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Annual Evaluation Report 2005-06

INTRODUCTION

Scotland has many strengths, but it faces great challenges. Its people are hard working, resourceful and well educated; its environment is second to none; it is a world leader in scientific research and the arts; and devolution has given it the opportunity to shape its destiny, working alongside its partners in the rest of the UK and Europe. But there are four key challenges that must be faced if it is to remain a place which Scots are proud to call home, and which welcomes others to visit and to work. We need to grow the economy, deliver excellent public services, build stronger, safer communities, and revitalise our democratic frameworks.

These themes are not competing priorities, but interlinked objectives towards the Executive's vision of a better Scotland. Growing the economy is essential if we are to deliver first class public services, social justice and opportunity. Public services must work together effectively, and truly involve local communities. And for everyone to share in the benefits of economic growth, we must improve the quality of life in communities, give all children the opportunity to realise their potential, and ensure that no-one is left behind.

Running through all four themes is a focus on sustainability: delivering social and environmental justice for all of Scotland's communities and passing on a positive legacy to future generations. We are also determined to ensure that resources are invested wisely, and will evaluate all new spending commitments for their economic, social and environmental impact and value for money.

The Scottish Executive will soon be making major decisions on how we allocate our resources in future years. The 2004 Spending Review will set the Executive's spending plans until 2007-08. It is therefore an important opportunity to ensure that the Executive's spending matches the priorities of the Scottish people.

The four themes outlined above will be central to the Spending Review process. The following text explains them in more detail, and provides information about what the Executive has already done in order to make progress in these areas. As part of the budget consultation process, we invite comments on whether our priorities are right, and whether we are taking the right steps to address them.

Growing the economy

Growing the economy is our top priority. Economic growth is not created by government - it comes from the productivity, skills and enterprise of a country's people. But there is much that government can do to create the conditions for higher growth - through improving the infrastructure, developing the skills base, targeted support for business and manufacturing, and helping to develop a culture of enterprise.

Improving the infrastructure

The key infrastructure challenge is connectivity - ensuring that businesses can reach both customers and other businesses, and that our workforce can get to work quickly and on time. In 2005-6 we will spend almost 1 billion on improving our public transport services and roads. We are also tackling the electronic infrastructure, by supporting the rollout and adoption of broadband technology throughout Scotland.

Skills and enterprise

One of Scotland's strengths is the quality of its graduate workforce. This is a strength that we need to develop if Scottish businesses are to compete in the global economy. We will therefore increase the higher and further education budget by 16% between 2002 and 2006.

But if we are to be better prepared to meet the demands of a knowledge economy, we need to improve the wider skills base - by increasing the successful programme of Modern Apprenticeships to 30,000 places by 2006, and by enabling school pupils to develop vocational skills. To meet our social justice and equality objectives, we will target our efforts on communities who are under-represented in the workforce.

Scotland faces a long term demographic shift to an ageing population. If we are to retain the balance of skills we need in the workforce, we need to retain and maximise our home-grown talent, make better use of our older and ethnic minority labour force, encourage Scots who have moved away to come back home, and attract fresh talent from elsewhere. As part of our Fresh Talent initiative, we will improve our promotion of Scotland abroad, establish a Relocation Advisory Service, and take targeted measures to retain students and increase the use of the work permit system in Scotland.

We also seek to foster a culture of enterprise, for example through investing 40 million between 2003 and 2006 to give all young people the chance to experience enterprise at school.

Supporting businesses

Improving the long term sustainable growth rate of the economy is strongly linked to our aims of improving productivity and increasing business research and development, compared to OECD competitors. We have improved business R&D in relation to the UK average in recent years, but there remains a significant gap we need to eliminate. Programmes such as SMART:SCOTLAND, SPUR, SPUR ^Plus and the Proof of Concept scheme will continue to play an important role in breaching this gap, by supporting the development of cutting edge technology in firms with high growth potential. We have created Intermediate Technology Institutes, and launched the Scottish Executive Enterprise Expertise, Knowledge and Innovation Transfer (SEEKIT) and Small Medium Enterprises Collaboration Research (SCORE) schemes to link small and medium sized enterprises more closely to our universities, promoting co-operation in research and development.

