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Scottish Budget Spending Review 2007

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SECTION 1 DELIVERING THE SCOTTISH GOVERNMENT'S PURPOSE AND STRATEGIC OBJECTIVES

Chapter 1: Overview

Since May 2007, the Scottish Government has been determined to set Scotland on a new path. The measures outlined in our spending plans build on some important first steps already announced.

To build a wealthier and fairer Scotland, we have refocused and energised the enterprise networks, removed the discriminatory tolls on the Forth and Tay Road Bridges and already provided an additional £100 million investment in an improved university and college estate.

To ensure a healthier Scotland, we have acted to remove hidden waiting lists and protected local Accident and Emergency Units threatened with closure.

To create a smarter Scotland, we have already allocated an extra £40 million for school buildings, employed more teachers and introduced the Bill to scrap fees for higher education.

To deliver a greener Scotland, we have confirmed our opposition to new nuclear power stations and set an ambitious target of an 80 per cent reduction in emissions by 2050 and acted promptly to protect the farming community severely undermined by the foot-and-mouth crisis.

And to make Scotland's communities safer and stronger, we have committed to invest in our prison estate and begun action to tackle the scourge of alcohol-related crime.

Our approach has already delivered big benefits for all parts of Scotland:

  • we have saved threatened higher education provision at the Crichton Campus in Dumfries;
  • we have sanctioned the largest commercial wave energy system in the world, in Orkney;
  • we have committed to a Road Equivalent Tariff pilot for the Western Isles; and
  • we have backed the world-famous Edinburgh Festivals with new funding.

This document builds on these firm foundations and makes clear the many ways the Scottish Government will deliver for the people of Scotland through its spending plans over the next three years from 2008-09.

This is the tightest financial settlement for Scotland set by the UK Government since devolution. Taking the Departmental Expenditure Limit for Scotland from 2002-03, the real terms increase in 2003-04 was 11.5 per cent. It was 4.7 per cent in 2006-07. Even in 2007-08, it was 3.4 per cent. For the next three years, the real growth for essential public services will be only 0.5 per cent in 2008-09, 1.6 per cent in 2009-10 and 2.3 per cent in 2010-11 - an average of 1.4 per cent. For that reason, and given the pressures inherited from the previous administration, we have:

  • set a new, challenging, and achievable, target of 2 per cent cash-releasing efficiencies each year over the next three years;
  • secured from the UK Government an unprecedented agreement to make full use of Scotland's money currently held at the UK Treasury. These plans include use of £874 million across the three years (£300m/£400m/£174m);
  • phased in our programme over the life of this Parliament; and
  • included a prudent level of over-allocation within our spending plans (£100m/£100m/£24m), to help minimise future underspends and to reduce the level of over-allocation that we have inherited.

Within that challenging settlement, we set out here how we will use the available funding towards the achievement of our single, overarching Purpose:

Our Purpose

To focus government and public services on creating a more successful country with opportunities for all of Scotland to flourish, through increasing sustainable economic growth

We will target our investment over the next three years to support policies and approaches that will deliver our Purpose through five Strategic Objectives:

The Strategic Objectives

WEALTHIER & FAIRER - Enable businesses and people to increase their wealth and more people to share fairly in that wealth

SMARTER - Expand opportunities for people in Scotland to succeed from nurture through to life long learning, ensuring higher and more widely shared achievements

HEALTHIER - Help people to sustain and improve their health, especially in disadvantaged communities, ensuring better, local and faster access to health care

SAFER & STRONGER - Help local communities to flourish, becoming stronger, safer places to live, offering improved opportunities and a better quality of life

GREENER - Improve Scotland's natural and built environment and the sustainable use and enjoyment of it

The document is in four Sections:

Section 1: Delivering the Scottish Government's Purpose and Strategic Objectives

In chapter 2, we describe the Scottish Government's Purpose in more detail and the rationale for the new approach we are taking, including the central role of the new Government Economic Strategy in delivering the Purpose.

