Spring Budget Revision 2022 to 2023: supporting document

Introduction

1. This booklet provides information for the Parliament and others in support of the 'Budget (Scotland) Act 2022 Amendment (No.2) Regulations 2023' – the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in February 2022. The booklet itself has no statutory force – it is produced as an aid to understanding the Order.

2. The purpose of the Spring Budget Revision is to amend the Budget (Scotland) Act 2022, which authorises the Scottish Government's spending plans for the financial year 2022-23.

3. The main changes to the Scottish Government's spending plans, as set out in the supporting document to the Budget Bill, are explained below:

i) Funding changes to reflect deployment of available resources to portfolios (total net increase to the budget of £502.3 million);

ii) technical adjustments (net increase to the budget of £130.6 million);

iii) Whitehall Transfers and HM Treasury allocations to the Scottish Government (£80.6 million); and

iv) the transfer of resources between Scottish Government portfolios.

4. In total these changes will increase the Scottish Government budget by £713.4 million from £56,985.0 million to £57,698.4 million.

5. The purpose of the Spring Budget Revision is to seek Parliamentary approval for these changes.

Funding Changes

6. Following the completion of the 2022-23 Autumn Budget Revision £94.2 million of funding was unallocated. Additional funding has subsequently become available from a number of sources. These include:

• revised block grant adjustments and tax forecasts,
• additional funding expected from the UK Supplementary Estimates Process
• an increased carry forward within the Scotland Reserve. The increased carry forward from the amount previously anticipated follows the conclusion of the 2021-22 Final Outturn exercise.

7. In areas where underspends have been delivered through the Emergency Budget Review or have emerged through the monthly budget management and monitoring process, budgets have been reduced and funding redeployed to address priority areas. The areas affected by these transfers are detailed throughout the document.

8. The largest element of funding deployed in the budget revision is being provided to Health and Social Care to support services. £292.2 million of additional capital funding has been provided alongside £135 million of resource funding.

9. The second largest allocation (£185.3 million) relates to gross funding being provided to Social Security to fund increases in demand led benefit expenditure following revised forecasts. These amounts are offset by funding reductions (£62.1 million ) for demand-led benefits where forecasts have reduced. These amounts are disclosed in their respective columns on Table A

10. The funding additions for Social Justice, Housing and Local Government also includes £178.9 million relating to additional funding being provided to support the Ukrainian Resettlement Scheme.

11. A further funding allocation of £130.6 million has been provided to the Justice and Veterans portfolio to fund Police and Fire Pensions following the allocation of £180 million at the Autumn Budget Revision.

Technical Adjustments

12. The Spring Budget Revision records net technical changes of £130.6 million. The largest technical change of (£627.1 million) relates to a reduction in the Student Loans non cash Resource Accounting & Budgeting (RAB) charge requirement. The RAB charge is a non-cash adjustment to reflect a change in valuation which considers the extent to which student loans issued to Scottish students will be repaid. The Health and Social Care depreciation budget has increased by £54 million with other material increases in Justice and Veterans (£4.9 million) and in Scottish Courts and Tribunals Services (£4.2 million).

13. There is an increase to the AME provision for future NHS and Teachers pension costs of £495.7 million. This arises from increased opening pension liability and reduced current service costs. There is an increase to the Student Loans AME budget of £45 million. There are also revisions of AME budget, as agreed and funded by HM Treasury, to cover provisions, impairments, fair value adjustments and pension liabilities (£108.1 million)

14. Additional budget cover has been provided for PFI projects in Health and Social Care (£42.6 million) and reduced from Justice and Veterans (£0.3 million) providing a net £42.4 million movement. These technical changes fall outside of UK Budget limits and are provided to align the Scottish Budget with accounting requirements.

15. Further technical adjustments have been required within the Spring Budget Revision as a result of additional work to accurately quantify the final impact of the introduction of International Financial Reporting Standard 16 (IFRS16 ) in some areas. Ring-fenced budget cover is being provided by HM Treasury to allow for this change in accounting treatment and the Scottish Government's net discretionary funding will not be impacted by these changes. Final IFRS16 budget cover requirements were provided to Treasury ahead of the UK Supplementary Estimates exercise. The net impact of the changes within the Spring Budget Revision was £3.8 million with a notional Corporate Running Costs impact reducing this further to £2.5 million.

