The Scottish Government

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FINANCE AND PUBLIC SERVICE REFORM

To plan and prudently manage the public finances; deliver excellence in public services; support growing Scotland's economy; enable local democracy to flourish; promote Scotland's international image; and communicate and explain the Executive's activities throughout Scotland, the UK and abroad.

OBJECTIVES AND TARGETS

Spending Plans 2002-08

Table 10.01 Categories of spending (Level 2)

Notes:
1. Following the introduction of the prudential framework for capital expenditure, a number of former specific section 94 consents converted to grant and are administered separately by other portfolios. In addition, the baseline excludes Police and Fire Capital Grants which are included within the Justice portfolio.
2. Funding of £10.25m for 2006-07 and £10.506 for 2007-08 has been transferred from Local Government Capital to Modernising/Efficient Government. This was previously included as the Incentives Fund within Local Government Capital.
3. For comparability with years 2004-05 onwards, the SPPA numbers for 2002-03 and 2003-04 have been amended to include FRS17 adjustments for pension scheme liabilities.

Table 10.02 Categories of spending (Level 2 real terms)at 2005-06 prices

What the budget does

The Finance and Public Service Reform portfolio will work to improve the delivery of public services, promote local democracy and support conditions for wealth creation that will benefit all in Scotland.

Local authorities have a key role in delivering frontline services. This is recognised in our continued commitment to delivering excellence in public services. We will also promote an image of a modern, vibrant and diverse Scotland as an attractive place to visit, with which to do business, and in which to study and live.

We will drive forward the Executive's Efficient Government initiative. As part of the Customer First programme, we will work with local authorities and community planning partners to implement a strategic framework programme of citizen focused service improvements.

We will ensure that all parts of the Scottish public sector make arrangements to provide Best Value in the effective management and delivery of services and will ensure through Customer First that citizens have a choice in accessing public services in a way convenient to them.

We will continue to promote Scotland's interests in Europe.

Through the initiative on Fresh Talent we will retain and attract people to live and work in Scotland. We will promote an image of a modern, vibrant and diverse Scotland as an attractive place to visit, to do business and invest, and to study, live and work.

We will support and encourage Scotland's contribution to international development, particularly in sub-Saharan Africa.

In everything that we do, we are committed to ensuring that we work to grow the economy, to promote equality and close the opportunity gap and to ensure that our activities are sustainable.

Table 10.03 Other confirmed Spending Plans for Local Government Outwith AEF

Notes:
1. These revenue and capital grants are included as part of the specific portfolio chapters of this document. This includes the capital grants within Finance and Public Service Reform which appear in Table 10.06 under Local Government Capital.
2. Figures for 2002-03 and 2003-04 are not currently available on a comparable basis.
3. Includes grants where Local Authorities receive funding as lead partners in Community Planning Partnerships or as part of other partnerships.
4. Figures for Finance and Public Service Reform's Cities Growth Fund have been correctly included in the above table. These were omitted from this table, but correctly detailed in the Finance and Public Service Reform chapter in Draft Budget 2005-06 and are now consistent with other portfolio chapters.

Table 10.04 Grant Aided Expenditure ( GAE) per portfolio

Grant Aided Expenditure ( GAE) relates to the levels of local authority net revenue expenditure on core services that the Executive is supporting through grant. GAEs are not budgets but more a basis for the distribution of grant through Aggregate External Finance ( AEF). Local authorities are, however, free to allocate their available resources to each service on the basis of local need. This table represents a summary of all GAE provision allocations included in each portfolio chapter throughout the Draft Budget document.

Statement of priorities

In 2006-07, we will focus our resources on:

• investing £25.5m in continuing the work of the Efficient Government Fund and in completing the work of the Modernising Government Fund;

• recognising the key role local authorities play in delivering the front line services (education, community care, transport, etc) on which the people of Scotland rely. Total revenue support for core services ( AEF) for local authorities will be increased by £455.6m or 5.6% over the period 2006-08 to provide additional support in education, for families with young children, additional funding for the increase in teacher numbers, significant increases in resources for residential and home based care for the elderly to meet demand for additional numbers requiring care and for improvements in the quality of the service, additional investment in the police service to increase police numbers and meet the additional demands placed upon them, extra resources for roads maintenance to help councils reduce the backlog, and protecting the services already being provided;

