Budget (Scotland) Act 2013 Amendment Order 2013 [Draft]
The second item on our agenda is to take evidence on the Scottish Government’s draft budget—[Interruption.] Sorry, I am having déjà vu. We nearly had another two-hour question session there.
The third item on today’s agenda is to consider the draft Scottish statutory instrument that provides for the 2013-14 autumn budget revision. Before we come to the motion on approval, which is under agenda item 4, we will have an evidence session on the order. I invite the cabinet secretary to make an opening statement explaining the order. I remind him not to move the motion at this point.
This is the first of two planned and routine revisions to the budget that occur in-year. The second and final revision will be the spring budget revision, the order for which will be laid in the early part of 2014. As in previous years, a pattern of authorising revisions to the budget in the autumn and spring is required, as the detail of our spending plans inevitably changes from when the Budget (Scotland) Act 2013 was approved.
The changes that are proposed in the autumn budget revision result in a net increase of £0.8 million in the approved budget, from £34,698.1 million to £34,698.9 million. The material changes to budgeted expenditure in the Budget (Scotland) Act 2013 reflect the changes that were announced at stage 3 of the Budget (Scotland) (No 2) Bill on 6 February, the allocation of financial transaction consequentials flowing from the United Kingdom Government’s budget in March and the deployment of available budget exchange headroom, as outlined in my provisional outturn statement on 19 June.
In addition, the autumn budget revision reflects in-year ministerial decisions, including a package of measures to assist fishermen, farmers, harbour repairs and the food and drink sector as well as capital funding for the futures information technology system, which is essential to ensure the effective delivery of the new European Union-funded common agricultural policy programme.
It is normal practice for the autumn budget revision to reflect a technical budget adjustment arising from the updated assessment of the national health service and teachers pension schemes. The latest actuarial assessments—based on the most recent HM Treasury discount rates, increases to employee pension contributions and a reduction in interest on scheme liabilities—record a net overall reduction in annually managed expenditure of £160 million.
A few significant transfers between portfolios 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 revisions. The significant transfers of that nature are the transfer of £57.6 million from health and wellbeing to further education for nursing and midwifery training, and £30.3 million from justice to health and wellbeing in respect of drug treatment and prevention.
As announced in my draft budget 2014-15 statement on 11 September, I have taken action at the autumn budget revision to deploy additional funding of £20 million, through a budget transfer, to enable local authorities to mitigate the worst effects of the UK Government’s bedroom tax.
Members might wish to be reminded that, for the purposes of the Scottish budget, only spending that scores as capital in the annual accounts of the Scottish Government or of direct-funded bodies is shown as capital, which 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. No further new announcements or initiatives appear in the figures that the committee is scrutinising. The revisions reflect decisions or announcements that have already been made.
The brief guide to the autumn budget revision that my officials have prepared sets out the background to and details of the main changes that are proposed. I hope that colleagues have found the guide helpful.
As I have mentioned, the 2013-14 spring budget revision will be laid in early 2014. In line with previous years, it will be informed by on-going in-year budget monitoring. That will include the recognition of the Scottish Government’s share of accumulated uncommitted reserves of the former eight police forces. As outlined in my answer to a parliamentary question in May, the recognition of our share of those reserves, which are currently estimated at £27.8 million, forms part of the strategy to address the £54.8 million fiscal resource DEL budget cut that was applied by the UK Government in its March budget.
I will be happy to answer any questions on the autumn budget revision.
Thank you, cabinet secretary. I welcome the Presiding Officer, Tricia Marwick, who has been out and about all day in Arbroath as part of Parliament day and is now in the public gallery. Welcome, Tricia.
Cabinet secretary, you touched on the transfer of £57.6 million from health and wellbeing to further education and the transfer of £30.3 million from justice to health. In previous years, such transfers have been made through the autumn budget revision. Why were they not just incorporated into the education and lifelong learning budget and the health budget from the outset?
The answer is that they are historical transfers that get made every year, in order to enable us to make a like-for-like comparison of the resources that are available in individual portfolios over time. If we were to change that practice, we would essentially be making it more difficult to see such like-for-like comparisons between portfolio budgets, which I appreciate is part of the scrutiny that interests many people. It is for that simple reason alone.
It seems a bit cumbersome to leave it there for eternity, so to speak, rather than to make the adjustment once and for all.
I would be happy to consider any issues that the committee wants to raise about that.
Scottish Water’s borrowing is reduced by £35 million. The guide to the autumn budget revision states that that does not impact on its investment programme, but it is not clear whether that means that those moneys must be found in future years or whether Scottish Water has made efficiencies that have reduced its borrowing requirement.