In chapter 3, we describe how we will invest to create a wealthier and fairer Scotland. This chapter shows how we will target our spending to increase our competitiveness; make Scotland a more attractive place to live, work and invest; generate more opportunities for work; and ensure that the benefits of a wealthier Scotland are shared fairly across the nation. Our priorities include:

  • reducing or removing rates bills for around 150,000 small business properties across Scotland;
  • providing for a freeze in council tax before consulting on the introduction of a fairer local taxation system under which people will contribute according to their ability to pay;
  • increased investment in Scotland's strategic transport networks, providing over £2.5 billion by 2010-11 to support the economy through the efficient movement of goods and people;
  • providing support for renewable energy, energy efficiency and climate change and tripling the funding for community renewables and microgeneration; and
  • launching the first ever Saltire Prize for innovation with the first challenge in 2008 focusing on renewable energy.

In chapter 4, we describe how we will invest to achieve a smarter Scotland. This chapter shows how we will target our spending to lay the foundations for the future wellbeing and achievement of our children and young people, increase skills development and the use of skills across our population and better channel the outputs of our universities and colleges into sustainable wealth creation. Our priorities include:

  • working with local government on improving the learning experience for children and young people by improving the fabric of schools and nurseries and developing and delivering the Curriculum for Excellence; as quickly as is possible, reducing class sizes in P1 to P3 to a maximum of 18 and ensuring access to a teacher for every pre-school child; and making substantial progress towards a 50 per cent increase in pre-school entitlement for 3 and 4 year olds;
  • legislating to extend entitlement to nutritious free school meals to all primary and secondary school pupils of families in receipt of maximum child or working tax credit in 2009 and to allow further extension of free school meals to all P1 to P3 pupils in 2010; giving more school pupils opportunities to experience vocational learning and improving support for children, young people and families at risk, including providing allowances for kinship carers of looked after children;
  • investing £5.24 billion (£1.67bn/£1.75bn/£1.81bn) in the further and higher education sectors in Scotland, with an extra £100 million capital funding package in 2007-08 to maintain the competitiveness and effectiveness of the sectors; and
  • implementing Skills for Scotland and establishing a skills body, Skills Development Scotland Ltd, to develop smarter demand, supply and use of skills in the economy and to deliver high quality training and learning across the population.

In chapter 5, we describe how we will invest to achieve a healthier Scotland. This chapter shows how we will target our spending to support people to lead healthier, longer and economically productive lives. Our investment is focused on supporting better health across Scotland, reducing inequalities in healthy life expectancy and further improving our health service. Our priorities include:

  • investing in protecting and improving health with £20.1m/£30.1m/£35.1m to reduce the harm done by misuse of alcohol, £3 million a year for further action to reduce smoking and an £11.5 million a year programme on diet and physical activity for health and to help prevent obesity - all of which will improve health, have a positive impact on productivity and enhance the life circumstances and life chances of our population;
  • making sure that NHS services are high quality, person-centred, convenient and efficient, with targeted health care investment for areas with the worst health records and £90 million a year to ensure that by the end of 2011, nobody will wait longer than 18 weeks from GP referral to be seen by a hospital consultant for routine conditions;
  • investing in a new screening programme to detect MRSA in hospital patients at admission, to help prevent the spread of infection (£12.0m/£21.0m/£21.0m);
  • investing £10 million each year to provide flexible access to primary care to help make services more accessible, especially to working people so that they do not need to take time off work to see their GP; and
  • improving access to NHS Dental Services, particularly for children, through the introduction of a prevention-based school dental service, starting in the most deprived areas, and an expansion of the dental workforce through the establishment of a third dental school in Aberdeen (£4.5m/£6.0m/£9.0m).

In chapter 6, we describe how we will invest to achieve a safer and stronger Scotland. This chapter shows how our spending will help our communities thrive and become better places to live and work. We will invest to provide greater opportunities in all our communities by focusing on improving housing, regenerating disadvantaged neighbourhoods, fighting crime and reducing the fear of crime. Our priorities include:

  • an increase in the rate of new housing by investing £430.0m/£507.8m/£533.2m in new and better housing supply across Scotland;
  • through local government, investing £145 million each year in regenerating our most disadvantaged communities, with the full engagement of those who live in them;
  • investing £13.5m/£18.0m/£22.5m to make an additional 1,000 police officers available in our communities through increased recruitment, improved retention and redeployment of police officers; and
  • tackling organised crime through the newly created Serious Organised Crime Taskforce.