• re-affirming our commitment to excellence in public services and our support for Best Value by continuing to support the Improvement Service. Continued investment to 2008 means that the service can be secure in the medium term, delivering efficient solutions to local authorities and their partners which will bring continuous improvement in services;

• increasing support to local authorities for capital investment through Capital Grants by £70/£20m over the period 2006-08 providing the infrastructure to underpin our prime aim of growing the economy;

• maintaining in real terms a dedicated source of infrastructure investment funding for our six cities through continued support for the Cities Growth Fund demonstrating commitment to the sustainable economic growth of Scotland's City-Regions and confidence in local authorities and their Community Planning partners to deliver City-Vision strategies;

• continuing to support locally-determined projects, through the Quality of Life funding. We have already invested £180m in Quality of Life funding (via Revenue Support Grant) from 2003-06, supporting a range of projects from community safety schemes to providing better play facilities, and we will invest a further £50m per annum from 2006-08;

• providing £0.5m to fund a prestigious scholarship scheme and £0.4m to continue the Relocation Advisory Service as part of the Fresh Talent initiative;

• spending up to £4m each year on targeted marketing and promotion of Scotland to supplement and enhance the efforts of others in the public and private sectors to promote Scotland internationally;

• using £0.3m to support the international development work of Scottish organisations particularly in Malawi and other parts of sub-Saharan Africa;

• encouraging the use of common systems for delivering support services, and develop further the use of e-procurement scotl@nd - our world leading electronic procurement system; and

• taking forward the Independent Review of Local Government Finance, as agreed in the Partnership Agreement.

New resources and transfers

Our spending plans include the following main changes made since the publication of Draft Budget 2005-06:

Local Government Revenue
Increase of £23.6/23.6m due in both years to transfers to Revenue Support Grant of £29.8m from Health for Residential Allowance and £2m from Communities for Money Advice offset by transfers of £3.2m to Health for Choose Life Funding and £5m to Communities for Supporting People.

Scottish Public Pensions Agency
Increase of £180.2/198.1m in AME due to additional provision of £148m and £161.1m for NHS Superannuation and £32.2m and £37.0m for Teachers Superannuation.

Growing the Economy

The mainstream work and expenditure of the Portfolio contributes directly or indirectly to Ministers' top priority, growing Scotland's economy. As explained in individual portfolio chapters, Local Government spending on activities such as education and local transport is critical to Scotland's economic prosperity. In addition, the Finance and Public Service Reform portfolio funds a number of initiatives directly related to growing Scotland's economy:

• Prudential Regime: The new Prudential Regime for local authority capital finance provides a flexible framework for investment in infrastructure. Councils now determine their own programmes for investment in assets for the delivery of quality public services, such as schools, housing and roads. All but two Scottish local authorities are already using or planning to use the Prudential Regime alongside centrally-supported borrowing to invest in new assets;

• Cities Growth Fund: Competitive cities are the keystones of a growing economy. The Cities Review highlighted concerns, particularly from the business community, that capital investment lagged behind development and recommended the creation of a fund as a source of infrastructure investment to help regenerate our cities and contribute to sustainable economic growth. The Cities Growth Fund (£83m over the next 2 years) is designed to support growth and opportunities in each of Scotland's six cities and to result in clear, measurable improvements in each City-Region;

• Efficient Government Fund: Improving productivity in the public sector is just as important to the Scottish economy as improving productivity in the private sector. The Efficient Government Fund which, with the Modernising Government Fund will become a merged fund of £51.7m over the next two years, will promote efficiency improvements across the public sector, particularly in savings on 'back office' functions. The Fund (£25.5m in 2006 - 07) will be particularly effective where some pump-priming is required on a 'spend to save' basis;

• Scottish Neighbourhood Statistics: Scottish Neighbourhood Statistics (£4m over the next 2 years) supports measurement of the unemployment gap and the related target of regenerating communities with persistently high levels of unemployment. It will provide information to help ensure that rural and remote communities have their distinct needs reflected across the range of government policy and initiatives; and

• Promotion of Scotland's International Image and Fresh Talent: The Executive's European and International Strategies aim to promote economic growth by positioning Scotland as an attractive location to live, work and study as well as for business. They also support the development of relationships that contribute to economic growth, such as business and education partnerships. In implementing the Strategies, the Executive works with local authorities and other partners in the public and private sectors to support their own European and international activities that contribute to growing Scotland's economy.

