1st Report, 2007 (Session 3)

Subordinate Legislation

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:

Andrew Welsh (Convener)
Derek Brownlee
Joe Fitzpatrick
James Kelly
Liam McArthur
Tom McCabe
Elaine Murray (Deputy Convener)
Alex Neil

Committee Clerking Team:

Clerk to the Committee
Susan Duffy

Senior Assistant Clerk
Mark Brough

Assistant Clerk
Allan Campbell

Committee Assistant
Katie Packer

Subordinate Legislation

The Committee reports to the Parliament as follows—

Introduction

1. At its meeting on 20 November 2007, the Finance Committee considered the draft Budget (Scotland) Act 2007 Amendment Order 2007.  This affirmative instrument seeks to make changes to the cash authorisations set out in the Budget (Scotland) Act 2007.  The instrument also reconciles the presentation of figures according to the departmental structure in the 2007-08 budget with the Scottish Government’s new portfolio structure.

Finance Committee consideration

2. The Committee took evidence on the draft instrument from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, John Williams, Head of Finance Co-ordination, and Martin Bolt, 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 revision in advance of the Committee meeting.  This is reproduced as an annexe 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-781—

That the Finance Committee recommends that the draft Budget (Scotland) Act 2007 Amendment Order 2007 be approved.

6. The motion was agreed to.

ANNEXE – SUBMISSION FROM THE SCOTTISH GOVERNMENT

A BRIEF GUIDE TO THE 2007-08 AUTUMN BUDGET REVISION

1. The 2007-08 budget was approved on a departmental basis. This is the first opportunity to formally represent that budget on the basis of the new government’s portfolio structure.  Table 1.10 in the Supporting document reconciles the old structure with the new structure.

2. The changes proposed in the Autumn Budget Revision result in an increase in the approved budget of approximately £1,129m from £29,774m to £30,903m.  This is net of additional funding of £319m from national insurance contributions which is treated as income for the purposes of parliamentary control.  Therefore, gross expenditure is increasing by £1,448m.

3. The largest part of the increase is accounted for by transfers of provision by UK government to fund revised pension forecasts for teachers, NHS and the Scottish Agricultural and Biological Research Institutes amounting to £1,011m in total.  There are further minor transfers of about £20m.

4. After these transfers are taken into account this leaves a net increase to be funded from drawdown of EYF balances of approximately £417m (£1,448m - £1,031m).

5. In order to cover this increase and the original budget over commitment of £220m, a total of £655m will be drawn down from our EYF balances at Westminster’s winter supplementary.

6. The increased spending to be funded from EYF drawdown is made up of four main elements:

• Impact of 100 day commitments (£30m);
• Capital expenditure brought forward for the Higher and Further Education sector (£100m);
• Accelerated capital expenditure approved by the previous administration (£246m); and
• Net drawdown from portfolios of CUP resources (£40m).

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

Revisions by type

Significant revisions include:-

Office of the First Minister

• £7.9m for various capital projects including - redevelopment of the royal museum and public areas of the national library, a new mobile cinema to tour the South of Scotland and electronic data records and data management system for Historic Scotland.
• £3m for ‘100 day’ commitment to double International Development Fund. This will allow the Scottish Government to demonstrate its commitment to international development and Scotland taking seriously its place as a responsible nation playing an active international role.

Finance and Sustainable Growth

• Additional £68.5m for Enterprise and Energy projects including £33.8m for Scottish Enterprise for a number of pre-announced capital activities, including high value regeneration and research projects, and £20m for the Pathfinder project to improve connectivity to schools and public sector sites in the Highlands and Islands and South of Scotland.
• £35.5m transfer from Department for Transport to allow Network Rail in Scotland to be fully funded by the Scottish Government.
• The Roads Cost of Capital is a notional charge of 3.5% on the total asset value of the Trunk Road Asset.  The £16.6m reduction shown in the Autumn Budget Revision simply reflects a lower than expected outturn in 06/07 and consequently a reduction in the expected outturn for 07/08.
• Additional £26.3m to meet costs of removal of bridge tolls on forth and Tay road bridges.  Resources are required for transitional costs of removing toll equipment, making changes to road layouts and possible staff redundancy costs; support for ongoing capital works programmes and the repayment of outstanding loans held by the Tay Road Bridge Joint Board.
• £26.6m drawn down from the CUP for various pressures including, Councillors’ severance, Cities Growth Fund - to help deliver a variety of projects which are intended to contribute to the transformation of our cities and Third Sector funding - to finance planned pilot projects that were due to commence in 2006-07, but were delayed.

Health and Wellbeing

• Increase in National Insurance contributions of £318.5m. This represents Scotland's share of the health portion of national insurance contributions and is outside DEL and AME. The Health and Wellbeing Portfolio funding is therefore not affected by this technical change.
• Additional £77m allocated for accelerating capital projects including Affordable Housing programme (£36m), Modernising Private Sector Housing programme(£10m), Central Heating Warm/Deal programme (£14m) and various regeneration programmes (£17m)
• Transfer of £90m to the CUP as a result of slippage in Health capital projects offset by drawdown from the CUP for Housing projects.

 
Education & Lifelong Learning

• Additional £100m for providing immediate support to colleges across Scotland including projects at Anniesland, Langside and Motherwell and developments at the University of Paisley Ayr campus and Glasgow School of Art. It will also allow progress to be made on forthcoming projects at Dundee, Inverness, Forth Valley and Kilmarnock.
• Additional £80m for Education and Young People capital projects including £56.5m for the maintenance and improvement of the School Estate across Scotland and £8m for improved quality and accessibility, of early years, childcare and play facilities and scope for extended and integrated service delivery.

Justice

• Additional £8.5m transfer from HM Treasury for Scottish Safety Cameras.

Rural Affairs and the Environment

• £370m accounting adjustment to cover the transfer of Scottish Agricultural and Biological Research Institutes’ pension scheme liabilities to the science and research pension scheme administered by the Biological and Biotechnological Research Council (BBRC).  This is a one off AME adjustment fully funded by HM Treasury.

NHS & Teachers’ Pensions

• The £641m increase in Pensions is mainly due to the discount rate change from 2.8% real to 1.8% real with effect from 31 March 2007 as announced in Treasury PES (Public Expenditure System) letter (2007) 02.  This change reduces the notional return from 5.37% to 4.6% which in turn increases the current service cost and value of the scheme liability at 31 March 2007. There is also an increase in interest costs as a result of the increased liability.  This is all Annually Managed Expenditure (AME) and the expenditure is notional (non cash).

Forestry Commission

• Additional £17m for Private Woodland Grant payments (£4m), acquisition and planting of additional land and increased new planting in the private sector in support of Scotland’s Climate Change programme (£7.3m) and cost of capital provision because of a significant rise in the valuation of the Forest Estate (£5.7m).

Finance Co-ordination
November 2007