1st Report, 2010 (Session 3)

Report on the draft Budget (Scotland) Act 2009 Amendment Order 2010

Remit and membership

Remit:

1. The remit of the Finance Committee is to consider and report on-

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them;

(b) any report made by a committee setting out proposals concerning public expenditure;

(c) Budget Bills; and

(d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business.

3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue.

(Standing Orders of the Scottish Parliament, Rule 6.6)

Membership:

Derek Brownlee
Malcolm Chisholm
Linda Fabiani
Joe Fitzpatrick
Tom McCabe (Deputy Convener)
Jeremy Purvis
Andrew Welsh (Convener)
David Whitton

Committee Clerking Team:

Clerk to the Committee
Jim Johnston

Senior Assistant Clerk
Terry Shevlin

Assistant Clerk
Allan Campbell

Committee Assistant
Jennifer Bell

Report on the draft Budget (Scotland) Act 2009 Amendment Order 2010

The Committee reports to the Parliament as follows—

Introduction

1. At its meeting on 2 March 2010, the Finance Committee considered the draft Budget (Scotland) Act 2009 Amendment Order 2010. This affirmative instrument seeks to make changes to the cash authorisations set out in the Budget (Scotland) Act 2009.

Finance Committee consideration

2. The Committee took evidence on the draft instrument from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Alyson Stafford, Director of Finance, and John Williams, Head of Finance Co-ordination, Scottish Government.

3. The Committee is grateful to the Scottish Government for providing a detailed list of the changes made in the draft instrument in advance of the Committee meeting. This is reproduced as annexe A to this report.

4. The Committee asked for and received clarification on a number of points during the evidence session. The Official Report of the meeting is available on the Parliament’s website, at:

http://www.scottish.parliament.uk/s3/committees/finance/meetings.htm.

5. Following the evidence session, John Swinney MSP moved motion S3M-5736—

That the Finance Committee recommends that the draft Budget (Scotland) Act 2009 Amendment Order 2010 be approved.

6. The motion was agreed to.

ANNEXE A: SUBMISSION FROM THE SCOTTISH GOVERNMENT

A BRIEF GUIDE TO THE 2009-10 SPRING BUDGET REVISION

1. The changes proposed in the Spring Budget Revision result in an increase in the approved budget of approximately £58.5m from £34,711m to £34,770m.

2. The main change is additional funding for Pandemic Flu (£28.3m) and housing and regeneration (£30.9m) from Barnett consequentials arising from the 2009 UK Budget and an additional £2m to cover costs of potential claims made by councils against the Bellwin Scheme. Members of the Committee will recall that £19.7m of the total consequentials of £79m announced at the UK Budget were allocated at the Autumn Budget Revision to Further Education.

3. The other changes to the budget include increases in the AME budgets for NHS and Teachers’ pensions (£33.1m)and NHS Impairments (£19.6m), and a decrease for Student Loans (-£13m) to reflect the latest estimates.

4. There was also a technical change to the presentation of the Scottish Water Cost of Capital (-£84.5m). The budget now shown reflects the income from the interest payable on loans to Scottish Ministers which offsets the cost of capital charge bringing budgets in line with the accounts. This has no impact on the resources available to Scottish Water or the Scottish Government.

5. Following a recent internal monitoring exercise, steps were taken to vire between portfolios according to estimated budget requirements for the remainder of 2009-10. Virement between and within portfolios is a ‘zero sum’ approach. What appears to be a small imbalance of -£3.2m mainly reflects the transfer of budget provision to support NDPB capital charges which are not included in the Parliamentary approval.

6. The adoption across central government of IFRS from 1 April 2009 requires The Scottish Government to convert during the course of the year our 2009-10 budget from a UK GAAP (Generally Accepted Accounting Principles) basis to an IFRS basis.

7. It is important to recognise that the conversion of the Scottish Government’s budget onto an IFRS basis is spending power neutral and the budget adjustments are technical non-cash adjustments or transfers reflecting a change in expenditure classification from resource to capital.

8. The third column in Table 1.3 ‘Summary of Changes by Type’ of the supporting document details the impact of the IFRS changes on the approved budget for 2009-10 following changes made at the Autumn Budget Revision.

9. Details of the major changes are summarised in the following table:

Revisions by type

Significant revisions include:-

Office of the First Minister

• £1.7 capital transfer from RCAHMS (direct capital) to Cultural Collections (indirect capital).
• -0.6m to fund Burns Birthplace Museum from RCAHMS/Cultural Collections

Finance and Sustainable Growth

• -£84.5m change due to a technical change for cost of Capital for Scottish Water budgets.
• £3.8m for Scottish Centre for Regenerative Medicine funded by savings in Transport and transferred to ELL via Scottish Enterprise.
• £33.3m internal transfers to rail infrastructure to reduce pressure on the budget arising from the final settlement decision by the Office of the Rail Regulator.
• -£89.3m savings transferred to a range of FSG programmes from slippage of Edinburgh trams and cancellation of Glasgow Airport Rail Link on the grounds of unaffordability.
• Internal transfers to meet increased demands for Smartcard applications (£9.7m) and to help fund the M74 (£33.9m), Pathfinder Broadband project (£14m) and the Scottish Investment Bank (£10m)
• -£10m transferred to Finance and Sustainable Growth for the Scottish Investment Bank to support access to finance for firms to contribute towards Scotland’s economic growth.

