Budget (Scotland) Act 2002 (Amendment) Order 2002
Item 3 is consideration of the Budget (Scotland) Act 2002 (Amendment) Order 2002, which concerns budget revisions. I invite the minister to make a brief opening statement. The debate must last no longer than 90 minutes, but I hope that it will be concluded considerably sooner.
I am reassured to hear that. I shall try to be brief.
The autumn budget revision is a regular piece of Government business whereby we seek parliamentary authorisation for a range of in-year changes to our estimated spending. There are three types of changes: the allocation to budgets of end-year flexibility; internal transfers between budgets; and other Whitehall transfers to the Scottish budget.
As we have discussed many times, EYF is about managing our resources to ensure that every penny of the Scottish Executive's finance is used for maximum impact. Any budget is an estimate and it will always be difficult to spend a budget of £20 billion to the penny on the last day of the financial year, especially as the penalties for overspending are quite severe. The flexibility that EYF offers us is very welcome.
We have discussed many times with the Finance Committee the five elements to EYF. First, there is finance that is put aside for future, planned spending commitments, of which the Glasgow housing stock transfer has been the biggest example. Secondly, there is slippage in the implementation of some—mainly capital—projects; for example, there may be delays in roads expenditure due to bad weather, land acquisition difficulties, planning delays, construction management, and so on. Thirdly, there is fluctuation in demand-led budgets such as regional selective assistance. Fourthly, there are other variances, including our contingency reserve; delayed project implementation; and additional in-year income—for example, money that is returned to the budget due to industrial closures. A recent example of the latter is the potential return of RSA following the closure of the Chunghwa Picture Tubes factory. Fifthly, there are budgets controlled by other bodies, such as water authorities and the health boards, which count against the Scottish budget for accounting purposes.
The total carry-forward from last year, under our direct control, was £443 million, of which more than £250 million is managed budget provision for future spend and capital slippage. Those figures include almost £100 million that was brought forward from the financial year before last for stock transfer—demonstrating how EYF gives us flexibility for good financial management.
In a parliamentary statement prior to the summer recess, when members had the opportunity to question him, Andy Kerr announced how we would use EYF. We focused EYF where we thought that it would do most good: for example, on front-line services, including money to buy the Health Care International hospital in Clydebank; on the economy, to support tourism; on the environment; and on additional resources for the prevention of youth crime.
There are a range of internal transfers, but I want to draw the committee's attention to three of them in particular: the £95 million that has been transferred from water to local government; the £9.3 million transferred from the reserve to Parliament; and the £450,000 transferred to bòrd Gàidhlig na h-Alba.
Let me try to illustrate what those transfers are for. Scottish Water is seeking to deliver its £1.8 billion investment programme over the next four years and has set its charges on that basis. Because Scottish Water has succeeded in meeting its target due to improved efficiency as compared with past plans, the Scottish public will have that additional necessary investment from Scottish Water at no cost to the customer and taxpayer. That means that we can make available another £100 million of public spending this year. Not only will that benefit other spending priorities, it means that Scottish Water's debt burden will not rise as much. Had it done so, there would have been knock-on effects for charging in the long term.
In line with the Presiding Officer's letter of 2 October to the convener of the Finance Committee, we are providing the Parliament with the next tranche of funding for the new Parliament building. That will come from the reserve.
Finally, I want to highlight a transfer that is relatively small in financial terms but which is of huge significance in this area of Scotland—I refer to the £450,000 transfer to bòrd Gàidhlig na h-Alba, which is the new Gaelic development agency. Those resources will meet the bòrd's start-up costs and part-year running costs. They will also allow more urgent elements of expenditure on Gaelic-medium education to be progressed in the current year: the training of teachers at Lews Castle College; some investment by local authorities in pre-school education; and the preparation of teaching materials for primary schools.
The autumn budget revisions also include £1 billion of resource transfers from Whitehall to Scotland. Of that sum, £920 million is transferred to allow the repayment of Glasgow City Council's housing debt at the point at which the stock is transferred to Glasgow Housing Association. I am sure that I need not point out to the committee the enormous significance of that transfer of resources. The transfer is part of the process of transforming housing conditions in Glasgow that will release huge new investment into Glasgow's housing. The enormous scale of the transfer is possible through the benefits that we obtain through the devolution settlement because of our firm place as part of the UK, in which we will remain.
I am happy to try to answer any questions that members may ask at the convener's discretion.
I move,
That the Finance Committee recommends that the draft Budget (Scotland) Act 2002 Amendment Order 2002 be approved.
As the minister mentioned, the most significant transfer sum is the housing support grant of £920 million. Does that transfer count as public expenditure in Scotland? If there were slippage, would EYF apply to it?
My understanding is that the transfer has gone into the annually managed expenditure line rather than into the departmental expenditure limit. Therefore, if there were slippage—currently, we plan to deliver on the housing transfer in the time scales that have already been indicated—the money would not show up in EYF in that way. However, I defer to David Palmer's technical knowledge.
