Scottish Budget 2023 to 2024: spring budget revision

Introduction

1. This booklet provides information for the Parliament and others in support of the ‘Budget (Scotland) Act 2023 Amendment Regulations 2023’ – the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in February 2024. 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 2023, which authorises the Scottish Government’s spending plans for the financial year 2023-24.

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 £564.8 million);

ii) technical adjustments (net decrease to the budget of £2,455.7 million);

iii) Whitehall Transfers and HM Treasury allocations to the Scottish Government (£144.4 million); and

iv) the transfer of resources between Scottish Government portfolios.

4. In total these changes will decrease the Scottish Government budget by £1,746.5 million from £60,205.9 million to £58,459.4 million.

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

Scottish Government Funding Changes

6. Following the completion of the 2023-24 Autumn Budget Revision additional funding has become available. This funding has arisen from a number of sources as detailed in Tables 1.7a to 1.7e. These include:

• Revised block grant adjustments and fully devolved tax forecasts;
• Additional funding expected from the UK Supplementary Estimates Process; and
• An increased carry forward within the Scotland reserve, following the 2022-23 Audit process, noting the most significant change reflects relates a timing difference with Health between years (i.e. an in for 22-23 and out for 23-24 with no impact over the two years combined) arising from a different audit interpretation of a contract from treatment of patients from a Health Board to other boards areas

7. The funding position here represents the final Scottish Budget aggregate available but this does not represent the final position which will be reflected in the funding aggregates in HM Treasury terms. At the time of publication The Supplementary Estimate position is not yet confirmed and any changes to this position, along with movements on devolved taxes, borrowing and other funding items will be reflected in the provisional and final outturn.

8. The pressures on the financial position across the year has required active management and reprioritisation of funding. In areas where savings have been targeted through this process, budgets have been reduced and funding redeployed to address priority areas, such as Health and Social Care and supporting Ukrainian displaced people. Details of these transfers are set out throughout the document

Scottish Government Funding Allocation Changes

9. The largest element of funding deployed in the budget revision is being provided to NHS Recovery, Health and Social Care portfolio. £514 million of additional resource funding has been provided alongside £235 million of capital funding

10. The Social Justice portfolio is receiving an additional £51.8 million of resource budget, which relates to funding being provided to Social Security to fund increases in demand led benefit expenditure following revised forecasts.

11. The portfolio is also receiving an additional £41.2 million of resource budget for Ukrainian Resettlement costs as part of the Scottish Government’s ongoing commitment to the displaced people of Ukraine.

12. Turning to other portfolios, a further funding allocation of £134.2 million has been provided to the Justice and Home Affairs portfolio to fund Police and Fire Pensions following the allocation of £44 million at the Autumn Budget Revision

13. An additional £24.3 million has been provided to support the Corporate Running Costs of the Scottish Government. This funding has been split proportionally across all portfolios based on existing operating cost budgets.

14. The Transport, Net Zero and Just Transition portfolio have provided £299.5 million of funding as part of the process of active management and reprioritisation of funding, to support the overall financial position.

Technical Adjustments

15. The Spring Budget Revision records net technical changes of £2,455.7 million. The largest technical change (of £3,160.2 million) relates to a decrease in the AME non-cash provision for future NHS and Teachers pension costs. The primary driver of this is the increase in discount rate (set by HM Treasury), which means a lower Net Present Value for the overall pension liability – this has no impact on discretionary spending.

16. Within the Education and Skills portfolio there have been two technical adjustments in relation to student loans, totalling (£734.1m). The first is an adjustment of (£419.9m) relating to a fair value adjustment and a revised estimate of the capitalised interest requirement. This is a non cash adjustment and has no impact on discretionary spending.

The second adjustment (£314.2 million) relates to an increase 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.

17. 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, with IFRS16 reflecting updated accounting for leases.

18. Additional budget cover has been provided for Private Finance Initiatives (PFI) projects in Health and Social Care £48.1 million. This technical change falls outside of UK Budget limits and is provided to align the Scottish Budget with accounting requirements (and has no impact on discretionary funding).

Whitehall transfers

19. There are nine specific Whitehall transfers and allocations from HM Treasury recognised at the Spring Budget Revision. The net positive impact on the Scottish Budget is £144.4 million.

20. The largest of the Whitehall transfers is the £85.6 million being provided to the NHS Recovery, Health and Social Care portfolio for additional covid funding for Health and Social Care services. The portfolio is also receiving a transfer of £2.5 million which is providing interim payments to all new members of the Scottish infected blood support scheme.

21. Within the Social Justice portfolio, Ukrainian Resettlement is receiving two transfers. The first is a transfer of £8.1 million for Thank You Payments, and the second a transfer of £0.1 million for the Children and Young People fund. Within the Deputy First Minister and Finance portfolio, Local Government is receiving a transfer of £30 million in relation to Ukrainian Resettlement.

22. A transfer of £1.1 million is also being provided to the Social Justice portfolio for the Debt Advice Levy. This will be used to fund essential debt advice services provided by a range of organisations across Scotland as per the requirements of HM Treasury.

23. The Wellbeing Economy, Fair Work and Energy portfolio is receiving a transfer of £16 million to provide funding to support the R100 Programme under Digital Connectivity.

24. Scottish Courts and Tribunals Service are receiving a transfer of £1.6 million relating to the devolution of Personal Independence Payment appeals from HMCTS.

Internal Transfers

25. 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 fund service delivery in one portfolio where the policy responsibility rests with another, or 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 Education & Skills to Local Government within the Deputy First Minister & Finance portfolio to support the expansion of Free School Meals (£139.7 million)
• Transfer from Education & Skills to Local Government within Deputy First Minister & Finance to support teacher training and the employment of teachers on permanent contracts (£60.5 million)
• Transfer from Social Justice to Local Government within the Deputy First Minister & Finance portfolio to support local authorities with funding for the Scottish Welfare Fund (£40.8 million)
• Transfer from Health & Social Care to Education & Skills to fund additional places for Medical, Nursing and Midwifery Students in Scotland 2023/24 (£25.1 million)
• Transfer from Education & Skills to Local Government within the Deputy First Minister & Finance portfolio to provide funding for the delivery of Kinship Foster Care Allowances (£16 million)
• Transfer from Transport Net Zero & Just Transition to Wellbeing Economy, Fair Work & Energy portfolio to support CARES Programme (£10.2 million)

Format of Supporting Document

26. 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.

27. The summary tables on pages 10 to 19 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 funding. 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 direct capital in the Scottish Government’s or Direct Funded Bodies’ Annual Accounts is shown as capital.

28. 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.

29. The Scottish Government’s spending proposals are in the main presented to Parliament in resource terms. 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

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