This item was published during the term of a previous administration that ended in April 2007
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Scottish Enterprise budget update
11/05/2006
Scottish Enterprise have been informed in a letter from Deputy First Minister Nicol Stephen that its budget will be a total of £550 million for 2006-07.
In response to a Parliamentary Question, Mr Stephen said today:
"I have today written to Sir John Ward, in respect of Scottish Enterprise's budget for 2006/07.
"The Executive will provide an additional £45 million of resource cover so Scottish Enterprise can meet its non-cash requirements in 2006-07 and access reserves. Scottish Enterprise will also be able to retain receipts up to £5 million above the previously agreed target.
"These steps will cover repayment of the non-cash element of the budget overspend in 2005-06. Scottish Enterprise will therefore be able to deploy an additional £50 million of resources. This will now allow the Board to agree Scottish Enterprise's budget for 2006-07, reflecting Executive priorities, when it meets on Friday May 12."
The full text of the DFM's letter to Sir John Ward, chairman of Scottish Enterprise, is:
I wrote to you recently about Scottish Enterprise's budget overspend in 2005-06 and implementation of the recommendations of the KPMG report. You have acknowledged that there were failures of financial management in Scottish Enterprise and it is absolutely crucial that proper controls are in place for 2006-07 and the future.
As the KPMG report identified, Scottish Enterprise's system of budget allocation must be accompanied by clearly defined responsibility for budget management and proper monitoring systems. As part of this it is also vital that you budget for and monitor non-cash items.
I recognise, however, that the scale of these non-cash items would mean that you would have to reduce your cash spend in order to keep within your total resource budget. The impact of this for 2005-06 and 2006-07 is estimated at £50 million.
I will therefore provide an additional £45 million of resource cover from my budget in 2006-07 so that Scottish Enterprise can meet its non-cash requirements (£25 million) and access reserves (£20 million). Scottish Enterprise will also be able to retain receipts up to £5 million above the previously agreed target where otherwise grant-in-aid would be reduced. (These latter two items will clearly mitigate the repayment due to the Executive from last year's overspend insofar as that relates to non-cash items.) Scottish Enterprise will therefore be able to deploy an additional £50 million of resources in 2006-07.
I therefore expect that the budget which you will be allocating, taking into account all income, and from which you need to allow for all resource spend items, will be £550 million.
You must manage your programme consistent with that figure for the rest of the year. (My officials are writing separately to Jack Perry setting out further details.) In allocating this budget you should of course have regard to the strategic guidance already provided to Scottish Enterprise and, as part of this, to the delivery of all Partnership Agreement commitments in which you have an agreed role.
Guidance is set out in A Smart, Successful Scotland (SSS). I want to emphasise that Ministers see all three themes of SSS as important to economic growth. As Scottish Enterprise is aware we have, since the refresh of SSS, been developing our approach to skills and learning and in particular to employability and to reducing the number of young people not in education, employment or training. A number of your programmes will play a vital role in meeting this objective and it is important that this is fully and properly taken into account.
Our decision in principle to separate Careers Scotland from Scottish Enterprise should not be seen as a signal to give it any less priority until the transfer takes place. We have also, as signalled in SSS, issued our Green Jobs strategy and our Regeneration Statement. It will be important that Scottish Enterprise plays its part in delivery. You will want to check that your proposals for spend on Global Connections deliver against our regeneration priorities to ensure this is possible. Under the Growing Business theme I have already indicated that the Business Gateway must continue at previous levels.
In my statement on March 30 I expressed support for your industry approach. This impacts on a number of Ministerial portfolios and I trust that you will take full account of this in allocating the budget.
You will also recognise that SSS places considerable emphasis on effective partnership working. I recognise that there are currently more demands on Scottish Enterprise than it can meet. However, I hope that the Board will take into account the expectations of partners and the need to explain clearly the considerations you have addressed in reaching a budget allocation.
After your Board meeting, I would expect that your Operating Plan, including the proposed budget, is presented to the Executive so that I can be satisfied that it reflects guidance and is fit for purpose.
I would hope this can be achieved very quickly in order that the Plan can be disseminated within Scottish Enterprise and made public next week. An essential part of the Plan will be your proposals for improving efficiency across your operations. I will also want to be assured that your spend on administration has been tightly scrutinised and reduced and that the budget set will allow you to meet legal commitments.