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Scotland's Budget Documents: The 2003-04 Spring Budget Revision to the Budget (Scotland) (No 4) Act for the year ending 31 March 2004

Spring Budget Revision
Introduction

1. This booklet provides supporting information for the Parliament and others in support of the "Budget (Scotland) (No 4) Act 2003 Amendment Order 2004" - the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Parliament by the Executive in January 2004. The booklet itself has no statutory force - it is produced as an aid to understanding the Order.

2. The purpose of the Spring Budget Revision is to amend the Budget (Scotland) (No 4) Act 2003, which authorises the Executive's spending plans for the financial year 2003-04. This builds on the amendments already made by the Summer Budget Revision ("the Budget (Scotland) (No 4) Act 2003 Amendment Order 2003") and the Autumn Budget Revision ("the Budget (Scotland) (No 4) Act 2003 Amendment (No 2) Order 2003").

3. The main changes to the Executive's spending plans set out in the supporting document to the Autumn Budget Revision are to reflect:

i) transfers of resources within the Executive, and with Whitehall;
ii) the implementation of FRS17; and
iii) a change in the share of the health budget notionally funded from National Insurance contributions.

The purpose of the Spring Budget Revision is to seek Parliamentary approval for these changes.

Transfers

4. Most transfers do not affect the Executive's budget as a whole. Instead, they move provision within or between portfolios, often to reflect changes in responsibility between departments or changes in payment mechanisms. Particularly as the year end approaches, departments are able to move resources to match emerging pressures. Technically speaking, Parliament authorises the Executive's spending plans at a departmental level. Movements within departments' budgets therefore do not require separate parliamentary authorisation, and are not reflected in the Budget Revision Order itself. The information is however included in this supporting document in order to meet the Executive's commitment to inform Parliament of movements within budget sections in as much as they affect the detail set out in the supporting document to the relevant Budget Bill. Such transfers are often relatively small, and comprise the majority of changes to plans detailed below.

5. Transfers to and from UK departments do affect the total of the Scottish Budget and the relevant department, and the Executive therefore does require Parliamentary approval before it can make use of any additional resources acquired in this way. Such transfers largely reflect either transfers of responsibility or work done by UK departments on our behalf, or vice versa. There are no significant Whitehall transfers in this year's Spring Revision.

The implementation of FRS17

6. As part of the implementation of FRS17, the change (generally increase) in the total liability for the teachers' and NHS pensions scheme for this and subsequent years will now be put through the Executive's accounts. The annual increases in liability this year are 499m and 569m for the teachers' and NHS schemes respectively. Together with prior period adjustments for each scheme - included because this is the first time the increases have been brought into the accounts - a total adjustment of 3.087bn has been included in the schedule for the Scottish Public Pensions Agency below, and taken into the total budget sought for the Finance and Central Services Department and the Executive as a whole. These figures are purely notional - no cash movements are involved and there is no impact on other items.

National Insurance Contributions

7. The budget sought for the Health Department in the Order reflects the resources sought from the Scottish Consolidated Fund (SCF). The Health Department also receives part of its funding from National Insurance contributions which are classified as income outside DEL and AME. Because of the increase in national insurance rates from 1 April 2003, announced by Chancellor Gordon Brown in the 2002 Budget speech, specifically to fund improvements to the health service, income from this source has been significantly higher than forecast at the time of the Budget Act. Schedule 3.1 for the Health Department below shows an increase in income this year from National Insurance contributions of 830m.

8. The Health Department's budget is not affected by changes in the balance of funding between the SCF and national insurance - and, since the SCF is itself largely funded by the Treasury, changes in the balance of funding have no real world effect. Therefore, any increases in funding from national insurance are exactly offset by reductions in the amount of funding sought from the SCF. Because the Order only seeks Parliamentary authority for resources from the SCF, the increase of 830m in funding from national insurance appears in the Order and this supporting document as a reduction in the budget sought. The change is presentational - there is no knock-on effect to patient care nor the Health Department's spending.

The form of this supporting document

9. 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. This document builds on changes introduced for the Autumn Budget Revision supporting document, and the rest of the document is set out as follows:

10. Following this introduction, the summary tables set out the changes sought in the Order at departmental level, and the effect of the proposed changes on the overall cash authorisations. There should therefore be a clear read across from the numbers shown on the face of the Budget Act (as amended by the Autumn Budget Revision), to those in these tables, and to the revised numbers shown in the Spring Budget Revision Order itself. A third set of summary tables provides a reconciliation between the resource budgets and the cash authorisations.

11. The main body of the document then provides a more detailed analysis of the proposed changes on a department by department basis. For each department and direct-funded body, it shows:

- a summary of the changes proposed for the department;
- how the proposed revised 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);
- details of the proposed changes; and
- details of the proposed revised budget disaggregated to Level 2.

12. 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 (NDPBs) 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 2004-05" - the following table compares cash and resource budgets at departmental level.

Table 1.1 - Revised NDPB Cash and Resource Budgets by Department, 2003-04

*Budget increased to reflect a one-off transfer of SNH pension liabilities (approx 65m)

Process for the Budget Revision

13. Following detailed consideration by the Subordinate Legislation and Finance Committees, the Scottish Parliament has an opportunity to vote on the Autumn Budget Revision order.

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