Essentially, the question that we continually pose to Scottish Water during the five-year period of the determination to which it operates is whether the delivery of the investment programme and the performance of the organisation require the resources that were identified at the outset of the determination period. The current determination period extends from 2010 to 2015. Based on the determination in 2010, we are asking the organisation whether, given all that has happened in the economic marketplace in the intervening years, all the resources and borrowing facilities that we are making available are required to support the investment programme. On this occasion, Scottish Water has been able to come back to us and say that it is able to sustain and deliver its investment programme as planned without the use of that £35 million, so it will not be required. That will be a product of the fact that particular projects are coming in cheaper because of competition within the marketplace, the fact that inflation is lower and other factors that have applied for a longer period than would have been envisaged when most of the thinking around the 2010 determination was undertaken in the two years before then.
Thank you. There are transfers from the education and lifelong learning budget to local government of about £7 million—£4 million to deliver the one-plus-two languages policy and £3 million for family support. Is that money ring fenced for the stated purposes?
No.
On the budget exchange mechanism, which was touched on previously, has the Scottish Government built any planned carry-forward from 2013-14 into the 2014-15 draft budget, given that £158 million will be carried forward from 2012-13, which is already built into the 2013-14 budget plans?
Yes, we will be utilising budget exchange mechanism facilities to carry forward resources from 2013-14 into 2014-15. I am confident that the resources will be available to support a transfer.
This is the last question from me before I open the discussion to the rest of the committee. It is on another subject that was touched on previously. On resource-to-capital transfers, are the planned transfers of £243 million in 2013-14, as presented in the 2014-15 draft budget, on track to be delivered within the current financial year? If so, what capital projects will they fund?
It is difficult for me to give a linkage, so to speak, that indicates which particular projects are funded by those transfers—that would be a contrived exercise. We are discussing with relevant areas of the public service what resources require to be transferred to fulfil their capital plans—essentially, creating the funds to support the capital programme. It is not simply a case of saying that a particular project requires a resource-to-capital transfer to make it happen. It would be difficult for me to give you a precise answer in that respect.
Our plans remain to transfer £243 million during this financial year, but I will be happy—as I have been before—to give the committee an outturn position on what has transpired as a consequence of the actions that we have taken.
My questions all relate to page 15 of the autumn budget revision document. I picked enterprise, energy and tourism because every entry appears to differ markedly from what is in the draft budget for 2014-15 at page 47—I do not know whether you have that to hand.
Sorry—page 40-what?
It is page 47 of the draft budget.
And that relates to page 15—
It relates to page 15 of the autumn budget revision document. In the bottom table on that page, we have budget lines for energy, enterprise bodies, innovation and industries—we can forget about Scottish Development International, because that is nil—and tourism. I picked that page because every line seemed to differ from what is in the draft budget itself. I seek clarification for each one.
The line for energy is £68.8 million, but the budget for 2013-14 in the draft budget document is £115.9 million. I seek an explanation of that difference.
Just give me that point again. It is £68.8 million—
Page 15 of the ABR says that the budget line is £68.8 million. Page 47 of the draft budget says that the 2013-14 budget is £115.9 million. I seek an explanation of the difference between the £115.9 million and the £68.8 million.
I will just get my sums going. The transfer in that line relates to the planned profile of the renewable energy investment fund. I think that I have been clear with Parliament that we have had slower uptake with emerging projects that would be able to command support under the renewable energy banner. Therefore, I have used resources to meet other priorities and, as part of my commitment to deliver the renewable energy infrastructure fund over a longer period, that resource will be replaced in later years.
I have heard those comments before. You explicitly refer to £15 million of reprofiling in the autumn budget revision document. That would take you from £115 million down to £100 million. I am just trying to work out how we get from £100 million down to £68.8 million. I simply cannot see the workings in the document.
Some of what is coming out is to do with the resources that we are making available to deal with the bedroom tax because of underspends in relation to the energy company obligation programme.
I think that that is the bulk of the detail that I can give the committee just now.
16:15
I am grateful for that and wonder whether that can be followed up. Even if you subtract the entire £22.8 million that is the proposed change to the enterprise, energy and tourism budget from the £115 million for energy, that still leaves quite a bit more than £68.8 million, which is what we seem to end up with. I cannot get the figures to balance. If that cannot be done here and now, that is fair enough, but I seek assurance that it can be done.
We can give the committee a more detailed explanation of that.
If it would be helpful, we can give the committee a table that shows the movement from the draft budget through the budget bill and on to the autumn budget revision.
That would be helpful. I have the same question in relation to the figure for enterprise bodies. It is £331.1 million on page 47 of the draft budget document, but it is £295.8 million on page 15 of the ABR. Is there an obvious explanation for that difference?
I am just looking at the interaction, some of which will be to do with the strategic forum savings, which must be netted off the total figure. That savings level is applied across all the enterprise bodies—VisitScotland, Scottish Enterprise and Highlands and Islands Enterprise. Those savings will have to come out of those bodies to make the numbers work and will contribute towards the reduction that is required.