What the minister has said is perfectly correct. The transfer is in AME, so it is not subject to EYF rules, which apply only to the DEL.
So in the case of any slippage, would the money be returned to the Treasury?
No. It would remain available for the purpose, when housing stock transfer occurred.
So it would carry over.
What is the difference between that kind of carry-over and EYF?
Technically, the £920 million would go back to the Treasury at the end of the year, but the Treasury would simply make the money available to us again.
Does that money count as public expenditure?
Yes. It counts as public expenditure.
A similar item appears on page 74 for the community ownership programme, where an entry of about £70 million appears for "Transfer Debt". To where or from what has that item been transferred? Was the item transferred from local authorities to the Executive or is it EYF money?
In a similar vein, an entry of £35 million appears for "Feasibility and Transfer", whatever that might be. I thought that the bulk of stock transfers had now been dealt with. What is the balance between feasibility costs and transfer costs in the £35 million that appears in the budget table on page 74 of the budget revisions?
I will try to locate that information.
The £69,587,000 is the "Transfer Debt" referred to in the first part of the question, and the £35 million is under the heading "Feasibility and Transfer". Where has that money come from and where is it going?
I will have to come back to the committee with the detail on that. I do not have an immediate explanation of the detail at my fingertips.
That is perfectly acceptable.
I am not criticising but, given that the document has 300 pages, there is not very much information in it—there are just lots of numbers.
One particular number caught my eye. On page 168, which refers to the enterprise and lifelong learning department, there is an increase in expenditure of approximately £44 million. Of that £44 million, £14 million comes under the heading "Miscellaneous" and almost £11 million comes under the heading "Unallocated". Will you give us some more detail about those figures?
How can we be increasing the budget to provide unallocated money? It does not seem to be rigorous cost control.
Again, I will come back to the committee on that. I take Alasdair Morgan's point, but I will not speculate.
You will accumulate.
I will give the minister another chance to add clarity. On page 172, there are two headings that mention NHS capital trust charges. Under those headings, there appears to be £315,380,000 coming in and going out. Is that just resource accounting and budgeting in action so that something shows up on an audit trail? It is not new money, is it?
No, it is a technical accounting change.
You could have let the minister answer that.
Sorry.
When are we going to get a cut of that technical accounting?
I would be quite happy if we got a cut.
The increase in funding is an increase in the income of NHS trust capital to reflect the revised treatment of NHS trust capital charges. I suspect that RAB has changed the way that the capital charges, or the 6 per cent of the assets, work within the health service. The adjustment is a technical adjustment.
It is an accounting price under RAB.
That poses questions for other departments about the application of the notional 6 per cent as a management tool.
In what sense?
If the money is going in and then out and it does not appear to make any difference, how does that affect other departments? Does it affect other departments at all or is it simply a technical issue?
It is just a technical issue. The reassuring thing is that it balances.
You get points for that comment.
Under the heading "Police Central Government", there is a sub-heading for draw-down of April budget consequentials.
Can you give us a page number?
It is on page 198. The amount is £2 million. Apparently the Barnett consequentials are not marked in that amount.
We were under the impression that the April budget consequentials all went to health and we were a bit puzzled by why they are included under "Police Central Government".
You are quite right, but there was a small amount of money allocated for other purposes and this amount is part of that. Can we come back to the committee with the detail of all the other purposes? All the public attention inevitably went to health but I think that something in the order of 7.4 per cent was allocated to other purposes.
On page 200, under the heading "Courts Group", there is a withdrawal to windfall funding EYF.
What does "windfall funding" mean?
Are you talking about the top line in the table?
Yes.
I think that that is a rather loose description of what the justice department regards as a windfall but is actually EYF.
It is extra money that the justice department got through the EYF process on top of its 75 per cent retention.
That is what it appears to be. I think that the department simply looks on it as a windfall.
It is not another windfall tax.
There is no other form of taxation in the figures. I think that it is loose drafting by the justice department.
Our final question refers to page 329, which is about the Scottish Parliamentary Corporate Body budget revisions. There is an interesting heading in the table: "Adjustments for Non Consumption of Cash". We are mystified by that heading.
That heading occurs in other departments.
It is also on page 296 in relation to the Crown Office and Procurator Fiscal Service.
The way in which the budget now works is that there is a resource element that economists and accountants tend to view as the proper stuff of public expenditure. There is then cash, which is just the stuff that sloshes around elsewhere. Schedule 1, on page 329, shows the cash consumption associated with the resource consumption in the rest of the document.
To get to the cash consumption, you have to take out from the operating capital budgets those things that are non-cash, such as depreciation cost capital.
Wow! So that is better budgeting.
If the committee would like further explanation, we will put it in writing.
Can we get the answers to our queries relatively quickly? Obviously we are working to a timetable.
That is the end of our questions and as there are no further debating points, I will put the question.
The question is, that motion S1M-3567, in the name of Andy Kerr, be agreed to.
Motion agreed to,
That the Finance Committee recommends that the draft Budget (Scotland) Act 2002 Amendment Order 2002 be approved.
We will report that decision to the Parliament.