Whitehall transfers

16. The Spring Budget Revision includes Whitehall funding transfers of £80.6 million. For the purpose of the budget revision these are being grouped into those that support arrangements following the death of Her Majesty The Queen (known as Project Unicorn) and all other Whitehall transfers. A breakdown of Whitehall transfers by portfolio is included in table B.

17. Health and Social Care Whitehall transfers are made up of £59.6 million for the Scottish Infected Blood Support scheme, £10.2 million from DHSC for Anti-Viral Deployment and £4.5m for the Drugs Death Open Innovation Challenge.. This has been offset by a £40.9 million transfer to the UK Department for Health and Social Care in respect of ongoing costs of Covid Test and Protect.

18. The Social Justice Housing and Local Government Whitehall transfers are made up of £18.6 million Education Tariff for Ukrainian displaced people; £5.5 million thank you payments for Ukrainian refugees; a £1.2 million transfer from Department for Transport of for Dundee to Stanstead Public Obligation and £1.1 million for the Tampon tax.

Internal Transfers

19. Internal transfers do not affect the Scottish Government's budget as a whole and net to zero. Internal transfers move budget provision within or between portfolios, often to reflect changes in responsibility between portfolios, changes in payment mechanisms and virement intended to maximise the use of available resources. The significant portfolio transfers are as follows:

• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to support the investment in integration of Health Social Care (£257.2 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio including funding for the Real Living Wage for staff providing direct Adult Social Care in commissioned services in the third and independent sectors (£233.5 million);
• transfer from Education & Skills to Local Government within Social Justice, Housing & Local Government to fund additional Teachers and Support Staff (£144.5 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to ensure delivery of the commitments set out in the Mental Health Transition and Recovery Plan (£120 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to provide funding for the implementation of the Carers Act (£65 million);
• transfer from Education & Skills to Local Government within the Social Justice, Housing & Local Government portfolio to provide funding for the delivery of the Whole Family Wellbeing Fund (£32 million);
• transfer from Education & Skills to Social Justice, Housing & Local Government to provide funding for the expansion of Free School Meals (£30 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to provide Free Personal and Nursing Care to care home residents (£27.3 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to fund increased Social Work Capacity in Adult Services within Local Authorities (£22 million);
• transfer from Health & Social Care to Local Government within the Social Justice, Housing & Local Government portfolio to fund Interim Care Funding within Local Authorities (£20 million);
• transfer from Social Justice, Housing & Local Government to Education & Skills of the Education Tariff to 30 November for Ukrainian Displaced People (£18.6 million);

Format of Supporting Document

20. The Scottish Government continues to discuss with the Finance and Public Administration Committee and others how it can improve the presentation and usefulness of supporting information.

21. The summary tables on pages 4 to 10 set out the changes sought in the Order at portfolio level, and the effect of the proposed changes on the overall cash authorisations. There is a clear read across from the numbers shown on the face of the Budget Act to those in these tables, and to the revised numbers shown in the Spring Budget Revision Order itself. Tables 1.5 and 1.6 provide a reconciliation between budgets and the cash authorisations. Tables 1.7 (a) and (b) show the sources of funding that support the changes applied and the movement of available resources. Table 1.8 shows the voted Capital Spending and Net Investment for each portfolio following the SBR adjustments. It should be noted that for the remainder of the document, only spending that scores as capital in the Scottish Government's or Direct Funded Bodies' Annual Accounts is shown as capital.

22. The main body of the document then provides a more detailed analysis of the proposed changes on a portfolio by portfolio basis. For each portfolio and direct-funded body, it shows:

• a summary of the changes proposed for the portfolio;
• how the proposed revised portfolio budget is comprised in terms of operating and capital resources, divided into the main spending aggregates: Expenditure Limit, UK Funded AME (Annually Managed Expenditure) and Other spending to show TME (Total Managed Expenditure) in respect of the Scottish Budget;
• details of the proposed major changes; and
• details of the proposed revised budgets disaggregated to Level 3.

23. The Scottish Government's spending proposals are in the main presented to Parliament in resource terms. But to meet the requirements of the "Public Finance and Accountability (Scotland) Act 2000", Budget Bills and Revisions seek authority for the budgets of NDPBs in cash, and NDPB numbers in this supporting document are also given in cash terms. In order to allow comparison with NDPB budgets presented in other Scottish Government publications, the following table compares cash and budgets.

Process for the Budget Revision

21. Following detailed consideration by the Subordinate Legislation and Finance Committees, the Scottish Parliament has an opportunity to vote on the Autumn Budget Revision Order subject to a recommendation by the Finance and Public Administration Committee.