Spring Budget Revision 2024-25: supporting document

Introduction

1. This booklet provides information for the Parliament and others in support of the ‘Budget (Scotland) Act 2024 Amendment Regulations 2025’ – the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in January 2025. 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 2024, which authorises the Scottish Government’s spending plans for the financial year 2024-25.

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 £971.3 million).

ii) Technical adjustments including IFRS 16 (net decrease to the budget of £83.1 million).

iii) Whitehall Transfers and HM Treasury allocations to the Scottish Government (a decrease of £25.1 million).

iv) The transfer of resources between Scottish Government portfolios.

4. In total these changes will increase the Scottish Government budget by £863.7 million from £60,449.0 million to £61,312.1 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 2024-25 Autumn Budget Revision, additional funding has become available. Analysis of all funding movements is set out in tables 1.7c,d&e. This funding has come from a number of sources. These include:

• £1.43 billion of additional Barnett consequentials confirmed at the UK Autumn Budget and are being applied in the Spring Budget Revision.
• Minor adjustment to the position following UK Supplementary Estimate consequential figures.
• With the 2023-24 Final Outturn process nearing conclusion additional amounts have been carried forward in the Scotland Reserve to be utilised in 2024-25.
• Revised tax and block grant adjustments and forecasts.

7. These funding changes have allowed the Scottish Government to remove all ScotWind funding that had been profiled into the 2024-25 financial year and to reduce resource borrowing to nil. Anticipated Capital borrowing has also been reduced to £318 million. Final decisions on borrowing will be made at the end of the financial year

8. The largest element of funding deployed in the budget revision is being provided to the Health and Social Care portfolio, totalling £688.5 million. Additional resource funding of £620 million has been provided as part of the budget revision to support Health services alongside £67 million of capital funding. Financial transactions funding of £2.8 million has been provided to provide continued support to the GP loans scheme, with this partially offset by £1.3 million of FT income from Covid-19 sports loans.

9. The Finance and Local Government portfolio will receive £456.2 million of additional funding. Within this £85 million is being provided to Local Government. This includes £29 million of resource budget being provided to support the Teachers’ pay and £24.5 million for the non-teacher pay. A further £10 million of capital budget is being provided as part of the overall package of support for the non-teacher deal.

10. Resource of £17.3 million is also being provided to fund the increased investment in the Scottish Welfare Fund. This follows the £20 million funding announcement with the balance of funding being provided from reprioritisation within the portfolio.

11. £3 million of capital budget has been provided to the General Capital Grant for Orkney Island Ferries to replace the current ferry fleet and electric ferry trials.

12. £20.2 million has been provided to support Corporate Running Costs while the Scottish Public Pensions Agency (SPPA) will receive £4.8 million to fund its operations for the remainder of 2024-25.

13. As well as the funding additions set out above, a total of £350 million is being held centrally within the portfolio, which comprises:

• £60 million of funding to be carried forward for Health and Social Care to support 2025-26 costs.
• £150-200 million is held as contingency for year-end audit adjustments (which is required annually).
• The balance is held to fund any changes in demand led schemes and devolved tax receipts as the financial year concludes.

14. Where this contingency is not required (noting there is always a requirement to hold contingency for audit adjustments through the Scotland Reserve) these amounts will be reported as underspends at provisional outturn and carried forward in the Scotland Reserve.

15. The Education and Skills portfolio is being increased by a total of £28.8 million. This includes £51.9 million of additional funding offset by £23.1 million of savings. The largest components of funding are £28.6 million provided to the Scottish Qualification Authority to cover operational costs and £18.4 million to the Scottish Funding Council principally to cover costs of increased employer pension contribution rates in the higher and further education sectors.

16. The reductions in funding are primarily within Higher Education Student Support where demand-led tuition fees costs are lower than previously forecast alongside some smaller resource and capital slippage (£16.5 million) and from savings across a number of programmes within Children and Families (£5.7 million).

