: £5m) and it is considered unlikely that any liability will occur.

20. Related Party Transactions

The Scottish Government is the sole shareholder and sponsor of Caledonian Maritime Assets Ltd, David MacBrayne Ltd, Highland and Islands Airports Ltd, Scottish Futures Trust, Prestwick Airport Holdco Ltd, Scottish Rail Holdings Ltd and Ferguson Marine (Port Glasgow) Holding Ltd; a shareholder in Scottish Health Innovations Ltd and the Student Loans Company; and sponsor of Scottish Water, a number of nonconsolidated Health Bodies, and 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. Further details of Scottish Public Bodies are available from the Scottish Government website.

The Scottish Government is also the sponsor of cross-border public authorities which are listed in The Scotland Act 1998 (Cross-Border Public Authorities) (Specification) Order 1999. These bodies are regarded as related parties with which the Scottish Government has had material transactions during the year.

In addition the Scottish Government has had a number of transactions with other government departments and other central government bodies, primarily the Scotland Office and the Office of the Advocate General, the Rural Payments Agency, the Home Office and the Department for Work and Pensions.

The Scottish Government has material transactions with local government bodies, Regional Transport Partnerships, Community Justice Authorities and Scottish Water.

Information is provided in the performance report in the beginning of these accounts of the register of interests members of the Corporate Board.

All Scottish Ministers are required, as Members of the Scottish Parliament, to register information about certain financial interests. The types of financial interest that must be registered are those that might affect any actions, speeches or votes in the Parliament. This register is available for public inspection at the office of the Standards clerks with a further copy available at the main visitor information desk at the Scottish Parliament building. There are no material transactions to report.

Accounts of the individual Executive Agencies, the Crown Office and Procurator Fiscal Service and Health Bodies contain details of related party transactions specific to those entities.

21. Third Party Assets

Assets held at Statement of Financial Position date to which monetary value can be assigned:

	2020-21	Gross Inflows	Gross Outflows	2021-22
	£m	£m	£m	£m
Monetary amounts such as bank balances and monies on deposit	22	33	(35)	20
Unclaimed dividends and unapplied balances	11	-	-	11
Total Monetary Assets	33	33	(35)	31

Accountant in Bankruptcy holds funds of £20m (2021-22: £22m) on behalf of third parties. This mainly comprises realised assets that are held whilst awaiting repayment to the public purse or distribution to creditors with a value of £11m (2020-21: £12m). The balance of £9m (2020-21: £10m) relates to money consigned in respect of unclaimed dividends and unapplied balances.

The NHS Bodies hold money on behalf of patients. This totalled £9m in 2021-22 (2020-21: £10m).

The Scottish Prison Service also holds £1m on behalf of prisoners (2020-21: £1m).

Other Assets held at the Statement of Financial Position date all relate to Accountant in Bankruptcy:

Description	2020-21 Number held	2021-22 Number held
Residential property	581	319
Motor vehicles, boats and caravans	36	32
Life Policies	49	24
Shares and Investments	14	13
Miscellaneous	278	141

No third party assets have been included within the Statement of Financial Position.

22. Resource Budget

The resource budget detailed in the outturn statements is the consolidated budget for the Scottish Government.

The following table provides a reconciliation of the budgets shown in the accounts with the total budget for Scotland approved by the Scottish Parliament.

	2021-22	2020-21
	£m	£m
Budget (Scotland) Act 2020	55,025	49,251
Scotland's Summer Budget Revision - Scottish Statutory Instrument 2020	-	2,787
Scotland's Autumn Budget Revision - Scottish Statutory Instrument 2020	1,470	2,458
Scotland's Spring Budget Revision - Scottish Statutory Instrument 2020	1,202	1,857
Total approved spending	57,697	56,353
Less activities not included in these accounts:
National Records of Scotland	(61)	(54)
Office of the Scottish Charity Regulator	(4)	(3)
Scottish Courts and Tribunals Service	(179)	(155)
Scottish Fiscal Commission	(2)	(2)
Revenue Scotland	(7)	(7)
Registers of Scotland	(21)	(53)
Food Standards Scotland	(22)	(19)
Scottish Housing Regulator	(5)	(5)
NHS and Teachers' Pension Schemes	(6,026)	(5,229)
Forestry Commission (Scotland)	-	-
Scottish Parliamentary Corporate Body	(128)	(112)
Audit Scotland	(17)	(13)
Consolidated Accounts approved estimates	51,225	50,701

Portfolio analysis	Budget Act Approval	2021-22 Capital Budget	2021-22 Operating Budget
	£m	£m	£m
Health and Social Care	18,398	501	17,897
Social Justice, Housing and Local Government	16,411	166	16,245
Finance and Economy	2,616	308	2,308
Education and Skills	4,587	526	4,061
Justice and Veterans	3,123	56	3,067
Net Zero, Energy and Transport	4,536	603	3,933
Rural Affairs and Islands	948	35	913
Deputy First Minister and Covid Recovery	72	-	72
Constitution, External Affairs and Culture	354	(1)	355
Crown Office and Procurator Fiscal Service	180	8	172
Consolidated Accounts approved estimates	51,225	2,202	49,023

23. Cash Authorisation

	2021-22	2020-21
	£m	£m
Cash authorisation for the Scottish Administration
Budget (Scotland) Act 2020	47,912	43,228
Scotland's Summer Budget Revision - Scottish Statutory Instrument 2020	-	2,787
Scotland's Autumn Budget Revision - Scottish Statutory Instrument 2020	1,026	2,448
Scotland's Spring Budget Revision - Scottish Statutory Instrument 2021	1,411	2,611
Total Approved Cash Authorisation for the Scottish Administration	50,349	51,074
Less non core activities not included in the consolidated accounts:
National Records of Scotland	(57)	(48)
NHS and Teachers' Pensions	147	(74)
Office of the Scottish Charity Regulator	(4)	(3)
Registers of Scotland	(8)	(53)
Scottish Housing Regulator	(5)	(5)
Scottish Courts and Tribunals Service	(153)	(128)
Revenue Scotland	(7)	(7)
Food Standards Scotland	(21)	(18)
Scottish Fiscal Commission	(2)	(2)
Available Cash Authorisation for Consolidated Bodies	50,239	50,736
Funding drawn down from the Scottish Consolidated Fund SOCTE	48,800	48,128