In chapter 7, we describe how we will invest to achieve a greener Scotland. This chapter shows how we will focus our spending on reducing the impact we have on our local and global environment, and on protecting and enhancing Scotland's unique environment. The investment will be targeted at: helping us make much greater use of our substantial renewable energy resource; reducing the climate change emissions from transport, housing and business; and improving Scotland's record on waste management and recycling. Our priorities include:

  • delivering increasingly high standards of environmental performance and design as we refurbish the public sector estate, including schools, hospitals and prisons, and requiring the same of all new buildings and investments drawing on public funds;
  • tripling spending for community renewables and microgeneration to £13.5 million a year and encouraging the recovery of woodfuel from waste, which can then be used to replace non-renewable fuels; and investing £15 million a year in new woodlands through the Forestry Commission;
  • minimising the materials and energy we waste, moving towards a 'zero-waste' society;
  • protecting our environment and people from pollution through record levels of investment in Scottish Water's infrastructure programme and providing additional funding for the Scottish Environmental Protection Agency's programmes addressing pollution; and
  • investing in public transport, providing £840.0m/£917.0m/£897.0m on rail and tram services and projects, £3 million a year on travel information, £57.2 million a year to support bus services and £11 million on direct support for sustainable and active travel. This, along with our support to local authorities, will support sustainable places by reducing car dependency and increasing the proportion of people walking and cycling.

Spending for all of Scotland

Because Scotland's people come from a range of different backgrounds and have differing needs, we will ensure that our investment and our policies promote equality and do not discriminate unjustly or perpetuate inequality and disadvantage.

We not only have legal responsibilities to promote equality and eliminate discrimination, we have also made voluntary commitments because we believe that achieving greater equality is essential for the successful delivery of our overarching Purpose.

The principles of equality underpin the investment outlined throughout this document and our work across all Strategic Objectives.

The new approach to performance

Our spending plans are supported by a new national performance framework outlined in chapter 8.

This framework will provide the basis for agreeing with the different parts of the public sector how they will contribute to the achievement of the Purpose and the Strategic Objectives. In this way, it will allow the people of Scotland to monitor the government's performance and the performance of all our public sector.

A more effective government

As highlighted above, the drive for more effective government is a central part of the Spending Review and is underpinned by a new Efficient Government Programme for 2008-11. This programme provides a new commitment to delivering 2 per cent cash-releasing efficiencies each year over the next three years. The majority of efficiency gains are expected to be delivered by business process improvement, more effective management of public assets and the application of shared services, including improved collaborative procurement.

In monetary terms, this will mean that £1.6 billion of taxpayers' money will be re-targeted over this spending period to support programmes and policies which are delivering against our five Strategic Objectives. We will publish our detailed plans by the end of March 2008.

Section 2: Portfolio Spending Plans

This Section provides the individual portfolio spending plans over the Spending Review period. Chapters 9 to 17 set out the responsibilities of each portfolio and the spending priorities and plans in more detail over the next three years.

In chapter 17, we describe the new partnership that we propose with local government, recognising its vital role in the governance of Scotland. We want this new partnership to be based on mutual respect and an agreed recognition of our shared national priorities. With local government, we want to introduce Single Outcome Agreements, giving local authorities more autonomy to deliver national outcomes and local priorities for the communities they serve.

As indicated in chapters 9 to 17, Scotland's Total Managed Expenditure ( TME) amounts to £33.3 billion in 2008-09, rising to £35.8 billion in 2010-11. Funding derives from three main sources. Around 94 per cent is Scotland's share of UK Government spending; 6 per cent comes from business rates. Funding from the European Union ( EU), through Structural Funds and schemes such as Common Agricultural Policy market support, is provided in addition to the TME figures and is presented as a net zero budget, reflecting both the income from the EU and the associated expenditure.

Table 1 sets out TME by portfolio from 2007-08 to 2010-11.

TME is made up of the Departmental Expenditure Limit ( DEL) and Annually Managed Expenditure ( AME). DEL makes up around 85 per cent of the Scottish Government's budget and includes funding which is determined by the Barnett Formula, an agreed element of draw-down of money held at the UK Treasury, and a prudent level of over-allocation to help minimise future underspends. The Barnett Formula gives Scotland a population-based share of changes in planned spending on comparable UK programmes. This Spending Review has focused on allocating DEL to deliver the policies and priorities of the Scottish Government.