As well as general support for business, we will work closely with the financial services and construction sectors to develop the supply of the skills they need; help to promote key sectors such as environmental technology, food and drinks, and aerospace; and support our manufacturing industries by comprehensively reviewing how readily accessible information, expertise and practical advice on manufacturing operations is to the sector - particularly small and medium-sized enterprises.

We are committed to maintaining strong and prosperous communities in rural areas and are tackling some of the key challenges faced by the rural economy. We are increasing the annual Scottish Rural Partnership Fund by 2.2 million to support innovative projects to provide better services and facilities in rural areas. We are providing an additional 2m each year to improve the quality and range of business advice to farmers and are implementing the historic CAP reform agreement in a way which ensures that farming will continue to play a key role in sustainable rural development. The future of the sea fisheries and aquaculture industry is very important to a number of communities in rural Scotland. Our ongoing delivery of over 55m of structural fund support to the sectors is easing short-term restructuring and improving long-term viability and sustainability.

In promoting economic growth, we direct resources to meet our cross-cutting objectives of closing the gap and sustainable development. We aim to be a leader in the developing market for environmental products and services, and are working with businesses to implement a green jobs strategy.

Excellent public services

Our aim is to provide public services which are of the highest possible quality and offer the greatest possible choice. We have chosen to invest heavily to secure better facilities, and to combine this investment with reform and modernisation.

Investing in assets

We are delivering the largest school building programme in Scotland's history, and will renew 200 schools by 2006. Within the NHS, we are investing to improve hospitals and primary care facilities, tackling delayed discharge by getting people who should not be in hospital into the most appropriate care setting, and investing in IT to improve the delivery of care. We are making substantial investment in improving the quality of Scotland's water supply.

Investing in people

In order to secure better services, we are committed to significant increases in the workforce in carefully targeted areas of the public sector: an increase in the numbers of police officers on operational duty; 12,000 new nurses and midwives recruited into the NHS by 2007; 600 additional consultants by 2006; and an increase of teacher numbers to 53,000 by 2007. We are combining these increases with reforms to working practices, to secure our aims of reducing crime and the fear of crime, reducing waiting times in the NHS, and reducing class sizes and improving educational attainment.

Reform and modernisation

We are determined to ensure that services are built around the needs of service users, and deliver best value. We have given local authorities new freedoms and responsibilities to improve, and are rolling the duty of best value across the public sector. Through our Modernising Government Fund, we have supported key initiatives to make public services more accessible and user-friendly, such as our drive to get all public services that can be delivered electronically online. We are investing in services such as NHS 24 and in initiatives such as Joint Futures, which remove structural boundaries between public services.

We are committed to ensuring that everyone has access to high quality public services, through national standards and rigorous inspection regimes. Examples include the creation of NHS Quality Improvement Scotland, the development of schools inspection in the context of the National Priorities for Education, and the creation of a new Inspectorate for the Crown Office and Procurator Fiscal service.

High standards can only be delivered where those at the front line have enough flexibility to allow innovation, which is why we are devolving more power to those on the frontline: for example, giving head teachers control of 90% of school budgets.

Public services are not an end in themselves, but exist to deliver a better quality of life for people: better health, improved educational attainment, a better environment; and, in turn, contribute to economic growth. None of these can be achieved by government action alone. Public services must help people to achieve them for themselves. This is particularly true of health - where we are investing in a range of health improvement initiatives. These will address issues of diet, lifestyle, and alcohol and tobacco use, as part of our drive to make long term and sustainable improvements in our levels of cancer, stroke and coronary heart disease.

