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Core Departments' Resource Accounts For the year ended 31 March 2003

THE SCOTTISH EXECUTIVE

FOREWORD TO THE ACCOUNTS

For the year ended 31 March 2003

Basis of Accounts

1. These accounts have been prepared in accordance with the accounts direction issued by the Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000. The accounts direction is reproduced at page 67 as an appendix to these accounts.

Brief History

2. The Scottish Executive is the devolved administration in Scotland and inherited the vast majority of the policy and administrative responsibilities of its predecessor, The Scottish Office. The Scottish Office was established at Dover House, Whitehall in 1885 when a Secretary for Scotland was appointed. He took responsibility for administering Scotland's separate legal system and the Scottish Boards for agriculture, education, local government and health. The increasing responsibilities of the Secretary for Scotland led to the post being upgraded to Secretary of State in 1926, and in 1928 the Scottish Boards became departments of The Scottish Office, laying the foundations of the Scottish Executive of today. In 1939 St Andrew's House in Edinburgh became the headquarters of The Scottish Office and Dover House was retained as a liaison office in Whitehall.

3. The responsibilities of the Secretary of State widened considerably between the time the Office was established and, the assumption of powers by the Scottish Parliament and the Scottish Executive on 1 July 1999. Following devolution, the role of the Secretary of State changed to representing Scottish interests in matters that are reserved to the UK Parliament and promoting the devolution settlement for Scotland. The majority of the Secretary of State's functions were transferred to the Scottish Ministers. From 1 July 1999 the Scottish Parliament assumed legislative responsibility for a wide range of devolved matters, including agriculture, economic development, education, environment, fisheries, food standards, forestry, health, housing, local government, planning, social work, some aspects of transport, and tourism. Matters such as the constitution, defence, foreign policy, national taxation and social security are reserved to the UK Parliament.

Principal activities and key aims

4. The principal activities and key aims of the Scottish Executive are set out below by Ministerial portfolio. The operating Departments and Ministerial portfolios are aligned in broad terms, although in some cases a Department will support more than one portfolio. The aims and objectives of all operating departments are given in more detail in a schedule detailing resources by departmental aims at pages 30 to 37 of these accounts.

Environment and Rural Affairs

5. Responsibility covers the primary sector industries, agriculture and fisheries, and the Department also has a role in the development of the EU Common Agricultural Policy and EU Common Fisheries Policy together with counterparts in other parts of the UK.

6. The key aim is to help the people of Scotland secure a life of quality and prosperity through the sensitive stewardship and sustainable development of the natural resources of Scotland.

7. Environment responsibilities cover natural heritage and environment protection, water services and publicity .

8. The key aim is to secure a clean, healthy and safe environment, ensuring a safe and effective water industry, and improving people's enjoyment of the environment.

Social Justice

9. The programme covers expenditure on housing, social inclusion, the voluntary sector and equality.

10. The overall aim is to tackle the root causes of poverty and injustice, promote equal opportunities, develop the voluntary sector and make sure that local communities are placed at the heart of the regeneration process.

Education

11. The programme covers central government expenditure on school education; Her Majesty's Inspectorate of Education; childcare and most other services for children and young people and their families (with the primary exception of health); Social Work Services Inspectorate; tourism culture and sport and the built heritage.

12. The key aim is to give every child and young person the best possible start in life and enhance everyone's quality of life through tourism, culture and sport and quality of the physical environment.

Enterprise and Lifelong Learning

13. The programme covers support for enterprise, innovation, competitiveness, energy, economic development, further, higher and adult education, student support, science, further education and higher education qualifications, employer based qualifications, qualifications framework, skills and other lifelong learning issues.

14. The key aim is to create a knowledge driven economy which can meet the challenges of a highly competitive global environment and at the same time promote economic development which is environmentally and socially sustainable.

Health and Community Care

15. Responsibility covers health and community care policy and the administration of the National Health Service in Scotland. The programme is delivered by the Scottish Executive Health Department through 15 Health Boards, 5 special Health Boards, the Common Services Agency for the 6 Scottish Health Service and 28 NHS Trusts; with general practitioners and others in primary care; with local authorities and, to promote public health, with other agencies.

16. The key aim is that every individual has a right to high quality health and community care. Access to, and quality of, service must be determined by need and not by ability to pay or by where people live.

Justice

17. The Justice Department has responsibility for police, fire, criminal justice social work services, criminal justice policy, civil law matters, administrative support to the Supreme and Sheriff Courts and various other courts and tribunals. The Scottish Prison Service, Scottish Court Service and Accountant in Bankruptcy are Executive Agencies of the Department.

18. The key aim is to create a safer and fairer Scotland.

Transport

19. The programmes cover a wide variety of transport functions including Rail Services, Lifeline Air and Seas Services and the construction and maintenance of motorways and trunk roads.

20. The key aim is to secure an integrated sustainable transport network in Scotland.

Local Government and European Funds

21. Local government is responsible for delivering a wide range of public services in a way which best recognises local needs and circumstances. The aim is to provide a sound financial framework for local government.

22. The aim is to maximise the economic and social benefits to Scotland from European Structural Funds.

Operating and Financial Review

23. The Scottish Executive publishes an annual expenditure report setting out its spending plans over a three year period. The Scottish Budget document which is approved by the Scottish Parliament and published in February 2002 set out the Scottish Executive's spending plans for 2002-03 and indicative proposals for 2003-04. The document provides an overview of the main areas of spending, the main drivers for spending and what the spending will achieve.