Closing the Opportunity Gap/Promoting Equality

Closing the Opportunity Gap

Our planning and monitoring role over the delivery of services by local government, the NHS and other public bodies will contribute to the Executive's cross-cutting priority of closing the opportunity gap by:

• delivering the greatest benefit to those most dependent on public services;

• ensuring that services to disadvantaged communities are not lower quality than those to other communities;

• ensuring that services are responsive to the needs of all Scotland's communities; and

• promoting an improved quality of life for everyone in local communities by building on the Quality of Life initiatives already undertaken by local authorities (£100m over the next two years), aligned to Closing the Opportunity Gap Targets.

In addition, the Portfolio supports a number of initiatives which contribute to this cross-cutting theme:

• Cities Growth Fund: The Review of Scotland's Cities points to the need to regenerate deprived areas of our cities. The Cities Growth Fund targets key regenerator projects in each City-Region and is contributing to closing the opportunity gap, with a particular emphasis on employability;

• Modernising Government Fund: It is those most at risk of social exclusion who are most dependent on public services. Support via the MGF for improved accessibility and new channels of delivery is of particular advantage to those with difficulties in accessing services and information for reasons of remoteness, disability, etc;

• Digital Inclusion Digital inclusion is focused entirely on closing the opportunity gap, by addressing the particular area of digital access which can enhance educational performance, improve employability, provide access to information about health and reduce disadvantage arising from other forms of exclusion, whether social, geographic or economic. Access to IT and training in its use can enhance life chances, especially for groups such as the elderly or those with disabilities. The strategy for digital inclusion is currently under review;

• Scottish Neighbourhood Statistics: The provision of statistics underpins the planning and delivery of Closing the Opportunity Gap objectives. SNS is one of the prime means of measuring the opportunity gap, and identifying both issues for action and the type of action necessary, particularly in the context of regeneration. The Scottish Index of Multiple Deprivation is being promoted across the SE to define deprived areas in order that baselines can be calculated and the change in the gap monitored over time; and

• Advertising: A significant proportion of advertising spend (£17.4m over the next two years) is aimed at closing the opportunity gap. For example, current campaigns seek to tackle issues such as anti-social behaviour, drugs misuse, care worker recruitment, debt management, alcohol abuse and healthy living.

Promoting Equality

In addition to addressing this priority through our planning and monitoring of delivery of local government services, a number of which can have a significant impact on equality issues, the following activities also support the promotion of equality:

• Scottish Neighbourhood Statistics: As with Closing the Opportunity Gap, the provision of relevant statistics is an essential requirement for the measurement of progress towards the achievement of equality objectives and for identifying areas for action. For example, the Office of the Chief statistician is currently leading work on developing a set of classifications on ethnicity;

• Advertising: Equality issues also feature prominently in the range of campaigns funded from the £17.4m provided for advertising expenditure over the next two years, with high-profile campaigns currently running on domestic abuse and racism; and

• Best Value: Work to drive forward Best Value in public services will include development of support and advice on equalities issues as a thematic component of Best Value.

Sustainable Development

As explained in portfolio chapters, Local Government spending on activities such as sustainable transport and waste disposal has an important influence on the environment and on our quality of life. In addition, this Portfolio supports other initiatives which contribute to sustainable development:

• Cities Growth Fund: A number of projects have a specific focus on sustainable investment and contribute directly to "green thread" commitments - for example, Glasgow City-Region's £1m Waste Management Innovation Fund;

• Best Value: Work to drive forward Best Value in public services will include development of support and advice on equalities issues and sustainable development as thematic components of Best Value;

• Modernising Government Fund: Support for the smartcard consortium will provide improved access to public transport and the means to deliver concessionary fares conveniently to key target groups. Support for more effective joined up delivery of services and electronic or electronically enabled accessibility reduces the need for personal visits to delivery agencies or at least reduces the number of journeys, with potential savings in travel and fuel consumption;

• Scottish Neighbourhood Statistics: Small area information will continue to be developed on water quality, derelict land, landfill sites and processes identified in the Scottish Pollutant Release Inventory. The development work on the Scottish Index of Multiple Deprivation will also be reviewing the inclusion of a domain on Physical Environment;

• Advertising: The advertising budget supports campaigns that are directly related to promoting sustainable development such as recycling and energy efficiency; and

• Quality of Life: Quality of Life funding supports the local environment and community well-being. Councils are encouraged to support sustainable development issues using this funding source.