Stronger, safer communities

A safer Scotland

We are engaged in a process of fundamental reform of our criminal justice system, to create a co-ordinated public service which gains public trust, reduces crime, deals effectively with those who offend, and supports victims.

We have invested in modernising the Crown Office and courts, increased the availability and quality of prison places and community based sentences, and given extra resources to the police. We are driving forward changes which will improve efficiency and co-ordination- joining up the system through shared ICT services and joint objectives, and reforming court procedures and working practices.

We have established a Sentencing Commission and are consulting on ways to reduce reoffending through the effective management of offenders and improved delivery of sentences.

We have focussed particularly on reducing anti-social behaviour, which eats away at communities, and damages people's lives. We are strengthening the duties and powers of local agencies to tackle anti-social behaviour, and have made 60 million available over 2004-6 to tackle anti-social behaviour, including 20 million to support the development of community warden schemes.

This is in addition to 35 million which we have made available to tackle youth crime and disorder. We have prioritised the need to tackle persistent offending. Through extra investment in a wider range of disposals for children's hearings and in early intervention, new services such as mediation, a commitment to double the number of restorative justice places, redevelopment plans for the secure estate and renewed commitment to speed up processes we look to have a real impact on the lives of young people and benefits for those who are the victims of youth crime.

Regenerating communities

We want to ensure that everyone in Scotland enjoys a decent quality of life, to tackle the damage caused by poor housing, a blighted environment and poverty, and to deliver environmental justice. We are investing in social housing stock and in developing a range of housing choices - to provide an additional 18,000 new and improved homes for social rent and low cost housing by 2006, and to enable councils and other social landlords to meet the Scottish Housing Quality Standard by 2015.

We are supporting a range of initiatives to regenerate disadvantaged communities - both in cities and in rural areas - addressing the key issues of the environment, community development, good public services and increasing access to jobs.

We are working with communities to help them take care of their neighbourhoods, making sure they are safe, clean and attractive, and guaranteeing quality of life for all - for example by establishing urban environmental task forces.

Closing the opportunity gap and promoting equality

People in Scotland still suffer from disadvantage, poverty and alienation - because of where they live or their family, social or economic circumstances or because of who they are. The Executive is committed to closing the opportunity gap for the most disadvantaged people and communities in Scotland.

The Executive is working, with the UK Government, to abolish child poverty in Scotland within a generation. We recognise that the best way out of poverty is through work, and so we will continue to support parents into training and employment, so that they have greater opportunities to increase their incomes. By improving people's skills, we can alleviate poverty while also promoting economic growth. The Executive will continue to implement its Equality Strategy, through specific initiatives to support particular groups and by incorporating equality considerations into its mainstream activity and expenditure.

Our commitment to tackling poverty has already brought results. Since 1997 more than half a million people in Scotland have been taken out of absolute poverty, and the number of children living in absolute poverty has halved from one in three in 1997 to one in six by March 2002.

Our 20m Working for Families Fund between 2004 and 2006 will help disadvantaged people in deprived areas into work by ensuring that availability of childcare is not a barrier to entering education, training or employment. We will improve people's employability and their prospects of a decent income through programmes like Modern Apprenticeships and Training for Work and we are targeting support for women, young people and people from minority ethnic backgrounds who want to start up their own business.

We have also improved the income and quality of life of Scotland's older people through initiatives such as free personal care, and the central heating programme, which contributes to our commitment to reduce the number of households in fuel poverty by 2006. The proportion of pensioners living in relative low income households has fallen by almost a third to 20% from a baseline of 29% in 1996-97.

We will tackle health inequalities by use of the Health Improvement Fund, and targeting other health resources.

We will extend concessionary fare schemes on public transport, including a national free off-peak bus scheme for older people and people with disabilities, and progressively introduce a scheme of national bus, rail and ferry concessionary travel for young people, initially for those in full time education or training.

