The Scottish Government

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Scottish Government spending figures

19/06/2008

The Scottish Government has today announced the provisional out-turn spending figures for 2007-08, which show the lowest underspend since devolution.

Making a statement to Parliament, the Cabinet Secretary for Finance and Sustainable Growth John Swinney reported that just £42 million of the planned budget of £27.4 billion was not spent.

Commenting on the figures, Mr Swinney said:

"This is good news for Scotland, with record sums spent delivering high-quality public services for households across our country in 2007-08.

"And it means that a record low amount is being added to the Scottish Government's End Year Flexibility balance, held by HM Treasury, where under current rules it would be locked away, unable to be used by the Scottish Government until 2011-12.

"Instead, through effective management of our budget, we have been able to accelerate spending in some areas so that Scottish taxpayers' money is working for the benefit of our communities this year and into the future.

"An example of this is the additional £100 million we provided to Scotland's colleges and universities, allowing them to fast-track capital investments - money that was made available last year that will free up spending this year and in years to come.

"This successful approach contrasts with the comparable levels of underspend reported at this time over the last four years - figures which ranged from £135 million to £623 million.

"I am determined to deliver best value and maximum return for the people of Scotland from the money we receive and I am delighted that in 2007-08 we were able to achieve this."

The provisional outturn for 2007-08 indicates a Departmental Expenditure Limit underspend of £42 million. This is less than 0.2 per cent of the DEL budget and is the lowest ever recorded by the Scottish Government.

For purposes of comparison the figures for the last four years are:

• 2006-07 - £135 million
• 2005-06 - £139 million
• 2004-05 - £382 million
• 2003-04 - £623 million

Provisional Outturn and End Year Flexibility 2007-08 - In detail

Provisional Outturn - Departmental Expenditure Limits (DEL)

The provisional outturn for 2007-08 indicates a DEL underspend of £42 million. This is less than 0.2 per cent of the DEL budget and is the lowest ever recorded by the Scottish Government.

Table 1: DEL Variances by portfolio 2007-08

*The original budget for 2007-08 included an overallocation of £220 million approved by the previous administration.

Comparison with previous years

For purposes of comparison the figures for the last three years are:

2006-07 - £135 million

2005-06 - £139 million

2004-05 - £382 million

End Year Flexibility

Since devolution, the Scottish Government has been able to carry forward any unused resources within the Departmental Expenditure Limit from one financial year to the next under End Year Flexibility (EYF) arrangements.

It is designed to deal with some of the problems arising from the annuality of the budget process by providing a facility to carry forward unspent budgets which helps to discourage 'year end spending sprees' and provided a better match with the actual phasing of expenditure.

Before the introduction of End Year Flexibility (EYF), Scotland's total budget for the following year was not increased by the amount of any resources not spent in the previous year. Either we used the resources, or we lost them.

EYF is neither new money, spare money nor free money - it is simply resources carried forward from one year to the next. This is a common sense and prudent approach to financial management.

Over a number of previous years, the Scottish Government has not required to draw down all of its End Year Flexibility and as a result a substantial balance built up at HM Treasury. When the balance was last published in July 2007 it amounted to just over £1.5bn. During 2007-08 over £600m was drawn down and additional funding approved as part of the Autumn Budget Revision.

As part of the 2007 Comprehensive Spending Review agreement the Cabinet Secretary for Finance and Sustainable Growth reached with HM Treasury, the Scottish Government will be drawing down just under £900 million of this balance over the three year period 2008-09 to 2010-11. These funds will help to fund a very tight Spending Review allocation.

Revised figures for the Scottish Government's cumulative EYF balance, will be published in July within HM Treasury's "Public Expenditure Outturn White Paper' and are expected to be around £950m - the first time since 2003 that the balance has fallen below £1 billion.

Provisional Outturn - Budget Act

Under the Scotland Act 1998, the approval of expenditure by Scottish portfolios is the responsibility of the Scottish Parliament. This responsibility requires the Parliament to set a limit on both the total amount of cash and the total level of resources that the Scottish Government can use.

While the largest element of the budget approved by the Scottish Parliament is accounted for by the Departmental Expenditure Limit it also includes Annually Managed Expenditure (AME) and other budgets which are not subject to strict annual control and do not create any EYF entitlement. Any under/overspends against Annually Managed (AME) and Other budgets are received from/returned to the UK Exchequer, cannot be carried forward, and breach of these budgets has no knock-on impact on the Scottish Block. Underspends of this type include roads capital charges, NHS impairments, student loans and Scottish Water capital and interest charges.

The primary purpose of the Budget Bill is to provide the means by which the Scottish Government seeks from Parliament sufficient resources and Parliamentary authority for its own expenditure each year. Approval for the final 2007-08 budget was sought in the Spring Budget Revision (the Budget (Scotland) Act 2007 Amendment Order 2008 - SSI 2008/107) laid in January 2008.

Outturn against the Budget Act limits will be published in the Scottish Government Consolidated Accounts later in the year and is expected to show an underspend of approximately £216m subject to audit. This is a reduction on the underspends detailed in the accounts for the previous two years which were £256m and £296m respectively.

Table 2: Provisional Variances against SBR 2007-08

The following table may help to reconcile the two sets of numbers:

Table 3: Reconciliation between Treasury DEL Variances and Consolidated Accounts

Notes:

1. General Register Office and National Archives of Scotland and NDPB non cash costs are not included in the Scottish Consolidated Accounts.

2. Underspends in AME and Outside DEL are reflected in the accounts and include underspends on roads capital charges, NHS impairments, student loans and Scottish Water capital and interest charges.

3. Balance of budget overallocation not reflected in the Scottish Consolidated Accounts.