Spring Budget Revision 2024-2025 guidance: finance update for FPAC

A. Guide to the Spring Budget Revision

1. The budget process for 2024-25 commenced with the publication of the Scottish Budget and annual Budget Bill which provided details of the Scottish Government’s spending plans. These plans (as amended at Stages 2 and 3 of the Budget Bill) were approved by the Scottish Parliament on 27 February 2024 and received Royal Assent on 28 March 2024.

2. Once the Budget Act has been approved by the Scottish Parliament, there are usually two opportunities to amend the budget as the year progresses - the Autumn Budget Revision and a Spring Budget Revision. The Spring Budget Revision provides the final opportunity to amend the budget figures.

3. The Spring Budget Revision was finalised on 24 January 2025 ahead of the draft SSI being laid in parliament on 30 January 2025. This guide was provided to the Finance and Public Administration Committee on 21 February 2025 ahead of the scheduled scrutiny session on 5 March 2025.

A.1 Summary of the Spring Budget Revision

4. The Spring Budget Revision is routine parliamentary business that proposes amendments to better align the Government’s budget with its planned spending profile.

5. The changes proposed in the Autumn Budget Revision result in an increase in the approved budget of £863.7 million from £60,449.0 million to £61,312.1 million.

6. The changes to the Budget are broken down into four main areas:

• A.2 - Funding changes to reflect deployment of available resources to portfolios (total net increase to the budget of £971.3 million);
• A.4 - Technical adjustments (net decrease to the budget of £83.1 million);
• A.3 - Whitehall transfers and HM Treasury allocations to the Scottish Government (£25.1 million decrease); and
• A.5 - The transfer of resources between Scottish Government portfolios.

7. The main changes included under each heading are categorised in table 1.2 in the Budget Revision document and summarised below.

A.2 Funding Changes

8. Funding changes provide additional budget spending power to portfolios and programmes, and also some reductions where funding has been returned to the centre for redeployment elsewhere. Table 1.2 provides the funding changes on a net basis by portfolio of £971.3 million, however the gross impact is shown below.

A.2.1 Gross Funding Changes

9. The largest element of funding deployed in the budget revision is being provided to the Health and Social Care portfolio, totalling £688.5 million. Additional resource funding of £620 million has been provided as part of the budget revision to support Health services

10. £67 million of capital funding has been provided to support major capital projects in construction, such as the Baird Family Hospital, Parkhead Health and Social Care Centre and the ANCHOR Cancer Centre, as well as the national replacement programmes for ambulances and radiotherapy equipment. It also supports development of the University Hospital Monklands replacement programme and wider capital pressures facing the Portfolio as a result of increased construction and inflationary costs.

11. Financial transactions funding of £2.8 million has been provided to provide continued support to the GP loans scheme, with this partially offset by £1.3 million of FT income from Covid-19 sports loans.

12. The Finance and Local Government portfolio will receive £465.5 million of additional funding. Within this £84 million is being provided to Local Government. This includes £29 million of resource budget being provided to support the Teachers’ pay and £24.5 million for the non-teacher pay. A further £10 million of capital budget is being provided as part of the overall package of support for the non-teacher deal.

13. £3 million of capital budget has been provided to the General Capital Grant for Orkney Island Ferries to replace the current ferry fleet and fund electric ferry trials.

14. £17.3 million of additional funding is being provided to Local Government for the Scottish Welfare Fund. This is the majority of the £20 million uplift announced on the 28^th November 2024. The balance of which was made up from within existing budgets within the portfolio.

15. The Scottish Public Pensions Agency (SPPA) will receive £4.8 million to fund its operations for the remainder of 2024-25. £20.2 million increase in funding to address corporate running cost pressure from increased costs in corporate transformation programme.

16. The balance of £6.7 million of additional funding relates to a realignment of corporate running cost budget to operating costs within Other Finance. A corresponding reduction in funding is reported within the portfolio.

17. As well as the funding additions set out above, a total of £350 million is being held centrally within the portfolio, which comprises.

• £60 million of funding to be carried forward for Health and Social Care to support 2025-26 costs.
• £150-200 million is held as contingency for year-end audit adjustments (which is required annually).
• The balance is held to fund any changes in demand led schemes and devolved tax receipts as the financial year concludes.

18. As the Scottish Government is unable to overspend its budget there has always been a requirement to maintain a degree of contingency in the budget for year-end audit adjustments as well as other forecast movements and volatility. The approach to holding this funding centrally marks a change from previous financial years. The tight controls placed on portfolio spending at the Fiscal Statement as well as the early certainty on the UK consequential position following the Autumn Budget mean that the contingency is not being held in the individual portfolio budget lines.

