Budget (Scotland) Act 2015 Amendment Regulations 2015 [Draft]
Our next item of business is to take evidence from the Cabinet Secretary for Finance, Constitution and Economy on the draft Budget (Scotland) Act 2015 Amendment Regulations 2015. Mr Swinney is joined by Scott Mackay of the Scottish Government. I welcome our witnesses to the meeting and invite the Deputy First Minister to make an opening statement.
This is the first of two planned, routine in-year budget revisions. The second and final revision will be the spring budget revision, which will be laid in January 2016. As in previous years, a pattern of authorising revisions to the budget in autumn and spring is required as the detail of our spending plans inevitably changes from when the budget bill is approved.
The changes proposed in the autumn budget revision result in a net increase in the approved budget of £87.5 million from £37.3221 billion to £37.4096 billion.
The material adjustments to the departmental expenditure limit budget reflect the changes announced to Parliament at stage 3 of the 2015-16 budget bill on 4 February. In addition, the autumn budget revision reflects Whitehall transfers and Her Majesty’s Treasury allocations in respect of energy efficiency measures as part of the green deal, a payment from London interbank offered rate—LIBOR—fines to Scotland’s Charity Air Ambulance, savings in costs for the devolved taxes, and a payment related to the costs of converting civil partnerships to marriages.
There are a few significant transfers between portfolios that occur on an annual basis, primarily between health and education and between justice and health. Those budgets are initially allocated to the portfolio where the policy lies and then transferred to the portfolio where the spending occurs at the in-year budget revision. The significant transfers of this nature are the transfer of £54 million from health and wellbeing to further education for nursery and midwifery training and £30.4 million from justice to health and wellbeing in respect of drug treatment and prevention.
Members may wish to be reminded that, for the purposes of the Scottish budget, only spending that scores as capital in the Scottish Government’s or direct funded bodies’ annual accounts is shown as capital. That means that capital grants are shown as operating in the document. The full capital picture is shown in table 1.7 of the supporting document.
There are no further new announcements or initiatives appearing in the figures that the committee is scrutinising today as the revisions reflect decisions or announcements that have already been made.
The “Brief Guide to the Autumn Budget Revision”, prepared by my officials, sets out the background to and details of the main changes proposed. I hope that colleagues have found the guide helpful. As I mentioned, the 2015-16 spring budget revision will be laid in January 2015; that is a little earlier than in previous years in order to complete the process before the Parliament is dissolved in March. In line with past years, that budget revision will be informed by on-going in-year budget monitoring.
I am happy to answer any questions from the committee.
Thank you for that, cabinet secretary. I will ask some opening questions, to be followed by questions from my colleagues.
You touched on the transfer from health and wellbeing to further education and lifelong learning for nursery and midwifery training. That transfer has been made in the autumn budget revision every year since 2008-09. Given that it seems to be a recurring transfer, why has it not been incorporated into the draft budget plans at the outset of the yearly budget process?
I covered this to some extent in my opening remarks, convener, but the principle is that the money is allocated to the originating policy area, and then the transfer is made for a delivery purpose at a later stage. That is the rationale. However, you are correct to say that it has happened every year since I have been finance secretary. I am happy to look at whether there is a better way to do that in future.
Given that you know that the transfer has to be made, from a budgetary point of view it would seem more sensible and tidier to deal with it initially rather than putting it in the autumn budget revision every year. Notwithstanding what you have said, the current arrangement does not seem to make any practical sense.
As you have pointed out, the funding changes in the autumn budget revision arise from a combination of Barnett consequentials and what the Scottish Government describes as an
“internal robust monitoring process ... to ensure that we maximise the budget available in 2015-16 through some reprioritisation of spending.”
It is not made clear in the accompanying document what that method means in practical terms. Why is the split between the Barnett consequentials and reprioritisation of spending not specified?
Essentially, we specify the new moneys coming into the budget settlement and then any other internal changes that we are making. It would be difficult for us to categorise what is uniquely funded by Barnett consequentials and what is uniquely funded through reprioritised expenditure.
The details listed under each of the budget headings convey exactly what changes have been made. That is the more important question, given that we have specified the overall impact on the financial envelope that is available to us as a consequence of the new money received.
11:30
Three of the changes were not mentioned in the stage 3 debate on the 2015-16 budget bill: the Scottish independent living fund of £16.5 million, the release of funding for justice and the Inverness justice centre. Why was that the case?
That arises from funding changes that have emerged from the UK Government: we are simply applying those changes to make sure that the resources can be deployed through the health, wellbeing and sport portfolio.
Resource to capital transfer has been an on-going issue for the Finance Committee for some years, and it has been raised in relation to previous autumn budget revisions. The Scottish Government has said:
“We propose it is most appropriate to report on these aspects as part of the in-year revisions and the outturn report”.
The draft budget included an intention on the part of the Scottish Government to transfer £58 million from resource to capital, but that was not reflected in the resource to capital numbers. Are the planned transfers on track to be delivered in 2015-16, and what capital projects will they fund?
When we construct the capital programme, we use a number of different resource streams: capital DEL, some borrowing facilities from 2015-16 onwards, proceeds of asset sales, and resource to capital transfers. A mix of factors come together to create the capital pot that we then allocate.