AME makes up the remaining 15 per cent of the budget. It is set each year and contains those elements of expenditure that are not readily predictable, such as NHS and Teachers' pensions and the cost of capital for Scotland's trunk road network.

Tables 2 and 3 set out DEL and AME by portfolio from 2007-08 to 2010-11.

Table 1 Total Managed Expenditure by portfolio

2007-08 Budget £m

2008-09 Budget £m

2009-10 Plans £m

2010-11 Plans £m

The First Minister

266.3

280.7

293.5

305.2

Finance and Sustainable Growth

5,831.0

5,997.3

6,209.0

6,330.8

Health and Wellbeing

10,776.9

11,220.8

11,733.9

12,201.8

Education and Lifelong Learning

2,518.7

2,532.0

2,608.8

2,699.0

Justice

979.1

1,041.3

1,085.8

1,110.3

Rural Affairs and the Environment 1

529.6

615.9

637.2

650.5

Administration

241.4

245.7

250.4

255.8

Crown Office and Procurator Fiscal

100.8

110.2

118.7

120.5

Local Government

10,651.1

11,137.3

11,600.4

11,992.6

Total Scottish Government

31,894.9

33,181.2

34,537.7

35,666.5

Scottish Parliament and Audit Scotland

106.9

110.0

113.4

116.6

Total 2

32,001.8

33,291.2

34,651.1

35,783.1

1 The RAE baseline total shown for 2007-08 is depressed by adjustments between RAE and local government portfolios.
2 Includes an over-allocation of £100m/£100m/£24m in order to minimise future underspends and to reduce the level of over-allocation that we have inherited. All figures are shown in cash terms and presented on a full resource basis, and so include depreciation and cost of capital charges where necessary.

Table 2 Departmental Expenditure Limit

2007-08 Budget £m

2008-09 Budget £m

2009-10 Plans £m

2010-11 Plans £m

The First Minister

266.3

280.7

293.5

305.2

Finance and Sustainable Growth

2,681.8

2,802.9

2,965.6

3,033.8

Health and Wellbeing

10,776.9

11,220.8

11,733.9

12,201.8

Education and Lifelong Learning

2,357.6

2,407.7

2,484.1

2,574.3

Justice

979.1

1,041.3

1,085.8

1,110.3

Rural Affairs and the Environment

529.6

615.9

637.2

650.5

Administration

241.4

245.7

250.4

255.8

Crown Office and Procurator Fiscal

100.8

110.2

118.7

120.5

Local Government

8,783.9

9,166.5

9,573.3

9,970.6

Total Scottish Government

26,717.4

27,891.7

29,142.5

30,222.8

Scottish Parliament and Audit Scotland

106.9

110.0

113.4

116.6

Total

26,824.3

28,001.7

29,255.9

30,339.4

Table 3 Annually Managed Expenditure

2007-08 Budget £m

2008-09 Budget £m

2009-10 Plans £m

2010-11 Plans £m

The First Minister

-

-

-

-

Finance and Sustainable Growth

3149.2

3,194.4

3,243.4

3,297.0

Health and Wellbeing

-

-

-

-

Education and Lifelong Learning

161.1

124.3

124.7

124.7

Justice

-

-

-

-

Rural Affairs and the Environment

-

-

-

-

Administration

-

-

-

-

Crown Office and Procurator Fiscal

-

-

-

-

Local Government

1,867.2

1,970.8

2,027.1

2,022.0

Total Scottish Government

5,177.5

5,289.5

5,395.2

5,443.7

Scottish Parliament and Audit Scotland

-

-

-

-

Total

5,177.5

5,289.5

5,395.2

5,443.7

Section 3: The Draft Budget for 2008-09

Chapter 18 introduces, and chapters 19 to 27 set out, for each portfolio, the more detailed categories of spending plans for 2008-09 and the following two years. The spending plans for 2008-09 will, subject to Parliamentary consideration, form the basis for the Budget Bill for 2008-09 which will be laid before Parliament in January 2008.

Section 4: Annexes

Section 4 provides a series of tables showing the restructuring of portfolios and comparative figures over a run of years, together with a glossary.