The other change is that the figure in the draft budget is based on the resource budget, whereas the figure in the budget bill for non-departmental public bodies is based on grant in aid—it is the cash grant in aid that goes to the NDPBs. So, for Scottish Enterprise and HIE, it will be the cash that is shown in the budget bill rather than the resource budget for the bodies that is in the draft budget.
I referred earlier to the way in which some of the figures are presented, given the relevance to direct-funded bodies. That will have an effect on the read-across from the numbers on page 15 of the autumn budget revision to the numbers on page 47 of the budget document. We can give a comprehensive picture of how those are related. The strategic forum savings are a net figure that must come out of the enterprise bodies and tourism line, supported by other budget lines.
I have the same question on the tourism and the innovation and industries budget lines. However, rather than dwell on the matter, I think that it will be helpful if you can provide a similar breakdown for all four lines—energy, enterprise bodies, tourism and innovation.
It is important to note that there is a step between the draft budget and the budget bill, with a reconciliation in the budget bill and then a move on to the autumn budget revision. We can certainly provide that trail.
Thank you.
I would like some clarity on housing. The picture becomes confusing because of all the extra tranches in housing, which we are very grateful for. Am I correct in saying that this document embodies the stage 3 figures plus the consequentials—the financial transactions that must be paid back? There was an extra housing announcement in the summer. Is that covered here, or is that for next year?
This document covers the Barnett consequentials that were announced on 2 May, the budget bill changes that I announced in February and the resources from the budget exchange mechanism that are flowing into that line.
Are the housing resources that were announced in July for next year, or will they appear in the spring budget revision?
They are split over two years. There is £290.8 million going to the housing sector, some of which is for 2013-14 and 2014-15. There will be other announcements arising out of the financial transaction decisions of the UK Government about what will go into 2015-16.
We have details about significant inter-portfolio transfers, one of which involves over £5 million. My first question is about the £20 million for local government discretionary housing payments that came from your portfolio and from the infrastructure, investment and cities portfolio. Has there been any calculation of how much that has freed up for local government? It was potentially up to £20 million, but given that we know that not every local authority topped up to the maximum, how much is likely to be freed up for local government to dispose of elsewhere?
Certainly, the resources that we are making available will provide the facility for up to £20 million to be taken forward by local authorities. Obviously, we are about halfway through the financial year, so we will monitor the use of those resources, and the further monitoring will be published in due course.
Will we be able to see that down the line?
Yes.
There is also the £5.9 million transfer from the culture and external affairs portfolio to the education and lifelong learning portfolio to support a number of initiatives for young people. I wonder what that is all about. Are the initiatives related to culture and external affairs per se, or are they something else entirely?
A number of changes are for part of the young Scot fund that the Government set out in the programme for Government in 2011. They look at topics such as the young innovators challenge and the Commonwealth games youth skills legacy programmes, and they are designed to support a range of different ventures in the field of employability and skills.
You mentioned earlier the issue of what is capital and what is not, but I was just a bit confused. Page 58 of the ABR document has a table entitled “Schedule 3.4 Motorways and Trunk Roads”, which shows under the “Capital” column an adjustment of £3 million against an increased budget for network road strengthening and, under the “Operating” column, an adjustment of £7 million for an increased budget for network bridge strengthening. Why are the sums listed in different columns?
It can literally be about the nature of the repair that is being undertaken and how far they have to dig down, which can determine whether it is a resource or a capital cost. I suspect that I will fail to get my elementary road engineering qualification with these remarks, but a limited repair to the road surface will be treated as a resource cost, whereas digging down to the foundations and rebasing the road will be considered a capital cost. The sums to which you referred are, in essence, enhancements of the relevant budgets to enable the work to be undertaken.
So there is a set rule or whatever.
Oh, yes! There is a set rule.
Okay. That is fine.
There are many set rules.
I am sure that there are. That is great. Thanks.
That appears to have exhausted all the questions, you will be delighted to hear.
Agenda item 4 is on the motion to recommend approval of the order.
Motion moved,
That the Finance Committee recommends that the Budget (Scotland) Act 2013 Amendment Order 2013 [draft] be approved.—[John Swinney.]
Motion agreed to.
The committee will publish a short report to the Parliament setting out our decision on the order.
As that was the last item on the agenda, I thank everyone who came along today: parliamentary staff, committee members, the cabinet secretary and, indeed, members of the public, who have sat through what has been—certainly, I would imagine, for the cabinet secretary—a fairly gruelling session this afternoon.
We have enjoyed our visit to Arbroath. It has been a lovely sunny day for those of us who were out at lunchtime enjoying the sunshine, visiting the harbour and so on. It has been a really great day. I thank the people of Arbroath for having us.
Meeting closed at 16:27.Previous
Draft Budget Scrutiny 2014-15