LOCAL GOVERNMENT REVENUE

Spending Plans 2002-08

Table 10.05 More detailed categories of spending (Level 3)

Note:
1. The NDR figures for 2006-07 onwards are estimates and will be reviewed when the poundage rate for 200-06 is announced early in November 2005. Any change in level of NDRI will not impact on the overall level of support Local Authorities will receive through AEF, which is confirmed.

What the budget does

Revenue grant to local government, known as Aggregate External Finance ( AEF), is made up of three components.

• 'Specific Grants', which are allocated and distributed centrally, are linked to specific policy initiatives and expectations, e.g. for policing, social work etc. Individual grants are covered in other portfolio chapters;

• 'Non-Domestic Rates' are collected by local authorities, paid into a central pool and redistributed to authorities in proportion to their populations; and

• 'Revenue Support Grant' makes up the balance of AEF each year after estimates of specific grants and NDRI have been subtracted from the national AEF total.

In 2006-07, we will focus our resources on:

• increasing revenue grant for local authorities by £280.675/£478.045m over the period 2006-08 to cover general cost increases and specifically to provide:

• additional support in education for families with young children and for the increase in teacher numbers;

• a significant increase for care for the elderly and for improvements in the quality of the service;

• additional investment in the police service to increase police numbers and meet the additional demands placed upon them;

• extra resources for roads maintenance to help councils reduce the backlog;

• additional provision for environmental programmes for increased costs of higher standards in waste collection and disposal;

• protection for all services already being provided; and

• continued support of locally-determined projects to improve people's quality of life, through the Quality of Life funding. We have already invested £180m in Quality of Life funding from 2003-06, supporting projects from community safety schemes to better play facilities, and will invest a further £50m per annum from 2006-07.

LOCAL GOVERNMENT CAPITAL

Spending Plans 2002-08

Table 10.06 More detailed categories of spending (Level 3)

Notes:
1. The single allocation was replaced by supported borrowing in 2004-05 and a number of section 94 consents under the single allocation formula were converted to cash grants administered separately by other portfolios.
2. The Incentives Fund budget of £10.0m for each of 2004-05 and 2005-06 has been transferred to the Supporting Borrowing budget and £10.25m and £10.506 for 2006-07 and 2007-08 to the Efficient Government Fund.

What the budget does

The Cities Growth Fund, established following the Review of Scotland's Cities, invests in the infrastructure of our six cities to help support sustainable economic growth and regeneration in successful and dynamic 'City Regions'. Each City based local authority is required to draw on local evidence to justify its City-Vision investment plans, recognising that each city is at the core of wider, mutually interdependent City-Regions which play a vital strategic role in Scotland's economic and social development.

Local Authority Supported Borrowing represents the proportion of local authority core capital expenditure through borrowing that attracts Scottish Executive support as part of Revenue Support Grant. The Scottish Executive covers the costs of servicing this debt. Capital expenditure financed through Supported Borrowing can be for any area of local authority service provision, in contrast to capital grants which are necessarily service specific. This centrally supported borrowing sits alongside councils' self-supported borrowing taken out under the auspices of the Prudential regime, the level of which councils themselves determine by reference to the prudential indicators.

In 2006-07, we will:

• maintain existing levels of support for borrowing by local authorities and increase capital grants, enabling local authorities to continue to fund capital projects and maintain and improve their current infrastructure; and

• maintain in real terms a dedicated source of infrastructure investment funding for our six cities through our continued support for the Cities Growth Fund, demonstrating our commitment to the sustainable economic growth of Scotland's City-Regions and our confidence in local authorities and their Community Planning partners to deliver their City Vision strategies.

COMMITTEES, COMMISSIONS AND OTHER EXPENDITURE

Spending Plans 2002-08

Table 10.07 More detailed categories of spending (Level 3)

What the budget does

The Local Government Boundary Commission for Scotland ( LGBCS) is an advisory NDPB funded by the Scottish Executive. It is an independent body created by Section 12 of the Local Government (Scotland) Act 1973. The LGBCS is responsible for statutory reviews of electoral and administrative arrangements and ad hoc reviews of electoral or administrative arrangements.