19. It’s important to note the scale of demand led schemes and volatility the Scottish Government is exposed to when considering the level of contingency being held. Just a two percent variance in Social Security benefit expenditure could amount to a £120 million movement. Final costs are not confirmed until after the end of the financial year when there are no longer any levers available to mitigate the movements. Given the level of volatility in the past its considered prudent to hold this contingency

20. Within the Social Justice portfolio the additional funding provided relates almost entirely to revised forecasts of the costs of Social Security benefit expenditure which amounts to £117.8 million. The funding increases are driven by uptake in the following benefit areas.

• Child Disability Payments (£67.9 million),
• Personal Independence Payments (£18.4 million),
• Disability Living Allowance (£15.2 million),
• Attendance Allowance (£8.9 million)
• Winter Heating Payment (£4.4 million), and
• Child Winter Heating Payment (£1.6 million).

21. A reduction in funding for Social Security Assistance for those benefits whose forecasts have decreased are outlined in section A 2.2. Despite the large movements in individual benefits the net impact of changes in benefit expenditure is just £0.5 million.

22. The Justice and Home Affairs portfolio has received additional funding of £72 million within the budget revision. The largest individual component of this is the £32.7 million that has been provided to fund an increased demand for Legal Aid.

23. £13.4 million additional funding has been provided for demand-led Police and Fire Pensions to reflect multifaceted overall costs which include numbers of retirals.

24. £14 million has been allocated to the Scottish Prison Service to support operating costs pressures including staff costs, goods and services and other administration expenditure. SPS increased costs are driven by the rising prison population, inflation, private sector contract increases above inflation, and social care costs.

25. £6.9 million additional funding towards Scottish Prison Service’s Public Private Partnership / Private Finance Initiative contracts including increasing the purchase of up to an additional 48 prisoner places at HMP Addiewell to help manage the high prison population.

26. £2.9 million has been provided to the Scottish Police Authority to meet cost pressures while £2.1 million has been provided to the Victim Centred Approach Fund (VCAF) to cover costs pressures within the VCAF programme

27. The Education and Skills portfolio is receiving a total of £51.9 million in additional funding. £28.6 million additional funding is going to the Scottish Qualifications Authority. In tandem with in year efficiency savings this extra funding is being used to reduce the pressure from increased operational costs.

28. £18.4 million to the Scottish Funding Council principally to cover costs of increased employer pension contribution rates in the higher and further education sectors as well as coving increased administration and annual NPD costs.

29. £4.9 million additional funding to Education Scotland. This budget transfer is required to meet Education Scotland’s financial operational pressure. This funding will allow ES to meet all outstanding payments due for the remainder of the year and continue to provide essential education services.

30. Deputy First Minister, Economy and Gaelic has been provided with £19.6 million in additional funding.

31. £8m has been provided to Ferguson Marine. £6 million of this is to mitigate under-recovery of costs of 2024/25. The remaining balance covers resource costs for post completion works to vessel 801 and the final crewing cost payment to Transport Scotland.

32. £6.7 million additional funding has been provided to support operational costs for the delivery of the Scottish Child Abuse Inquiry. The demand led nature of the SCAI requires budget transfers in-year at SBR to cover the full costs of the inquiry.

33. £1.6 million additional funding is being provided to the Sheku Bayoh inquiry to help cover operating costs with £1.4 million of additional capital funding for the Scottish Covid-19 inquiry hearings to support the Waverly Gate accommodation refit.

34. £1.6 million of previously centrally held funding for corporate running costs associated with the Covid inquiry has been released to Covid inquiry staff costs.

35. The Rural Affairs, Land Reform and Islands portfolio received £15.9 million in additional funding. £12.4 million has been provided to the Rural Affairs and Islands portfolio to allow Marine Scotland to fund a distribution to Local Government to deliver coastal community benefits in their area

36. £3.5 million of additional capital budget is being provided for the Agricultural Reform Programme IT upgrades (£2 million) and the Agricultural Transformation Fund (£1.5 million) to help support the agricultural sector to reduce greenhouse gas emissions, improve efficiency and enhance Scotland’s natural environment through the period of transition.

37. The Transport portfolio received £7 million additional funding. This is comprised of £6 million to Scottish Rail Holdings to reflect pressures as a consequence of lower rail fair revenues from the reduced timetable. The remaining £1 million is provided to support the continuation of the Wick to Aberdeen air service.

