Thank you, convener—I will be brief.
The report that I bring to the committee today is the fourth in a series of reports examining how the Scottish Government is implementing the new powers arising from the Scotland Act 2012 and the Scotland Act 2016. My report assesses progress up to the end of January and provides an update since I last reported in March 2017.
As the committee knows, the 2012 and 2016 acts devolved a range of responsibilities for taxes, borrowing and social security. Implementing those powers is a huge and complex programme of work. About 40 per cent of the Scottish Government’s planned spending in 2018-19 is expected to come from Scottish taxation and borrowing; that will increase to about 50 per cent by 2020. As a result, managing Scotland’s public finances is fundamentally changing. The Scottish budget is becoming increasingly complex, with greater uncertainty and volatility compared with when the budget was relatively fixed through the block grant from the UK Government. How the Scottish economy performs relative to the UK economy will have a greater influence on the Scottish Government’s choices over tax and spending than ever before.
Implementing and managing the new powers alongside the Scottish Government’s current responsibilities and responding to the UK’s withdrawal from the European Union has significant staffing implications. Over the past year, the Government has been modelling its workforce arrangements and refining its processes for collecting workforce information to help to inform its recruitment plans. That starts the process of workforce planning at all levels of the organisation, but there is lots still to do. It will be difficult for the Government to recruit the staff numbers and skills that are needed to deliver the powers in time.
I am pleased to report that the Government’s social security programme has made good early progress. However, a significant amount of work is required this year if planned timescales are to be met. That includes launching a new agency—social security Scotland—to deliver the carers allowance supplement in summer 2018, and putting in place the foundations for the IT infrastructure that is required to deliver the devolved benefits. That will require effective working with other organisations, such as the Department for Work and Pensions.
The programme is not without risk, and I highlight a number of the risks in my report, along with areas to prioritise. Ensuring that enough time is built into plans for assurance activities, procurement, recruitment and succession planning will be key to managing those risks.
Finally, the cost of implementing the new powers will be significant. The Government estimates that the social security powers alone will cost around £308 million to implement. By 31 March this year, it had drawn down the full £200 million UK Government contribution towards the cost of the new powers, with the excess to be funded from the wider Scottish budget.
There is a need for greater transparency and a better understanding of the overall costs of implementing the new powers to support financial planning. Having a clear picture of how much it is costing to implement the powers of the 2012 and 2016 acts and how that is being managed will help the Parliament’s scrutiny and decision making in the years ahead. My report also highlights the need for the Scottish Government to finalise and embed the governance and organisational arrangements for the new Scottish exchequer to oversee the continued implementation of the powers of the 2012 and 2016 acts and the management of Scotland’s public finances.
As always, we will do our best to answer your questions.