Thank you, convener. The spring budget revision provides the final opportunity to formally amend the Scottish budget for 2015-16. This year’s spring budget revision deals with four types of amendment to the budget. First, there are a few funding changes. Secondly, there are a number of technical adjustments, which have no impact on spending power. Thirdly, there are a small number of Whitehall transfers. Finally, there are some budget-neutral transfers of resources between portfolio budgets, including a modest budget redirection to ensure that we maximise our available budget.
The net impact of all those changes is a decrease of £2 million in the approved budget, from £37,409.6 million to £37,407.6 million. Table 1.1 on page 5 of the supporting document shows the approved budgets following the autumn budget revision and the changes sought in the spring budget revision. The supporting document to the spring budget revision and the brief guide that my officials have prepared provide the background to the net changes.
The first set of changes comprises mainly two deployments of Barnett consequentials—to health, as per the Scottish Government’s commitment to pass on any Barnett consequentials received in respect of changes to the Department of Health’s budget, and to local government following the widespread damage and flooding caused by the storms in December and January. In total, those changes increase the budget by £42.2 million.
The second set of changes comprises a number of technical adjustments to the budget. They are mainly non-cash and therefore budget neutral as they cannot be redeployed to support discretionary spend elsewhere. They have a net negative impact of £115.3 million on the overall aggregate position. It is necessary to reflect those adjustments to ensure that the budget is consistent with the accounting requirements and with the final outturn that will be reported in our annual accounts.
The third change is a reduction of £138.6 million that is required for the NHS and teachers pension schemes. That reflects updated estimates from Her Majesty’s Treasury based on the most recently available factors and scheme information. Again, the change is a technical adjustment to the budget and the required reduction in funding cannot be used to support discretionary spending elsewhere.
The Scottish budget aligns with the accounting requirements under the Government’s financial reporting manual. Accordingly, budget provision is included within the Scottish budget for the financial year to reflect the recognition of relevant health and transport assets in revenue finance infrastructure schemes, in accordance with the accounting requirements. The adjustment to the budget at the spring budget revision is £110.1 million. Other technical adjustments include an increased annually managed expenditure budget to cover provisions; impairments and fair value adjustments; and other non-cash adjustments to the portfolio budgets.
With regard to Whitehall transfers and allocations from the Treasury, there is a net positive impact on the budget of £70.7 million. That includes additional funding of £60 million to meet the costs arising in relation to police and fire pension schemes as a result of the final judgment in the case of Milne v the Government Actuary’s Department.
The final part of the budget revision concerns the transfer of funds within and between portfolios to better align the budgets with profiled spend. As part of the revision process, there are a number of transfers between portfolios that have no impact on overall spending power. The main transfers between portfolios are noted in the SBR supporting document and the guide to the SBR. In line with previous years, there are a number of internal portfolio transfers that have no effect on portfolio totals but ensure that internal budgets are monitored and managed effectively.
As I have mentioned previously, the committee will wish to note that, as part of our robust budget management process and in line with good practice, we have taken the opportunity in the spring budget revision to deploy emerging underspends to ensure that we maximise public expenditure in 2015-16, in particular to support capital investment where possible.
The spring budget revision also reflects the proposed transfer of budget from resource to capital in respect of the Scottish budget, noting that the Scottish budget records capital that scores in the Scottish Government’s consolidated accounts or the accounts of our directly funded bodies. In the context of the Treasury budget, the planned resource to capital transfer is £15.3 million. That switching is managed within the total departmental expenditure limits that are available to the Scottish Government and takes into account the latest profile of the Government’s overall capital programme.
As we approach the financial year end, we will continue to monitor forecast outturn against budget in line with our normal practice and, wherever possible, we will seek to utilise any emerging underspends to ensure that we make optimum use of the resources that are available in 2015-16, and to proactively manage the flexibility that is provided under the budget exchange mechanism that has been agreed between the Treasury and the devolved Administrations.
I confirm that, in line with previous years, I intend to make a statement to Parliament on the provisional outturn in respect of both our Scottish Parliament budget and the HM Treasury budget. The document “A Brief Guide to the 2014-15 Spring Budget Revision”, which has been prepared by my officials, sets out the background to and details of the main changes that are proposed. I hope that members have found it helpful.