38. Scottish Courts and Tribunals received £4.9 million additional funding. £2.3 million funding increase to cover salaried judicial positions. An additional £1.3 million funding for vacancies being covered by temporary judges and sheriffs. With the remaining balance of additional funding offsetting operational pressures.

A.2.2 Reductions to Portfolios

39. The Portfolio with the largest funding reduction is Deputy First Minister, Economy and Gaelic with a gross funding reduction of £142.2 million. The majority of this funding reduction is unexpected, realised income from the European Structural Fund (£106.4 million).

40. This is followed by returned capital budget from Offshore Wind due to underspend from program slippage (£21.8 million). In-year underspend accounts for most of the remaining balance with £8.9 million from Digital and £1.1 million from Organisational Readiness the largest contributors.

41. £2.8 million is reduced funding from the Scottish National Investment Bank as it has attained a higher income than expected.

42. Within the Social Justice portfolio, the reduction in funding required of £132 million relates largely to revised forecasts of the costs of Social Security benefit expenditure which amounts to £117.4 million. The funding decreases are driven by reduced uptake in the following benefit areas.

• Adult Disability Payment (£98.7 million),
• Carer Support Payment (£9.9 million),
• Industrial Injuries Disablement Scheme (£2.9 million),
• Best Start Food Grants (£2.3 million),
• Scottish Child Payment (£1.4 million),

43. Additional funding for Social Security Assistance for those benefits whose forecasts have increased are outlined in section A 2.1. Despite the large movements in individual benefits the net impact of changes in benefit expenditure is only £0.5 million in additional funding.

44. The balance of the movement within Social Justice relates to savings generated within the Social Security Programme totalling £11.3 million. This is driven by staff cost savings. Further funding reductions of £3.1 million have been reflected in Tackling Child Poverty and Social Justice, with these savings primarily as a result of reductions in demand led areas

45. Within the Justice and Home Affairs portfolio there has been a £71.8 million reduction in funding. The largest element of this is the £55 million saving in capital budget for Scottish Prison Service, due to slippage on planned investment in the prison estate at HMP Inverness and HMP Glasgow. A resource saving of £1.7 million from an increase in income from sale of prison goods and a PFI contract.

46. Resource savings of £13.2 million are also part of the reduction within Police Central Government primarily across the Emergency Services Mobile Communications Programme (ESMCP) project.

47. Transport has had a gross funding reduction of £47.9 million. The largest component of this relates to an additional £20 million of financial transaction income from the Low Carbon Transport Scheme. Reflecting this income has allowed the overallocation of budget within financial transactions to be heavily reduced.

48. £13.6 million of reductions in capital budget lines across several projects in the Active Travel, Low Carbon and Other Transport, alongside a £9.1 million reduction in Vessel Services and a £5 million reduction in Support for Bus Services capital budgets.

49. Net Zero and Energy has gross funding reductions totalling £23.5 million. The largest elements of this are capital savings totalling £9.9 million within the Environmental Services for capital grants for Nature Restoration and Zero Waste. There are also £7.4 million of savings from Energy Industries due to project slippages.

50. £5 million of the funding reduction is from realised income from interest on Scottish Water Voted loans.

51. Education and Skills has gross funding reductions of £23.1 million. This is driven by the £16.5 million reduction in funding for Higher Education Student Support budget line. The largest component is the £11.2 million reduction in Student Support and Tuition Fee Payments reflecting reduced demand.

52. Further reductions in HESS include £2.2 million of savings in Student Loans Company and HMRC Administration budget and £2.1 million for the Student Loan Interest Subsidy to Bank write-off level being lower than previously forecast has resulted in an underspend. £1 million of capital budget has been returned due to procurement and staffing delays.

53. £4.6 million reduction in funding to Children and Families from a combination of a scaled down digital procurement contract, withdrawal of post graduate bursary uplifts and underutilised capital budget from resource constraints.

54. The Rural Affairs Land Reform and Islands has a gross funding reduction of £17 million. £10.1 million of this reduction is from revised forecasts in demand led schemes, primarily from the Agriculture Reform Programme.

55. £3.5 million of funding for Marine has been returned following the implementation of spending controls as part of the fiscal statement alongside project delays from procurement time for specialist equipment.

56. £3 million of additional income from European Maritime and Fisheries Fund is also reflected within these figures.

57. Finance and Local Government has gross funding reduction of £9.3 million. This primarily relates to the realignment of budgets between corporate running costs and operating costs as outlined in paragraph 16 and 34.

