Agenda item 2 is consideration of the Budget (Scotland) (No 4) Bill at stage 2. Members have a note by the clerk with their papers. For this item we are joined by the Cabinet Secretary for Finance, Constitution and Economy, who is accompanied by Terry Holmes of the Scottish Government’s finance directorate. I invite the cabinet secretary to make an opening statement.
Thank you, convener. I begin by welcoming the Finance Committee report on the 2015-16 draft budget. As I informed Parliament last week, I will respond in full in advance of the stage 3 debate.
This session of the Finance Committee focuses on the content of the bill itself, as approved in principle by the Scottish Parliament. As members of the committee are aware, there are a number of differences in the presentation of budget information between the draft budget and the budget bill.
To assist the committee, I will explain the main differences, with reference to table 1.3 on page 4 of the supporting document. Column A sets out the updated portfolio budgets for 2015-16 following the announcement by the First Minister of the new responsibilities on 21 November 2014. To ensure a transparent read-across from table 3.01 draft budget document published in October, table 1.2 of the supporting document provides a reconciliation between the portfolio budget published in the draft budget and the revised portfolios.
12:30Column I in table 1.3 sets out the draft budget as it is required to be restated for budget bill purposes. Columns B to G provide details of the adjustments, including the necessary statutory adjustments to meet the requirements of the parliamentary process.
There are two substantive changes to the spending plans outlined in the draft budget that I wish to take this opportunity to highlight.
First, the budget bill confirms the deployment of £127.4 million of health consequentials flowing from the UK autumn statement on 3 December 2014. That is in line with the Government’s commitment to pass on resource consequentials in full to the national health service in Scotland.
In addition, to ensure that budgets align with the latest available information, there is an adjustment of £345.3 million to the annually managed expenditure budget provision for the teachers and NHS pension schemes. That reduction to the draft budget 2015-16 number reflects the Treasury update to the discount rate applied for post-employment benefits announced in December 2014.
The other adjustments set out are the exclusion of £151.7 million non-departmental public body non-cash costs, which do not require parliamentary approval—these are mainly in relation to depreciation and impairments in our NDPB community; the exclusion of judicial salaries and Scottish Water loan repayments to the national loans fund and the Public Works Loan Board, which again do not require parliamentary approval; and the inclusion of police loan charges to be approved as part of the budget bill. There are technical accounting adjustments to the budget of £124.5 million reflecting differences in the way in which HM Treasury budgets for these items and how we are required to account for them under international financial reporting standards-based accounting rules that apply in respect of the Government financial reporting manual. I remind the committee that the budget conversion to an IFRS basis is spending power neutral.
There are adjustments to portfolio budgets to reflect the requirement that a number of direct funded and external bodies require separate parliamentary approval. Those include the National Records of Scotland, the Forestry Commission, Food Standards Scotland, the Scottish Court Service, the Office of the Scottish Charity Regulator, the Scottish Housing Regulator, Revenue Scotland and the teachers and NHS pensions schemes. There is the restatement of specific grants included in the overall 2015-16 local authority settlement that remain under the control of the appropriate cabinet secretary with policy responsibility. Full details of all grants that are treated in this way are included in the summary table on page 42.
I again make clear that those are essentially technical adjustments and do not change in any way the budget that has been so far scrutinised by this and other committees and approved in principle by Parliament.
I also remind members that for the purposes of the budget bill only spending that scores as capital in the Scottish Government or direct funded bodies’ annual accounts is shown as capital. That means that capital grants are shown as operating in the supporting document. The full capital picture is shown in table 1.4 on page 5.
As I made clear to Parliament last week, I remain committed to an open and constructive approach to the 2015-16 budget process and continue to seek consensus on a budget that will meet the needs of the people of Scotland. I look forward to discussing that with the committee.
Thank you very much for that comprehensive opening statement. I have one question to put to you about the Barnett consequentials. You received £211 million to the Scottish budget following the autumn statement and, as you have pointed out, the budget bill has allocated £127.4 million to health—the amount arising from increases proposed for health in England. Will you give us some information with regard to the rest of the consequentials?