We will introduce Education Maintenance Allowances, from academic year 2004-05, which will offer financial support to 16-19 year olds from low income families to allow them to continue their education at school or college, and review the eligibility criteria for bursary support for further and higher education. We will improve and develop services for children leaving care.

We currently support youthwork through funding to local authorities for community learning and development (109.7 million), with an additional 5 million specifically for youthwork being made available in the next two years, plus grants of around 4 million to support organisations that promote young people's issues related to personal development, social inclusion, lifelong learning and active citizenship. We are discussing with partners development of a national strategy for youthwork.

Sure Start Scotland, the Changing Children's Services Fund, and the rollout of the Integrated Community Schools approach to all Scottish schools will help children to overcome the barriers to learning and positive development. The delivery of integrated children's services, for support, learning and health, will give children the best possible start in life, driven by our target to ensure that at least 15,000 vulnerable children under five have an integrated package of health, care and education support which meets their needs by 2006.

We will continue our support for the many women facing violence and domestic abuse and will review both the Violence against Women Service Development Fund and the Domestic Abuse Service Development Fund by 2006. We will continue to work for the support of the 100,000 children who experience domestic abuse.

A confident, democratic Scotland

Culture

Arts and culture play a vital role in developing the confidence, identity and spirit of people in Scotland. Culture is central to all aspects of our lives, providing jobs, promoting education and achievement, fostering community involvement, and contributing to personal wellbeing.

Since the establishment of the Scottish Parliament, our National Cultural Strategy, with its key messages of access, education, and excellence, has provided a framework for actions underpinning the development of cultural life in Scotland. Much has been done to provide high quality cultural experiences to enrich lives across Scotland's diverse communities, most recently through the decision by Scottish Ministers to establish a National Theatre for Scotland and by substantial investment to make sure that, by 2006, every primary school pupil in Scotland will be able to benefit from a year's free music tuition.

Fulfilling the commitment made in our Partnership Agreement, we are launching a major review of cultural strategy to set the framework for our programmes in the years ahead.

Promoting Scotland

The Executive is working with other Scottish and UK bodies to project Scotland as a tourism destination with a strong identity, to support and enhance Scotland's international business connections, and to promote Scotland internationally as a modern, vibrant country, which is an attractive location in which to live, work, study and do business.

Because overseas perceptions are crucial to promoting Scotland overseas, the Executive is researching how Scotland is viewed internationally. The research work in progress will lead to an announcement later this year of a new campaign to promote Scotland. We will also appoint a senior Scottish figure to report by the end of 2004 on ways of improving first impressions of Scotland at points of entry and beyond.

Tourism, a key sector of the Scottish economy, has experienced strong growth in the last 2 years. We have a strong Scottish tourism brand which is successfully marketed by VisitScotland in partnership with the industry. This marketing is working well, focussing on branding Scotland as a single world-class destination.

Improving governance and participation

Scots have a long tradition of civic engagement - of which the creation of the Scottish Parliament is one example. More widely, we have a strong culture of volunteering. In recent years, though, there has been a decline in participation in formal democratic structures. If public institutions are to reflect the need and values of those they serve, we must reconnect institutions to their communities. We are reforming the voting system and voting arrangements. Through Community Planning, we are working with local authorities to develop new ways of involving local communities, and ensuring that local agencies work together to deliver the priorities of the people of Scotland.

In partnership with key stakeholders in the voluntary and private sectors, we are developing a gap year volunteering scheme for young people, which will together with our support for Young Scot, the Scottish Youth Parliament and Youth Link, encourage their more active involvement in the lives of their communities and wider society.

Sustainable Development

The Scottish Executive is committed to delivering sustainable development, to environmental concerns being at the heart of public policy and securing environmental justice for all of Scotland's communities.

In Enterprise we are committed to making Scotland's growth sustainable, in particular taking advantage of Scotland's resources to grow our renewable energy industries. We will take measures to reduce energy use throughout the public sector. We shall be assessing our economic development policies against their impact on targets set through our sustainable development indicators and we will return vacant and derelict land to productive use.

