Budget (Scotland) (No 2) Bill: Stage 2
Good morning and welcome to the fourth meeting in 2013 of the Scottish Parliament’s Finance Committee. I remind all those present to turn off mobile phones, BlackBerrys, tablets and so on.
Agenda item 1 is consideration of the Budget (Scotland) (No 2) Bill at stage 2. Members have a note by the clerk. I welcome the Cabinet Secretary for Finance, Employment and Sustainable Growth, who is accompanied by Andrew Watson, Terry Holmes and Janet Egdell, all from the Scottish Government’s finance directorate. I invite the cabinet secretary to make an opening statement.
I begin by acknowledging the work of the Finance Committee during this year’s budget process. I have given careful consideration to the points and recommendations that are made in the committee’s report on the budget and I submitted my formal response to the committee on 21 January.
Today, we are focusing on the content of the Budget (Scotland) (No 2) Bill, as approved in principle by Parliament last week. As members will be 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 1.2, on page 3 of the supporting document. Column A sets out by portfolio the 2013-14 budget, as shown in table 2.01 of the draft budget document that was published last September. Column J in table 1.2 sets out the draft budget as it needs to be restated for the budget bill, and columns C to I provide details of the adjustments, including the necessary statutory adjustments to meet the requirements of the parliamentary process.
There are two substantive funding changes to the spending plans that are outlined in the draft budget. First, the budget reflects the impact of my statement to Parliament on 19 December 2012 regarding the deployment of £164.3 million of additional capital departmental expenditure limit in 2013-14. That is recorded at column H. In addition, as I informed Parliament during the stage 1 debate last week, the local government budget has been adjusted to include the transfer of £328 million to the Scottish Government as a result of the arrangements that surround the changes to council tax benefit. The transfer relates to the devolution of responsibility in the area to Scotland and does not increase the discretionary spending power that we have in 2013-14.
I point out that we are addressing some of the impacts of welfare reform in a number of interventions that we are making along with our local government partners, including funding of around £50 million to increase the Scottish welfare fund and to plug the funding gap that the United Kingdom Government has created through its handling of the abolition of council tax benefit.
I come to the other adjustments that are set out. There is the exclusion of £78.6 million of non-departmental public body non-cash costs, which do not require parliamentary approval. Those relate mainly to charges for depreciation and impairments and include bodies in our NDPB community such as the national institutions, Scottish Enterprise and Scottish Natural Heritage. The adjustments also exclude 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. There is the inclusion of police loan charges that are to be approved as part of the budget bill.
There are technical accounting adjustments to the budget of £92.2 million, reflecting differences in the way that Her Majesty’s Treasury budgets for those items and how we are required to account for them under international financial reporting standards-based accounting rules. IFRS-based accounting was introduced across central Government from 1 April 2009. I remind the committee that the 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, teachers’ and national health service pensions, the Food Standards Agency, the Scottish Court Service, the Office of the Scottish Charity Regulator and the Scottish Housing Regulator.
There is a restatement of the specific grants that are included in the overall 2013-14 local authority settlement and which remain under the control of the appropriate cabinet secretary with responsibility for those policies. Those are also excluded. For example, housing and hostel support grants remain the responsibility of the Deputy First Minister and Cabinet Secretary for Infrastructure, Investment and Cities. Full details of all the grants that are treated in this way are included in the summary table on page 74 of the supporting document. I again make clear that these are, in essence, technical adjustments and do not in any way change the budget that has been scrutinised by this and other committees and approved in principle by the Parliament.
We have taken the opportunity that is presented by the bill to reflect a small number of budget transfers, to provide clarity on the starting point for portfolios. The most significant budget transfer is a £14.8 million transfer from the local government portfolio to the rural affairs and the environment portfolio, to support the next generation digital fund.
I remind members that, for the purposes of the budget bill, only spending that scores as capital in the annual accounts of the Scottish Government or direct-funded bodies is shown as capital. That means that capital grants are shown as “operating” in the supporting document. The full picture on capital is shown in table 1.3, on page 4.
As I made clear to Parliament last week, I remain committed to an open and constructive approach to the 2013-14 budget process and continue to seek agreement on a budget that will meet the needs of the people of Scotland in challenging times. I hope that members of the committee found my remarks helpful, and I will be happy to answer questions.