In resource departmental expenditure limit for 2015-16, the Government received £200.8 million, £120 million of which has been allocated to health. Some £11 million has been allocated to match the business rate poundage south of the border, which I announced in my statement to Parliament on the local government financial settlement. We have conveyed £5 million of ring-fenced grant from the UK Government in relation to the Glasgow School of Art.
That leaves a resource DEL uncommitted number at this stage of £64.8 million. There was £26.3 million in capital DEL consequentials that came to the Government. A sum of £7.4 million has been allocated to health, and £15 million has been conveyed as part of the Glasgow city deal—a UK Government contribution, to which the Scottish Government contribution is additional—and that leaves uncommitted capital DEL of £3.9 million. There is £4 million of unallocated financial transactions into the bargain.
Just for the record, when are you going to decide on how those resources will be committed?
I am considering those issues in preparation for stage 3 of the budget and will conclude my discussions at that time.
Thank you for that clarification. Do members have any questions?
If the cabinet secretary is going to respond to our report in advance of stage 3, will that be this week or next week, or is he not sure at this stage?
I suspect that it will be at the start of next week.
I am trying to work out how much Scottish Water is projected to borrow in 2015-16. In the bill, paragraph 4 of schedule 3 refers to
“Section 42 of the Water Industry (Scotland) Act 2002 (Scottish Water)”,
and the amount next to that is £150 million. On page 132 of the draft budget, there is £80 million against the line “Voted Loans”, and on page 61 of the supporting document that you published alongside the bill, there seems to be capital for Scottish Water of £132 million. I am trying to work out the three different figures. Can you square the circle and explain how they match?
Whether I can explain how it all matches is a moot point. In my comments to the committee today, I said that Scottish Water loan repayments to the national loan fund and the Public Works Loan Board do not require parliamentary approval, so that is why some of the numbers look different. The simplest way to express it is that I expect the borrowing requirement of Scottish Water to be £80 million in 2015-16.
The £150 million is presumably some kind of maximum limit.
There will be two factors that influence it. There will be gross versus net, and there will be what requires parliamentary approval and what does not.
You anticipate £80 million, though. Is that your best estimate?
Yes.
My last point is that I would like you to explain the different figures in the draft budget versus the supporting document for the Queensferry crossing. Page 122 of the draft budget has a figure of £219 million for 2015-16 for the Queensferry crossing, but page 65 of the supporting document has a figure of £269 million for the Queensferry crossing in 2015-16. What is the explanation for the difference between those two figures?
The difference is the payment back to the Treasury of the pre-payment that we received on the Forth replacement crossing back in 2011-12, probably. We secured an agreement with the Treasury to enable us to wrap up expenditure on the Forth crossing when we did not have budget capacity to do so. I have a feeling that that was over two financial years, which would probably be 2011-12 and 2012-13, but it was on the basis that it would be repaid, which accounts for the difference. If it is £219 million in one document and £269 million in the other, that is right. I think that there were two instalments of £50 million—£100 million in total.
Thank you.
Most of my question has been answered; it was about the unallocated consequentials, which you gave a very full account of. You said that £64.8 million resource DEL was unallocated and £3.9 million capital DEL was unallocated. I take it that we could add to that some of the health consequentials that have not been allocated to a particular line. Can you tell us how much health capital and resource has not been allocated to a particular health line?
It is £22.5 million resource.
Is there any unallocated capital?
I am not aware that any capital announcements have been made.
That has concluded the committee’s questions. We now turn to formal proceedings on the budget bill. We have no amendments to deal with, but we are obliged to consider and agree to each section and schedule and the long title. We will take the sections in order, with schedules being taken immediately after the section that introduces them, and the long title last. Fortunately, standing orders allow us to put a single question when groups of sections and schedules are to be considered consecutively and, unless members disagree, that is what I will do.
Section 1 agreed to.
Schedule 1 agreed to.
Section 2 agreed to.
Schedule 2 agreed to.
Section 3 agreed to.
Schedule 3 agreed to.
Sections 4 to 11 agreed to.
Long title agreed to.
That ends stage 2 of the Budget (Scotland) (No 4) Bill. I thank the cabinet secretary for coming.
12:41 Meeting suspended.Previous
Further Fiscal Devolution