24. The Executive's priorities for spending in 2002-03 were described as follows:

The budget reflects our commitment to invest to secure a better life for us all. We must invest to provide effective public services and to build on infrastructure suitable for Scotland in the 21 ^st century. It means investment in better transport, water and sewerage systems, as well as the fabric of schools, colleges and the NHS. In addition we will continue to work to support our telecommunication infrastructure to ensure it compares to that of our competitors.

Social justice remains a key theme of our spending plans. Our funding plans demonstrate our commitment to lift 100,000 Scottish children out of poverty and ensure that every child gets the best possible start in life. For older people we aim to improve their quality of life by ensuring that the services they need are provided effectively. All community care services for older people should be jointly managed and resourced. We will deliver our programme of central heating for older people, tackle fuel poverty and enhance concessionary travel.

25. Objectives and targets for all services are also set out in the Annual Expenditure Report of the Scottish Executive : Detail Document. This indicates targets for future years and reports actual performance in previous years. Agencies within the Scottish Executive also publish annual reports and accounts, and corporate plans.

26. The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of 19,671m, compared to the Resource Budget of 19,930m. The underspend of 259m represents 1.3% of the resource budget and an explanation of the major variances is included within the accounts.

27. The key aggregate for control of expenditure is the Departmental Expenditure Limit (DEL).This covers the great majority of the core Scottish Executive spend, which is planned and controlled on a three-year basis in biennial spending reviews. Annually Managed Expenditure (AME) is other expenditure, such as payments under the Common Agricultural Policy, which cannot be reasonably subject to firm multi-year limits.

28. In terms of DEL the core accounts record an underspend of 636m in operating costs and 21m in capital expenditure as detailed in Note 26 to the accounts. It is the DEL underspend which determines the Executive's entitlement to End Year Flexibility (EYF), which is the mechanism by which the underspends can be carried forward from year to year and so avoid potentially wasteful year end spending sprees. Approximately 191m of the underspend arose as a result of changes in the treatment of expenditure by the Treasury and a further 148m as a result of additional non-domestic rate income, leaving a managed underspend of 318m. The target set by the First Minister for managed DEL underspend was 483m. When other DEL variances not reported in the core accounts are added to the managed underspend of 318m, it is anticipated that the total underspend will be well within the target.

29. Additions to tangible and intangible fixed assets in the financial year were 56.0m including 38m of assets under construction, primarily roads, and 10m of ICT systems and software.

Ministers and Senior Officers

30. The Scottish Ministers and their Deputies and responsibilities during the financial year were:

31. The composition of the Scottish Executive Management Group during the year was as follows:

The non-executive members bring an external perspective to the consideration of corporate management issues such as staffing, administration costs, monitoring of programme expenditure, training and development, accommodation strategy and relations with stakeholders.

Senior official appointments

32. Sir Muir Russell is Permanent Secretary at the Scottish Executive. He was appointed by the Prime Minister on the recommendation of the Head of the Home Civil Service following an open competition. The appointment was for an indefinite term under the terms of the Senior Civil Service contract. The rules for appointment were set out in Chapter 5 and Chapter 11 of the Civil Service Management Code .

33. Others who held membership of the Management Group, with the exception of the Principal Finance Officer and Principal Establishment Officer for whom there are separate appointment arrangements, were appointed following approval by the Prime Minister on the recommendation of the Head of the Home Civil Service. Appointments made from May 1999 onwards were also made with the agreement of the First Minister.

Remuneration of Ministers and members of the Management Group

34. The salaries of the Scottish Executive ministers (including junior ministers) were established under section 81(1) and (2) of the Scotland Act 1998.

35. The Permanent Secretary's remuneration was set individually by the Government on the recommendation of the Permanent Secretaries Remuneration Committee. Paragraph 7.1.11 and Annex A to paragraph 7.1 of the Civil Service Management Code provides the details.

36. For other members of the Management Group remuneration was determined by the Scottish Executive Top Level Pay Committee, chaired by the Permanent Secretary. Paragraphs 7.1.12-7.1.14 and Annex A to paragraph 7.1 of the Civil Service Management Code provides the details.

37. Further details on remuneration are set out in Note 2 to these accounts.

Departmental Accounting Boundary

38. These accounts reflect the assets and liabilities and the results of the Scottish Executive "core" only. This consists of the seven internal Departments, supported by Administration. The core Departments are as follows:

• Environment and Rural Affairs Department
• Development Department
• Education Department
• Enterprise and Lifelong Learning Department
• Finance and Central Services Department
• Health Department
• Justice Department

39. Consolidated resource accounts, reflecting the position for all the entities within the departmental accounting boundary as defined in the Resource Accounting Manual (RAM), are produced and published separately.

Pensions and Early Departure costs

40. Details about the Scottish Executive's Pensions and Early Departure Costs policies are included in Notes 1.17 and 1.19 to these accounts.

Post-Balance Sheet events

41. The Permanent Secretary, Sir Muir Russell, left the Scottish Executive in July 2003. His successor, John Elvidge, took up this post on 4 ^th July 2003.

Employment of people with disabilities

42. 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

43. 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.

44. 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.

45. 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.

46. 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 an alternative pattern are assessed on exactly the same basis as those working full time.

47. The Scottish Executive adopted a Diversity Strategy, which was launched by the 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.

Payments of Suppliers

48. 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 2003 the Scottish Executive paid 68.5% (2002: 86.4%) of all invoices within the terms of its payment policy. Following initial performance problems related to the implementation of SEAS (Scottish Executive Accounting Package), performance has improved significantly in the latter part of the year rising to just under 80% by the year end.

Auditors

49. The accounts of the Scottish Executive are audited by the Auditor General for Scotland.

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