Thank you, cabinet secretary. Do members have questions?
Thank you, cabinet secretary. I seek clarification on the funding for money advice that was announced last week. Is the £5.4 million made up of consequentials from the £65 million that the Cabinet Office made available, which was match funded by the Big Lottery Fund? Is a £1.7 million consequential included in the £5.4 million?
As you are aware, the Government receives consequentials from the UK Government for a range of factors across different areas of spending activity. The UK Government has acknowledged that the Scottish Government is free to allocate consequentials as it chooses to do—that is how Administrations have consistently operated, and the Scottish Government is no different. Over the years, there have been a number of examples of consequentials being provided as a consequence of decisions of the United Kingdom Government; the Scottish Government is free to allocate such moneys as we see fit.
The announcement last week was, in essence, about the allocation of additional resources for advice services in 2013-14 and 2014-15—also in 2012-13. We set out our approach to that in last week’s announcement.
You have said that it is your practice not to ring fence such funding. Will the money go to local authorities for distribution or will it be centrally disbursed?
The funding distribution arrangements beyond the headline allocation of £1.7 million have not yet been set out. Discussions are going on between the Deputy First Minister and relevant organisations about the most appropriate method of taking that forward, so the precise distribution of the £1.7 million is not confirmed at this stage.
Thank you.
I have a couple of technical questions. There are three entries in column C of table 1.2. The £328 million for local government is explained on the previous page, as is the £27.8 million for infrastructure, which relates to Scottish Water loans. Can you explain the third entry, which is -£24.1 million? It is in the justice row.
It relates to judicial salaries, which do not require parliamentary approval.
The reason I asked—[Interruption.]
I am being reminded that the figure also includes police loan charges.
Okay. I read the bit on page 2 where it says
“Judicial Salaries of £30.3m appear in the Draft Budget but are excluded from the Budget Bill”,
but I could not tie up that £30.3 million with the figure of -£24.1 million in the table.
In essence, the -£24.1 million figure is a net figure, taking account of the gross figure of £30.3 million in relation to judicial salaries, with the netting of the police loan charges, which are in the order of £5.8 million.
I move on to my second technical point. In table 1.2 in the supporting document, column J gives the restated budget taking into account adjustments and consequentials from 5 December. In the rest of the document, we have figures for 2012-13 and then figures for 2013-14 for each of the portfolios, and those are then broken down into the parts of each portfolio. Do the 2013-14 figures throughout the rest of the document reflect the Barnett consequentials or are they the initial budget figures, if you like?
On 2013-14? They—
If I choose a specific page, that might help. On page 17, which is on the health and wellbeing budget, at the top on the right-hand side under “Total”, we have £12,043.1 million. Was that the initial budget or is it the budget now, taking into account the Barnett consequentials, adjustments and additions and so on?
A table such as the one on page 17 essentially reconciles to table 1.2, although in saying that, there will be various factors in there, such as the way in which capital is accounted for and what shows on our balance sheet. However, that takes into account capital consequentials.
Terry Holmes (Scottish Government)
Page 16 gives a summary of the health portfolio—
Excuse me. Only the cabinet secretary is allowed to speak during stage 2 of the budget bill.
Sorry.
Those tables will reconcile with table 1.2.
Finally, if we take page 17 again, in comparing the total figure for 2013-14 with 2012-13, is the 2012-13 figure the final figure for that year or the initial budget figure? Does it include consequentials and so on?
That is the original budget approved by Parliament in the budget bill process as at February 2012. There will be subsequent changes to that through the autumn budget revision, which will not be shown in 2012-13, and that is the only other formal parliamentary process that could have been undertaken to change those 2012-13 budget totals. Obviously, there is a spring budget revision yet to come.
There appear to be no further questions from committee members, so we turn to the formal proceedings on the bill.
We have no amendments to deal with, but we are obliged to consider each section and schedule of the bill and the long title and to agree to each formally. 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 me to put a single question where groups of sections or schedules are to be considered consecutively. Unless members disagree, that is what I propose to do. Do members agree?
Members indicated agreement.
Thank you.
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 consideration of the bill. I thank the cabinet secretary and his officials. I will allow a couple of minutes for them to leave and for the new witnesses to be seated.
09:43
Meeting suspended.
09:50
On resuming—