The OCS budget, which includes provision for Scottish Neighbourhood Statistics ( SNS) aims to develop a wide range of data and related analysis at the smallest geographical level possible to support decision making and monitoring in all programmes. The system, which has a particular emphasis on closing the opportunity gap, also allows for dissemination of information to local communities and supports community planning and equality issues. It meets the increasing need to strengthen the evidence base of policy making and provide insight into the delivery and the impact of policy actions.

The International Relations budget includes provision for the Fresh Talent and Scotland's International Image initiatives and covers cross-sectoral and marketing work for promoting Scotland and Scottish interests overseas in line with the European and International Strategies. It includes the budget allocated to taking forward the Executive's 2005 policy document on international development. Other provision relates to costs involved in the Executive's engagement in EU activities.

The Standards Commission provision goes towards the costs of the Standards Commission for Scotland. The Commission offers guidance to councillors and to members of public bodies on standards in public life, and investigates complaints made against these councillors or members for breach of Codes of Conduct approved by the Parliament.

The aim of Digital Inclusion is to address the risk that those most at vulnerable social, economic or geographical exclusion have their life chances further reduced by exclusion from access to the web and information technology. Ensuring that individuals are digitally included can improve their learning and employment opportunities, as well as improving access to public services for some of those who are most dependent on them.

The Miscellaneous budget funds research undertaken by academics and consultancies on our behalf. Current and future projects include work on evaluations of the Fresh Talent Initiative and the Relocation Advisory Service, Perceptions of Scotland as a Leading Small Nation and analyses for the Local Government Finance Review and Scottish Local Authority Remuneration Committees. In addition, the baseline holds provision for a variety of local government organisations and activities such as the Association of Scottish Community Councils, Community Leadership Forum and Chief Executives' Meetings. Scottish Civic Forum ( SCF) is a body focusing on achieving greater civic participation in public policy development. SCF provides a conduit for facilitating discussion between civic Scotland (particularly the 'hard to reach' parts), the Executive and Parliament and seeks to address expectations of the new politics in terms of access, participation and power-sharing. The Public Appointments Call Centre centralises some of the initial administrative and routine processing functions of the Executive's public appointments process.

Scottish Ministers have established a new independent Inspectorate of Prosecution in Scotland to inspect aspects of the work of COPFS. It reports to the Lord Advocate and is answerable directly to him. The Inspectorate is fully independent of the COPFS. An Advisory Board will be established with lay representatives to assist the Inspectorate in its work.

The Advertising Budget covers the topics which Ministers wish to be communicated to various audiences. They range from calls to action, to communications aimed at changing behaviour and attitudes over the long term, e.g. anti speeding campaigns whilst others are one off such as the European Year of the Disabled campaign spelling out changes in legislation.

The Marketing Development Budget allows the campaigns to be supported through the provision of public relations, web design and hosting, consultancy costs and the provision of support materials such as leaflets and posters.

The Improvement Service has been launched to support, promote and assist in the delivery of excellent public services - through learning, sharing and delivering improvement solutions. The Improvement Service will also support Efficient Government activities. It will take on recommendations coming out of the Efficiency Review and is already exploring the development of a co-ordinated approach to training in local government and promotion of generic training across the public sector. It will promote the use of action learning networks, benchmarking and best practice to deliver better performance in local government and in joint delivery of services. The Improvement Service is a delivery agent for the Modernising Government Funded programme "Customer First". All of this activity is expected to lead to savings in the longer term, through better processes and better service outcomes.

In 2006-07, we will:

• develop and implement long-term plans to promote Scotland internationally, working closely with key partners and expanding activities overseas. The overall plans will provide a structure and direction for the Department's activities in promoting Scotland's image and interests, as well as supporting strategic direction in other Executive international initiatives outside the Department;

• change current perceptions and thinking about Scotland and promote a contemporary image to gain recognition as a place to invest, do business with, visit, live, work or study. In order to effect such perception shifts there will be a detailed programme of phased marketing activity targeted at key geographic regions and countries which will be delivered via the Executive's own activities in-country and working with a variety of other partners including the Foreign and Commonwealth Office, the British Council and Scottish bodies;

