Operating and Financial Review 2005-06
Background
36. As part of the annual Parliamentary budget process, the Scottish Executive publishes spending plans for the next three financial years. These are then refined through consultation with the Parliament and the public, and to reflect changing circumstances, before Parliamentary approval is sought for plans for the forthcoming year in the annual Budget Act. These plans can themselves then be refined through in year budget revisions, implemented by statutory instrument.
37. The size of the Scottish Budget is partly determined by the block grant which is separately approved to the Secretary of State for Scotland by the UK Parliament (now accounted for by the Department for Constitutional Affairs), and forms part of the UK public expenditure control regime. This requires the Executive to plan, monitor and report its spending against the control aggregates set by the UK Parliament and HM Treasury alongside those set by the Scottish Parliament. A reconciliation between the UK "Departmental Expenditure Limit/ Annually Managed Expenditure" framework and the Scottish Parliamentary aggregates is given in the supporting documents to the Budget Act and subsequent revisions.
2005-06 Spending Plans and Service Delivery Targets
38. Spending Plans for 2005-06 were initially set as part of the 2002 Spending Review, announced in September 2002 with the publication of Building a Better Scotland: Spending Proposals 2003-06: What the money buys. For the first time, that document set out the major service delivery objectives and 105 key service delivery targets the Executive sought to achieve across the full range of its spending plans, based on five priorities for action - health, education, crime, transport and jobs - and two cross-cutting themes - closing the opportunity gap and sustainable development.
39. Following the May 2003 Election and the completion of the Partnership Agreement, spending plans were revised to take account of the commitments made in that Agreement, and to make an early start on progress against the new priorities set for the 2004 Spending Review period - growing the economy, delivering excellent public services, building stronger safer communities and a confident, democratic Scotland. Full details of the revised plans were given in Draft Budget 2005-06, published in September 2004. Agencies within the Scottish Executive also publish annual reports and accounts, and corporate plans.
40. After consideration by the Finance and other Committees, these plans were embodied in the Budget Bill laid in January 2005, and which received royal assent as Budget Act 2005 in March 2005. Parliamentary approval for the in-year revisions to the plans set out in the Budget Act was granted in the Autumn Budget Revision ( SSI 2006 No. 56), made in February 2006 and Spring Budget Revision ( SSI 2006 No. 162), made in March 2006.
Financial Performance
41. The original budget of £24,292m which received parliamentary approval as Budget Act 2005 was increased by £106m and £85m respectively at the Autumn and Spring Budget Revisions to produce a final approved budget of £24,483m. Details of the budget revisions are published in Scotland's Budget Documents: The 2005-06 Autumn Budget Revision and The 2005-06 Spring Budget Revision. The budget reported in these accounts of £23,843m is net of adjustments to reflect differences in resource accounting and budgeting treatment as set out in Note 24 on page 88.
42. The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of £22,681m, compared to the Resource Budget of £22,894m, yielding an underspend of £213m. The Net Capital Outturn for the year was £866m, compared to the Capital Budget of £949m, yielding an underspend of £83m. See the Summary of Total Outturn on page 25 for further information. The total underspend of £296m represents just over 1% of the total budget and an explanation of the major resource and capital variances is included within the accounts.
43. The reported underspend of £296m compares with the £235m announced by the Minister for Finance and Public Sector Reform at the end of June 2006 which was based on provisional outturn figures. The difference is largely accounted for by the impact of changes arising from the annual revaluation of the roads network, which was not finalised until after the provisional outturn was announced.
Performance Against Targets
44. As outlined above, key objectives and targets for the Spending Review 2002 period (that is, April 2003 to March 2006) were set at the end of that review. These relate to the period up to 2005-06, and initial progress towards meeting those targets was reported in Annual Evaluation Report 2005-06, published in March 2004, which indicated whether or not a target was on course and explained the reasons behind that assessment.
45. As agreed with the Parliament's Finance Committee, a final report on delivery against these targets was published in September 2006 - Draft Budget 2007-08: Final Report on SR2002 Targets. This indicates that 67% of the targets have been achieved and 16% reported as ongoing. Of the remainder, 7% have been replaced and a further 5% have been updated - these new and modified targets are expected to be met in the future. The net expenditure incurred in this financial year is reported for the objectives of each department in these accounts.
46. Copies of all the documents mentioned above, giving full details of the subjects covered, are available on the Executive's website at www.scotland.gov.uk/publications
Future Developments
47. Spending plans for 2007-08 were initially published in 'Building a Better Scotland: Spending Proposals 2005-2008: Enterprise, Opportunity, Fairness' following the 2004 Spending Review. Full details of the 2007-08 budget are set out in the 'Draft Budget 2007-08' published in September 2006.
48. Spending plans beyond 2007-08 will be set as part of the next spending review which will cover the years 2008-09, 2009-10 and 2010-11. Preparatory work on the 2007 Spending Review is currently underway and is intended to give greater focus than ever on long-term outcomes for Scotland. This is based on work completed by Ministers earlier this year and thinking from the Executive's Futures project - for example around the impact of globalisation, technology and changing demographics, as well as the importance of learning. It is further informed by insight and evidence from the Efficient Government initiative, the external Budget Review and evaluations of past policies.
