Scottish Government

Budget (Scotland) (No.3) Bill Supporting Document

Introduction

1. This booklet provides supporting information for the Parliament and others in support of the "Budget (Scotland) (No.3) Bill". The Bill was laid before the Parliament by the Executive in January 2006. The booklet itself has no statutory force - it is produced as an aid to understanding the Bill.

2. The purpose of the Bill is to seek Parliamentary approval to the Executive's spending plans for the financial year 2006-07. These plans were set out in Building a Better Scotland: Spending Proposals 2005-2008 Enterprise, Opportunity, Fairness published in September 2004, following the 2004 Spending Review. More detailed plans for 2006-07 were published in September 2005 in Draft Budget 2006-07. The Parliamentary Committees have already scrutinised the draft plans across the autumn of 2005, culminating in the debate on the Finance Committee's Report on Stage 2 of the Budget Process on 21st December 2005.

3. There are three main changes between the figures given in Draft Budget 2006-07 and those set out in the rest of this document and the bill:

i) the presentation of the numbers is different to reflect statutory requirements and ongoing discussions with the Finance Committee about the information they would like to see; and

ii) the Office of the Scottish Charity Regulator has been removed from the Development Department section and is now shown in a separate section in both the bill and supporting document.

iii) the responsibility for expenditure relating to drugs misuse has been transferred from the Health Department to Justice Department.

These changes are explained in more detail below.

i) Presentational Changes

4. The Executive's spending proposals are in the main presented to Parliament in resource terms. But to meet the requirements of the "Public Finance and Accountability (Scotland) Act 2000", Budget Bills and Revisions seek authority for the budgets of non-departmental public bodies ( NDPB's) in cash, and NDPB numbers in this supporting document are also given in cash terms. In order to allow comparison with NDPB budgets presented in other Executive publications - including Draft Budget 2006-07 - table 1.1 compares cash and resource budgets at departmental level.

Table 1.1 - NDPB Cash and Resource Budgets by Department, 2006-07

£000's

5. Since the introduction of resource accounting and budgeting, there has been a difference between the spending that scores as capital in the Executive's accounts, and that which scores as capital within DEL (the departmental expenditure limit).

6. Draft Budget 2006-07 reported as capital spending which scores against capital DEL, but since the Executive accounts are against the aggregates set in the Budget Bill, this supporting document uses the "accounts definition" of capital, so that only spending that scores as capital in the Executive's or Direct Funded Bodies' accounts is shown as capital (just the first column in table 1.2).

7. In June 2004, the Executive announced a new target to increase net investment by 5% per annum in real terms over the period of the 2004 Spending Review. The rule defines net investment as capital DEL and capital grants to the private sector (the first four columns of table 1.2 below).

Table 1.2 Capital Spending 2006-07 under the various Definitions of Capital

£000's

1. Estimated payments under PPP contracts ( FCSD figures comprise PPP projects undertaken by Local Authorities and so include waste management and schools PPP projects)
2. Approximately £168m of the ETLL direct capital scores outside DEL and AME
3. Approximately £298m of FCSD capital grants to local authorities is Local Authority Supported Borrowing

ii) Office of the Scottish Charity Regulator

8. From the 1 ^st of April 2006 the Office of the Scottish Charity Regulator will become a non-ministerial department. The budget for this department has been removed from the Development Department section of the bill and supporting document. A separate section has been created in both the bill and supporting documentation. This is to reflect the fact that the accounts for the Office of the Scottish Charity Regulator will no longer be prepared as part of the consolidated accounts for the Scottish Executive.

iii) Transfer of responsibility for expenditure from Health to Justice Department

9 Following the decision to transfer responsibility for expenditure on tackling drugs misuse from the Health to the Justice Department, the Health Department budget has been reduced by £31.352m. The Justice Department budget has been increased by the same amount. The budget transfer allows the financial responsibility to rest with the department which is making the policy decisions.

Central Unallocated Provision

10. The central unallocated provision ( CUP) was first introduced at Autumn Budget Revision 2004. Further information on the CUP is set out in Scotland's Budget Documents: The 2004-05 Autumn Budget Revision.

11. The amounts shown in the table below show transfers to the CUP made by portfolios as part of their preparation for the Budget (Scotland) (No.3) Bill. Any residual balances at the end of financial year 2005-06 will be reported as part of the 2006-07 Autumn Budget Revision. Where negative balances are shown below these will be offset by balances brought forward from 2005-06.

Table 1.3 Transfers to Central Unallocated Provision by Portfolio at Budget Bill 2006-07

The form of this supporting document

12. The Executive continues to discuss with the Finance Committee and others how it can improve the presentation of supporting information, and which material they find most useful.

13. Following this introduction, the summary tables set out the overall resource authorisations sought in the Budget Bill at departmental level, and the cash equivalents. The numbers shown in these summary tables will in general read directly across to the numbers shown on the face of the Bill. The main body of the document then provides a more detailed analysis of the proposed plans on a department by department basis. For each department and direct funded body, it shows:

- how the proposed departmental budget is comprised in terms of operating and capital resources, divided into the main spending aggregates: DEL (Departmental Expenditure Limit), AME (Annually Managed Expenditure) and spending outside TME (Total Managed Expenditure); and

- details of the proposed budget for each individual Level 2.