In Transport our 10 year Transport Plan involves a wide range of rail projects and investing in a tram network in Edinburgh. A new Scotrail franchise with improved service levels will create more sustainable rail transport. We are introducing Green Transport Plans, 20mph speed zones round schools and safer routes for walking and cycling.

In Health we will develop the NHS Scotland environment policy to require more efficient fuel, energy and water use in all NHS buildings. In Education we will develop curriculum materials to promote environmental awareness.

We have reaffirmed our radical target to start massive change in Scotland's waste practices by recycling and composting 25% of our municipal waste by 2006.

We will also legislate to introduce Strategic Environmental Assessment, to ensure that the full environmental impacts of all new strategies, programmes and plans developed by the public sector are properly considered. Sustainable development will also be supported by the new Best Value duty in the Local Government in Scotland Act 2003, which requires local authorities to contribute to the achievement of sustainable development. A similar duty has been applied across the public sector, including the Executive.

Conclusion

The next chapters explain in more detail the progress that we have made on meeting the targets that we have set ourselves. Most of these were set during the 2002 Spending Review, and so relate to the period up to 2005-06, just as the new targets that we set ourselves in the coming Spending Review will apply for the period up to 2007-08. For many of the targets, therefore, we are not yet able to say whether we will meet them. However we can indicate whether or not we are on course for the targets, and explain the reasons behind that assessment. In doing so, we hope that we will give you an indication of how we are using your money.

The coming Spending Review is likely to provide far more limited increases in public expenditure than was the case during 2000 and 2002. In this context, it is even more important that we get the best possible value for every pound that we spend, and that we match our resources to meet the priorities of the Scottish people. For that reason, this document is intended to help to inform your views, so that your views can then help to shape our decisions.

Spending Plans

The tables below set out in details our spending plans for 2003-06. Tables 0.01 and 0.02 set out the Scottish Executive's spending plans until 2006. The figures represent the Total Managed Expenditure (TME) of the Scottish Executive. Table 0.02, the "real terms" table, presents our expenditure plans at 2003-04 prices. In order to calculate expenditure in 2004-05 and 2005-06 at 2003-04 prices, we have assumed inflation of 2.5% for the next two years. The real terms value of expenditure in 2004-05 is therefore equal to the actual expenditure, divided by 1.025. The real terms value of expenditure in 2005-06 has been calculated as the actual expenditure, divided by 1.050625.

Table 0.01 Total Managed Expenditure by portfolio

Table 0.02 Total Managed Expenditure by portfolio in real terms (in prices for 2003-04)

Public Spending

Tables 0.03 to 0.06 show the budget broken down into the various categories of spending Departmental Operating Limit: Operating Budget; Departmental Expenditure Limit (DEL) Capital Budget and Annual Managed Expenditure (AME).

Total Managed Expenditure (TME) comprises the Departmental Expenditure Limit (DEL), and Annually Managed Expenditure (AME). DEL comprises the majority of the Executive's budget, and is the element of the budget the Barnett Formula operates on. DEL is set for 3 years and the annual DEL spend is subject to End Year Flexibility. Table 0.3 sets out DEL by portfolio.

Table 0.03 Departmental Expenditure Limits

Table 0.04 DEL operating budget

DEL comprises the operating and capital budget. Table 0.04 shows the operating budget from 2003-04 - 2005-06 and table 0.05 shows the capital budget over the same period.

Table 0.05 DEL capital budget

The final element of TME is AME, shown in table 0.6. AME is set annually and contains those elements of expenditure that are not readily predictable - such as demand-led programmes under the Common Agricultural Policy. As a result of changes made at SR2002 AME no longer includes the resources for cost of capital or depreciation, with the exception of the cost of capital for Scotland's trunk road network, which still comes under AME.

Table 0.06 Annual Managed Expenditure

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