49. The timing of the election in May 2007 and the Spending Review 2007 offers a unique opportunity to align the three-year spending allocations with Minister's priorities for the entire Parliamentary term to 2011. However, this timing, and the time required to appoint a new government, also means that the priorities for the new administration cannot be confirmed until late May / early June 2007. This leaves a very tight timescale before portfolio allocations are finalised and plans published in September 2007.
Post-Balance Sheet events
50. On 1 April 2006 Scottish Ministers assumed responsibility for funding Network Rail for the maintenance of the rail infrastructure in Scotland. This function, which is covered by a budget transfer from the Department for Transport, is being undertaken by Transport Scotland.
51. Philip Rycroft was appointed head of the Scottish Executive's Enterprise, Transport and Lifelong Learning Department ( ETLLD) from May 2006 following the retirement of Eddie Frizzell, after an open competition.
52. From 1 April 2006 the Office of the Scottish Charity Regulator has become a non Ministerial Department. As such the body no longer falls within the departmental boundary and it will not form part of the consolidated results of the Scottish Executive for 2006-07. It will, of course, continue to publish its own accounts.
53. Lord Boyd of Duncansby resigned as Lord Advocate on 4 October 2006. He has been succeeded by Elish Angiolini QC. John Beckett QC has succeeded Elish Angiolini as Solicitor General.
Significant Development
54. Transport Agency - Transport Scotland, an agency of the Enterprise, Transport and Lifelong Learning Department, is responsible for helping to deliver the Scottish Executive's capital investment programme, overseeing the safe and efficient running of Scotland's trunk roads and rail networks and establishing and running a national scheme for concessionary travel in Scotland. Although the agency was established on 1 January 2006, it continued to be funded as part of Enterprise, Transport and Lifelong Learning Department. From 1 April 2006 the agency will be separately funded and accounted for and will produce its own financial statements. Further details are available on its website www.transportscotland.gov.uk.
The table at note 27 discloses the net expenditure attributable to the agency during the last 3 months 2005-06.
Public Interest Reporting
Employment of People with Disabilities
55. The Scottish Executive follows Cabinet Office good practice guidance on the employment of people with disabilities and is a Job Centre Plus Disability Symbol user. As such, the Scottish Executive ensures that there is no discrimination on the grounds of disability and that access to employment and career advancement is based solely on ability, competence and suitability for the work.
Staff Relations and Equal Opportunities
56. The Scottish Executive is an equal opportunities employer. Policies are in place to guard against discrimination and to ensure that there is no unfair or illegal discriminatory treatment or any barriers to employment or advancement in the Scottish Executive.
57. The Scottish Executive gives a high priority to the development of all its staff. Training, development and learning in the Executive is quality assured through our commitment to the Investor in People (IiP) Scheme. The Scottish Office was first recognised as an Investor in People in 1997 and since then has gone through four re-recognition assessments. We are committed to a programme of continuous improvement in relation to our implementation of the IiP standard.
58. The Cabinet Office is responsible for developing, formulating and promulgating equal opportunities guidance for the Civil Service as a whole, but operational responsibility rests with individual Departments. The Scottish Executive has an Equal Opportunities Officer who is responsible for developing and promulgating equal opportunities and diversity policies and acting as an inter-departmental liaison officer with the Cabinet Office.
59. The Scottish Executive Equal Opportunities policy states that all staff should be treated equally irrespective of their sex, marital status, age, race, ethnic origin, sexual orientation, disability or religion. Employment and promotion are solely on merit. Staff who work full time and those who work an alternative pattern are assessed on exactly the same basis.
60. The Scottish Executive adopted a Diversity Strategy, which was launched by the then Permanent Secretary, in November 2000. The strategy commits the Scottish Executive to increasing the diversity of staff within the organisation, to develop them regardless of irrelevant differences and to valuing the contribution of each individual.
Payment Policy
61. The Scottish Executive policy requires that all suppliers' invoices not in dispute are paid within the terms of the relevant contract. The Scottish Executive aims to pay 100% of invoices, including disputed invoices once the dispute has been settled, on time in these terms. During the year ended 31 March 2006, the Scottish Executive, its Executive Agencies and the Crown Office and Procurator Fiscal Service paid 95% of all invoices within the terms of its payment policy (2004-05: 94%). The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The Scottish Executive's Core Departments paid 89.7% (2004-05: 89.3%) of all invoices within the terms of its payment policy.
Auditors
62. The accounts of the Scottish Executive are audited by the Auditor General for Scotland. So far as the Principal Accountable Officer is aware, there is no relevant audit information of which the auditors are unaware. In addition, the Principal Accountable Officer has taken all the steps he ought to have taken to make himself aware of any relevant audit information and to establish that the Department's auditors are aware of that information.
Principal Accountable Officer
Date: 26 October 2006