17. The Justice portfolio is increasing by £0.2 million. Funding of £32.7 million is required to fund increasing demand for Legal Aid, with £13.4 million provided to Police and Fire Pensions to reflect overall costs (with costs dependant on a number of factors including numbers of retirals) and £14 million allocated to the Scottish Prison Service to support operating costs pressure including on pay.

18. This additional budget is largely offset by £71.8 million of funding reductions, the largest of which by a £55 million saving in capital budget for Scottish Prison Service, due to slippage on planned investment in the prison estate at HMP Inverness and HMP Glasgow. Resource savings of £13.2 million are also part of the reduction within Police Central Government primarily across the Emergency Services Mobile Communications Programme (ESMCP) project.

19. The Social Justice portfolio is being reduced by £14 million. The majority of this movement relates to savings generated within the Social Security Programme totalling £11.3 million. This is driven by staff cost savings. Further funding reductions of £3.1 million have been reflected in Tackling Child Poverty and Social Justice, with these savings primarily as a result of reductions in demand led areas.

20. There have been some revisions to the Social Security benefit expenditure forecasts across a number of lines, however the net impact on funding is just £0.5 million. The major movements are a reduction in the forecast for Adult Disability Payment offset by increases in the forecast requirement for Child Disability Assistance, Disability Living Allowance and Pension Age Winter Heating Payments. Full details of final benefit budgets are set out below in schedule 3.7 of the Social Justice chapter. Forecasts will continue to change between now and the end of the financial year.

21. The Net Zero and Energy portfolio is being reduced by £23.3 million. This includes £13.9 million of capital savings within Energy Industries, Nature Restoration and Zero Waste where capital budget has been released following a review of deliverability of projects in the year.

22. Energy Industries have a related resource underspend in delivering the capital projects, while other resource funding is reduced as part of the emergency spending controls. Additional income of £5 million for Scottish Water loan interest is also reflected.

23. Within the Transport portfolio there is a £40.9 million funding reduction. The largest component of this relates to an additional £20 million of financial transaction income from the Low Carbon Transport Scheme.

24. £13.6 million of further capital savings are also included following slippage across several projects in the Active Travel, Low Carbon and Other Transport, alongside a £9.1 million reduction in Vessel Services and a £5 million reduction in Support for Bus Services.

25. The savings are partially offset by an additional £6 million of resource budget for Rail Services to mitigate the impact of a reduced rail timetable and £1 million for Air Services to fund the continuation of the Wick to Aberdeen Air service.

26. The Rural Affairs, Land Reform and Islands portfolio is being reduced by £1.1 million. Funding reductions relate to £17 million of savings in demand-led agriculture programmes and reduced income forecasts, as well as the remaining savings outlined in the Fiscal Statement in September.

27. These savings are offset by £15 million of additional funding, including £12.4 million for the Marine Directorate to enable distribution to Local Government of Crown Estates Net revenues relating to income generated within 12 nautical miles of the coast.

28. The Deputy First Minister, Economy and Gaelic portfolio has been reduced by £122.5 million. The largest element of relates to the recovery of additional income of £106.4 million from the European Structural Funds programmes.

29. There is also a £22.3 million reduction in Enterprise, Trade and Investment of which £21.8 million relates to capital budget in Offshore Wind Capital as projects have slipped. A further £8.9 million of savings are realised in Digital through the Connectivity Programme.

30. These savings are offset by additional amounts provided to Ferguson Marine (£8 million) and funding being provided for the Scottish Child Abuse Inquiry (£6.7 million).

*Includes £350 million of centrally held funding not related to wider portfolio commitments as set out in paragraph 13

Technical Adjustments

31. The Spring Budget Revision records net negative technical changes of £83.2 million.

32. The largest changes are within the Education and Skills portfolio which sees a £414.2 million reduction. This movement is driven by a £516.7 million reduction in the Student Loan RAB charge. This is offset by £100.9 million of additional AME budget cover in respect of student loans capital and capitalised interest requirement. There is no impact on the Scottish Government’s discretionary spending as a result of these adjustments.