Health and Wellbeing

• £19.6m Transfer from HM Treasury to cover increase in NHS Impairments (AME)
• £28.3m UK Budget consequentials for flu pandemic.
• £30.9m UK Budget consequentials allocated to support affordable housing.
• -£9.5m transfer of responsibility for Mental Health Tribunal (Scotland) to Justice as part of the simplification of public bodies which also makes it easier to use the MHT (Scotland) Administration as a basis for developing an integrated support service for a range of tribunals with significant efficiency savings.
• £45m Transfer from Justice to assist with emergency response to the outbreak of flu pandemic.
• £16.9m Net IFRS adjustment to reflect PPP/PFI projects going on balance sheet.
• -£5m other minor transfers within the Scottish block.

Education & Lifelong Learning

• -£3m transfer to local government to cover the costs of employing additional teachers in schools to assist with the implementation of Curriculum for Excellence.
• £8m capital transfer from Rural Affairs and Environment. This additional capital will be used to address a forecast over-commitment on the Scottish Funding Council's capital budget in 2009-10. The over-commitment has been created by an increase to forecast costs on a number of previously approved projects in the FE sector, and the additional capital will ensure that these projects remain on track in 2009-10.
• £3.8m from Scottish Enterprise for the Scottish Centre for Regenerative medicine for a project jointly funded by the Scottish Government, Scottish Enterprise and Edinburgh University. The new Scottish Centre for Regenerative Medicine forms part of the broader Centre for Biomedical Research at Little France, Edinburgh.
• £2m from Rural Affairs and Environment for the University of Aberdeen’s new Animal Institute.
• the Scottish Funding Council will receive an additional £20 million largely from savings secured from across other portfolios to help it meet the costs resulting from increased levels of higher and further education students entering the system this year.

Justice

• £9.5m transfer of responsibility for Mental Health Tribunal (Scotland) from Health and Wellbeing as part of the simplification of public bodies which also makes it easier to use the MHT (Scotland) Administration as a basis for developing an integrated support service for a range of tribunals with significant efficiency savings.
• -£45m Transfer to Health to assist with emergency response to the outbreak of flu pandemic. Funding released as a result of time bar being applied to provision resulting from European Human Rights Commission ruling.
• -£10m transferred to Finance and Sustainable Growth for the Scottish Investment Bank to support access to finance for firms to contribute towards Scotland’s economic growth.
• £18.1m Internal transfer from Scottish Prison Service for Firelink. Scottish Government is investing £100 million through its Fire and Resilience Programme to increase resilience, enhance capability and contribute to the delivery of a Safer Stronger Scotland. Our Fire and Rescue Authorities rely on high quality and resilient radio communications system in order to provide the standard of service we expect.
• £10.7m Internal transfer from Scottish Prison Service capital slippage for the purchase of the Dundee Forensic Laboratory.
• £0.9m transfer from Administration for costs of relocation to Saughton House. Funding to help cover the dilapidation and relocation costs to allow the Scottish Court Service (SCS) headquarters functions to remain within Edinburgh and relocate to Saughton House to make the best use of the assets available to the Scottish Government

Rural Affairs and the Environment

• Transfer of £5.1m to Administration for support services previously undertaken by FRS and SFPA which transferred to core SG with the creation of Marine Scotland.
• Transfer of £28m to Education and Lifelong Learning from across a range of programmes. This includes an initial grant for the new University of Aberdeen Rowett Institute of Nutrition and Health and additional funding for the Scottish Funding Council.
• Transfer of £2m from Natural Heritage and Rural Services to Education and Life Long Learning - funding was set aside to cover a grant for a creamery investment but no expenditure will take place this financial year. This funding will be returned to RAE in 2010-11.

Local Government

• £3m Transfer from ELL to cover the costs of employing 100 additional teachers in schools to assist with the implementation of Curriculum for Excellence.
• £3.2m transfer from Scottish Enterprise for Business Gateway and Local Regeneration.
• Transfer of £1.9m from Highland & Islands Enterprise and Scottish Enterprise for Business Gateway funding
• £2.2m additional funding for Bellwin Scheme to cover potential claims from councils for the costs of emergency works following severe weather.

Finance Co-ordination
February 2010