Payments and transfers to UK departments
1. This section gives guidance on payments and transfers of budgetary provision from the Scottish Government (SG) to UK Government Departments. It also provides guidance on the participation of the SG in pooled schemes / funds or joint initiatives with UK Government Departments.
2. Payments to UK Departments in consideration of their undertaking expenditure on wholly reserved functions would be irregular as the payments would not be provided for in legislation.
3. There should be a presumption against transfers of budgetary provision in consideration of a UK Department undertaking specific expenditure on devolved functions.
4. There should be a presumption against participation with a UK Department in a pooled scheme or fund which operated in devolved functions.
5. Section 65 of the Scotland Act 1998 provides that a sum may only be paid out of the Scottish Consolidated Fund (SCF) if:
- it has been charged on the SCF by any enactment or is payable out of the SCF by virtue of the Scotland Act;
- it is to meet expenditure of the Scottish Administration (i.e. the core SG, the Crown Office and Procurator Fiscal Service, SG Executive Agencies and non-ministerial departments); or
- it is to meet expenditure payable out of the SCF under any enactment.
6. Expenditure of the Scottish Administration relates to devolved functions as defined in the Scotland Act plus: additional functions transferred to Scottish Ministers under section 63 of the Scotland Act (executive devolution); and functions exercised by Scottish Ministers on an agency basis specified by orders under section 93 of the Scotland Act. Expenditure on devolved functions includes expenditure in relation to cross-border public authorities subject to specification by order under sections 88 and 89 of the Scotland Act and expenditure in relation to jointly established bodies under section 56(4) of the Scotland Act. Expenditure payable out of the SCF "under any enactment" relates only to other bodies funded directly from the SCF i.e. the Scottish Parliament Corporate Body and Audit Scotland. The authorisation by the Parliament of the use of resources by the Scottish Administration and other direct funded bodies by annual Budget Act under section 1 of the Public Finance and Accountability (Scotland) Act 2000 is a separate requirement as is the need for specific statutory authority to undertake the activity giving rise to the expenditure.
7. Payments to UK Departments in consideration of their undertaking expenditure on wholly reserved functions would be irregular as the payments would not be provided for in legislation. As a general rule therefore payments to UK Departments would normally only be appropriate in relation to commercial transactions e.g. the purchase of assets, goods and services. (It should be noted that, under the terms of the Scotland Act 1998, it is possible for agreements between the Scottish Ministers and UK Ministers to be legally binding.)
8. Payments to UK Departments may also be appropriate in relation to cross-border public authorities and jointly established bodies or devolved functions undertaken by a UK Department on an agency basis under section 93 of the Scotland Act. However, the normal funding arrangements in respect of cross-border public authorities and jointly established bodies should be to make payments directly to the bodies concerned.
9. Transfers of planned budgetary provision to UK Departments covering current and/or forward financial years may be appropriate in certain circumstances e.g. in consideration of a UK Department undertaking specific expenditure on reserved functions. There should be a presumption against transfers in consideration of a UK Department undertaking specific expenditure on devolved functions. This would be inconsistent with the principles of devolution under which the authorisation of the use of resources for devolved functions is the responsibility of the Scottish Parliament.
10. Transfers of planned budgetary provision to and from UK Departments effect the amount of funds available for expenditure on devolved functions subject to authorisation by the Parliament. Details of all such transfers covering current and/or forward financial years will therefore be set out in supporting documentation to the Budget Acts and Budget Revisions reconciling the revised aggregate figures for planned and forecast expenditure with those published previously.
Pooled schemes / funds
11. A pooled scheme or fund in the context of this guidance is one held within the budget of a UK Department to which Scottish Ministers may be invited to contribute planned budgetary provision. Bids against the fund would be considered on their merits and decided administratively with no certainty with regard to the level of resources allocated to Scotland. There should be a presumption against participation with a UK Department in such a pooled scheme or fund which operated in devolved functions as it would be inconsistent with the principles of devolution. (Consideration should therefore be given to establishing separate arrangements covering Scotland.) Participation with a UK Department in a pooled scheme or fund which operated in reserved functions would be possible by means of a transfer of budgetary provision to the relevant UK Department.
12. Participation with a UK Department in a joint initiative which operated in devolved functions and where each party makes payments covering their own share of the costs would be proper provided that all of the relevant sums paid out of the SCF were expended in Scotland. Payments in respect of joint initiatives which operated in wholly reserved functions would be irregular.
Updated: March 2019