33. There are also significant technical movements (including IFRS 16 adjustments) within the Health and Social Care portfolio amounting to £238.6 million. This amount includes £112.4 million of AME cover for the Scottish Infected Blood Support Scheme, £86.9 million for Health PFI changes and £25.3 million for ring-fenced depreciation amounts.

34. There is an increase to the AME provision for future NHS and Teachers pension costs of £105.4 million. This arises from increased opening pension liability and reduced current service costs.

35. Included within the technical adjustments are a number of changes which relate to International Financial Reporting Standard 16 ('IFRS16’) adjustments. IFRS16 has resulted in a significant alteration to the accounting treatment for leases, with budgets now adjusted to align with that treatment. We are currently in the final year of a three-year transition period with budget initially applied at Budget Bill to reflect the changes but subject to in-year amendment.

36. These changes provide additional capital and non-cash budget cover to be applied for existing and new assets acquired under lease arrangements, to allow for their reclassification and subsequent depreciation. There are also changes to the resource budget position to adjust for the elements of the rental costs that are now capitalised.

37. Ring-fenced budget cover has been provided by HM Treasury to support this change in accounting treatment however some of the IFRS16 changes will impact our discretionary funding. This is due to changes in forecasts provided against original plans for IFRS16 leasing requirements with full additional budget cover not provided to cover these forecast changes.

Whitehall transfers

38. There are a number of specific Whitehall transfers and allocations from HM Treasury recognised at the Spring Budget Revision. The net negative impact on the Scottish Budget overall is £25.1 million.

39. The negative movement is driven by a reduction of £37.74 million in City Deals funding from HM Treasury which is held in the Deputy First Minister, Economy and Gaelic portfolio. There is a £43.74 million reduction which will be reprofiled into future years with no loss of funding for the overall City Deal programme. Separately £6 million of project specific City Deal transfers offsets the negative amount.

40. Within the Deputy First Minister, Economy and Gaelic portfolio the City Deals negative is reduced by £2.7 million of capital transfer for the R100 programme

41. There are four Whitehall transfers impacting the Health and Social Care portfolio. The largest of these is a reduction of £5.7 million for a return of Covid-19 funding. The reduction is offset by positive Whitehall transfers of £3.2 million from DHSC for Branded Medicine Pricing and Access and £0.9 million for the Infected Blood Support Scheme.

42. £8.2 million is being provided to the Social Justice portfolio. This includes £4.9 million for Ukrainian Thank you payments and £2.9 million for the Ukrainian Refugee Home Fund.

43. Scottish Courts and Tribunals Service are receiving a transfer of £1.65 million relating to the devolution of Personal Independence Payment appeals from HM Courts and Tribunals Service.

44. Finance and Local Government have received £1.2 million for Regional Connectivity, Net Zero and Energy have received £800k for Project Will, Transport have a negative Whitehall of £670k for a return of funding for A75 Union Connectivity Funding alongside smaller transfers for Justice and Food Standards Scotland.

Internal Transfers

45. 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 Learning in Education and Skills to Local Government within the Finance & Local Government portfolio to support teachers and learning support staff costs (£145.5 million);
• transfer from Learning and Children and Families in Education and Skills to Local Government within the Finance & Local Government portfolio to support Free School Meals (£70 million)
• transfer from Health & Social Care to Scottish Funding Council in the Education & Skills portfolio to fund additional medical school student places (£18.1 million);
• transfer from Learning in Education and Skills to Local Government within the Finance & Local Government portfolio to support Teachers’ Pay Deal (£10 million);
• transfer from Health & Social Care to the Scottish Funding Council in Education & Skills to fund salary costs of Clinical Academics and Senior Academic GPs (£8.9 million);
• transfer from Rural Affairs, Land Reform and Islands to Natural Resources & Peatland in the Net Zero & Energy portfolio to fund Peatland Restoration Work (£7.9 million); and
• transfer from Health & Social Care to the Scottish Funding Council in Education & Skills to fund teaching grant for nursing and midwifery students (£7.0 million).

Format of Supporting Document

46. 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.

47. The summary tables on pages 14 to 24 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) to (e) 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.

48. 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.

49. 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

50. 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.