• continue the implementation of the First Minister's Fresh Talent initiative and the Relocation Advisory Service. Fresh Talent has developed an aligned and pro-active marketing programme in order to deliver Fresh Talent messages to bright, talented and motivated people in a variety of markets internationally to raise awareness of, and interest in, Scotland as a place to live and work. A domestic campaign will be taken forward to inform those people currently in Scotland, such as the international student community, of the opportunities to stay in Scotland after graduation;

• position Scotland as one of the leading regions of Europe and promote Scotland's interests in Europe - both directly in Brussels and in collaboration with the UK Government, the other Devolved Administrations and other European regions in accordance with the Executive's European Strategy;

• continue to support the two-way exchange of knowledge and expertise between Scotland and developing countries, through the broad-based development of Non-governmental Organisations ( NGOs) and other bodies; and

• continue to develop Scottish Neighbourhood Statistics ( SNS), especially gaps in coverage such as the physical environment, housing and crime; further developing the Scottish Index of Multiple Deprivation ( SIMD) through reviewing the methodology and enhancing the domains it contains.

MODERNISING/EFFICIENT GOVERNMENT FUND

Spending Plans 2002-08

Table 10.08 More detailed categories of spending (Level 3)

Note:
1. Funding of £10.25m and £10.506m has been transferred from the Incentives Fund previously within Local Government Capital.

What the budget does

From 2006-07 onwards the funding streams will merge into a single fund to support further efficiency and service delivery improvement in public services.

In 2006-07, we will:

• build on our strategic programme of work with local authorities called Customer First which sets out a common national framework to deliver consistent and measurable improvement to deliver modern public services;

• continue to refine and develop a series of outcomes, identified by Customer First, for the improvement of the efficiency and responsiveness of core local authority services to include wider public service organisations;

• agree a timescale over which these service improvements are to be delivered;

• encourage the take up of services which are available online;

• continue to oversee delivery of projects supported by the Efficient Government Fund; and

• look to providing further support through the merged funding stream to the public sector to assist in the delivery of the efficient government agenda.

SCOTTISH PUBLIC PENSIONS AGENCY

Spending Plans 2002-08

Table 10.09 More detailed categories of spending (Level 3)

What the budget does

The Scottish Public Pensions Agency ( SPPA) is an Agency of the Scottish Executive. Its principal role is to administer the pensions, premature retirement and injury benefits schemes for employees of the National Health Service in Scotland ( NHSPS) and for members of the Scottish Teachers' Pension Scheme ( STPS).

The Agency has responsibility for developing the regulations covering the NHSPS, STPS, Local Government, Police and Fire pensions schemes in Scotland; for determining appeals made by members of these schemes and provides a pension calculation service for the Scottish Parliamentary Pension Scheme, the Legal Aid Board for Scotland and (for 2005-06 only) Scottish Executive Environment and Rural Affairs Department ( SEERAD) Scheme.

In 2006-07, we will:

• pay 100% of all existing NHSPS and STPS pensions and 98% of lump sums on the due date;

• ensure 98% of all payment authorisations are correct at the point of payment;

• Collect 98% of contributions for the NHS and Teachers' schemes within the period prescribed by legislation;

• ensure that all eligible scheme members receive annual benefit statements in line with legislative requirements;

• develop and implement the IT systems necessary to support the reforms to the public sector pension schemes by April 2008;

• introduce and manage effectively the reforms to the public sector pension schemes administered and regulated by SPPA by the specified target dates in 2006;

• achieve Investors in People accreditation by April 2007;

• establish customer satisfaction levels in 2005-06 and secure subsequent year on year improvement; and

• meet annual requirements for Corporate Governance reporting and organisational efficiency within prescribed deadlines.

OTHER FINANCE AND PUBLIC SERVICE REFORM RELATED LOCAL AUTHORITY FUNDING

Spending Plans 2002-08

Table 10.10 More detailed categories of spending (Level 3)

What the budget does

The Finance and Public Service Reform Grant Aided Expenditure ( GAE) figures relate to the level of local authority net revenue expenditure on these services above that the Executive is supporting through grant GAEs are not budgets, but more a basis for the distribution of grant through Aggregate External Finance ( AEF). Local authorities are, however, free to allocate their available resources to each service, including those within Finance and Public Service Reform, on the basis of local need. The figures in this table are included in the GAE summary table (Table 10.04) contained within this chapter.

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