Capital projects are not linked to the source of the money—for example, resource to capital transfers. We do those exercises quite separately to create a total capital pot that is then allocated. It would be impossible to say that because of a resource to capital transfer we are funding a particular project. That would be a contrived analysis.
We will be able to update the committee in June about the extent to which that resource to capital transfer has taken place. We will look at the pattern of capital projects, how those capital projects are performing, whether the money is required this financial year, and a variety of other factors.
So you look to optimise the capital resource rather than see what can be taken from the resource budget to allocate to specific projects to enable them to happen.
In the formulation of our capital plans, we have assumed a resource to capital transfer of £58 million. As we go through the year, we will be determining through our constant budget monitoring the extent to which that transfer is required. More may be required, depending on the circumstances that prevail. We are best to report on that once the financial year is concluded.
There is a transfer from police central government to the Scottish Police Authority of £57.6 million operating and £10 million capital expenditure. All of the capital element of the transfer appears to have gone into operating expenditure. It is not clear how that fits in with the convention of not switching money from capital to operating spend.
It is to do with the point that I made in my opening statement about the fact that, for the purposes of the Scottish budget, only spending that scores as capital in the annual accounts of the Scottish Government or directly funded bodies is shown as capital.
Therefore, because of the Scottish Police Authority’s status as a non-departmental public body, the money shows as resource but remains as capital. The currency does not change; it is just that, in the presentation of the information for the Scottish budget process, only the capital of the Scottish Government or directly funded bodies is shown as capital.
Page 48 shows a reclassification of £7.5 million from direct capital to indirect capital in the housing and regeneration budget. What does that mean?
That is a revenue-neutral proposition that relates to the way in which the budget is shown in relation to the expenditure that we undertake versus expenditure that external bodies undertake. It is similar to the issue that you just raised with me about the Scottish Police Authority budget.
Thank you for that clarification.
I apologise to you, convener, and to the cabinet secretary because I will have to leave straight after my question.
I agree with the convener’s comments about the transfer from health to education since 2008-09 not being reflected in the budget. It would certainly be helpful and aid transparency if those figures could be reallocated, and I am pleased that you are considering that, cabinet secretary.
The convener has done a comprehensive job of asking questions, so I will home in on the Scottish independent living fund. My understanding, which stands to be corrected, is that the fund was capped. It was devolved last year, so I am curious to know whether the £16.5 million is simply the amount that was devolved or whether there is any addition. The Scottish Government has been consulting on the fund and we are waiting to see what plans are in place to disburse it and how it will operate. Therefore, I am keen to interrogate the figure a little.
It is the agreed transfer from Westminster.
Are you aware of the plans to disburse it?
My colleagues will set out the approach on that. Indeed, I think that some information already be in the public domain. However, I would need to check that because I am not absolutely sure about it.
That would be helpful.
Obviously, the transfer enables that spend to be undertaken so, to respond to the points that Jackie Baillie raises, communication of information on the fund is certainly possible, given the fact that the Parliament will, I hope, authorise the transfer.
Cabinet secretary, the last line of the top table on page 37 of the budget revision document contains the heading “Release of funding for reprioritisation”, under which £1.9 million of capital from the Scottish Prison Service budget is reprioritised. Is there any explanation for that? Is it savings in a number of projects or one? Is it due to cancellation? Is there any detail behind that number?
It will be a sum within the Scottish Prison Service capital programme. We operate a rigorous process of challenge, particularly about capital budgets, because the last thing that we want to find as the financial year goes through is that we have capital budgets sitting in places where they cannot be used. Therefore, organisations are challenged about resources that they require. In the later stages, the prisons capital expenditure is looking at £40.8 million. I would think that that £1.9 million relates to elements of the programme that are not required and, because there is no need to allocate that expenditure, we can use it for other projects in the Government.
I refer to page 33 of the budget revision document. You might not be able to give me an answer now—you may need to get back to me—but I ask you to look at the bottom table on that page, where the “Legal Aid Administration” budget is given as £11.6 million. I compared that with the draft budget, where it is £10.6 million for the same budget line. I am a bit nervous about admin costs going up, in high percentage terms if not in giant cash terms. Is there an obvious explanation that you can offer, either now or in writing later?
We had better give the committee a note about that. There may well be issues there: there is no process point that will have changed, but there may well be a classification issue that affects the matter that means that the number is presented differently in the document before us compared with the budget document that Mr Brown has. There could be an issue of that nature, which has had that effect.
There could be some non-cash issues, but there might also be issues around the implementation of the Children’s Hearings (Scotland) Act 2011 and the work on supported activity in relation to advice standards. Some other minor issues may be associated with that. I suspect that it may be to do with the “Miscellaneous minor transfers” that are listed in the top table on page 33. We will check that.
I am grateful—thank you.
We appear to have concluded all our questions on the autumn budget revision.
We therefore move to item 4, which is the debate on motion S4M-14961. I ask the Deputy First Minister to move the motion.
Motion moved,
That the Finance Committee recommends that the Budget (Scotland) Act 2015 Amendment Regulations 2015 [draft] be approved.—[John Swinney.]
Motion agreed to.
Thank you for your appearance and for answering the committee’s questions, Deputy First Minister.
11:42 Meeting suspended.