A.3 Whitehall Transfers

58. There are a number of specific Whitehall transfers and allocations from HM Treasury recognised at the Spring Budget Revision. The net negative impact on the Scottish Budget overall is £25.1 million.

59. The negative movement is driven by a reduction of £37.74 million in City Deals funding from HM Treasury which is held within the Deputy First Minister, Economy and Gaelic portfolio. There is a £43.74 million reduction which will be reprofiled into future years with no loss of funding for the overall City Deal programme. Separately £6 million of project specific City Deal transfers offsets the negative amount.

60. Elsewhere within DFMEG the negative movement is reduced by £2.7 million of capital transfer for the R100 programme.

61. £8.2 million is being provided to the Social Justice portfolio. This includes £4.9 million for Ukrainian Thank you payments and £2.9 million for the Ukrainian Refugee Home Fund as well as £200k for the Debt Advice Levy.

62. Scottish Courts and Tribunals Service are receiving a transfer of £1.65 million relating to the devolution of Personal Independence Payment appeals from HM Courts and Tribunals Service.

63. Finance and Local Government have received £1.2 million for Regional Connectivity, Net Zero and Energy have received £800k for Project Will, Transport have a negative Whitehall of £670k for a return of funding for A75 Union Connectivity Funding alongside smaller transfers for Justice and Food Standards Scotland.

A.4 Technical Adjustments

64. The largest changes are within the Education and Skills portfolio which sees a £414.2 million reduction. This movement is driven by a £516.7 million reduction in the Student Loan RAB charge. The RAB charge is a non-cash adjustment to reflect a change in valuation which considers the extent to which student loans issued to Scottish students will be repaid.

65. This is offset by £100.9 million of additional AME budget cover in respect of student loans capital and capitalised interest requirement. There is no impact on the Scottish Government’s discretionary spending as a result of these adjustments.

66. There are also significant technical movements (including IFRS 16 adjustments) within the Health and Social Care portfolio amounting to £238.6 million. This amount includes £112.4 million of AME cover for the Scottish Infected Blood Support Scheme. This funding has been provided by HM Treasury to compensate people who were infected with hepatitis C and/or HIV following treatment with NHS blood, blood products or tissue.

67. £86.9 million is being provided to Health for Private Finance Initiatives (PFI) projects. This technical change falls outside of UK Budget limits and is provided to align the Scottish Budget with accounting requirements. £25.3 million for ring-fenced depreciation amounts are also being provided to the Health and Social Care portfolio.

68. There is an increase to the AME provision for future NHS and Teachers pension costs of £105.4 million. This arises from increased opening pension liability and reduced current service costs.

69. Included within the technical adjustments are a number of changes which relate to International Financial Reporting Standard 16 ('IFRS16’) adjustments. IFRS16 has resulted in a significant alteration to the accounting treatment for leases, with budgets now adjusted to align with that treatment. We are currently in the final year of a three-year transition period with budget initially applied at Budget Bill to reflect the changes but subject to in-year amendment.

70. These changes provide additional capital and non-cash budget cover to be applied for existing and new assets acquired under lease arrangements, to allow for their reclassification and subsequent depreciation. There are also changes to the resource budget position to adjust for the elements of the rental costs that are now capitalised.

71. Ring-fenced budget cover has been provided by HM Treasury to support this change in accounting treatment however some of the IFRS16 changes will impact our discretionary funding. This is due to changes in forecasts provided against original plans for IFRS 16 leasing requirements with full additional budget cover not provided to cover these forecast changes

A.5 Internal Transfers

72. There are a number of internal transfers within the Scottish Block as part of the Spring Budget Revision process. Transfers between and within portfolios are ‘zero-sum’.

73. The significant budget internal transfers between portfolios include:

• transfer from Learning in Education and Skills to Local Government within the Finance & Local Government portfolio to support teachers and learning support staff costs (£145.5 million);
• transfer from Learning and Children and Families in Education and Skills to Local Government within the Finance & Local Government portfolio to support Free School Meals (£70 million)
• transfer from Health & Social Care to Scottish Funding Council in the Education & Skills portfolio to fund additional medical school student places (£18.1 million);
• transfer from Learning in Education and Skills to Local Government within the Finance & Local Government portfolio to support Teachers’ Pay Deal (£10 million);
• transfer from Health & Social Care to the Scottish Funding Council in Education & Skills to fund salary costs of Clinical Academics and Senior Academic GPs (£8.9 million);
• transfer from Rural Affairs, Land Reform and Islands to Natural Resources & Peatland in the Net Zero & Energy portfolio to fund Peatland Restoration Work (£7.9 million); and
• transfer from Health & Social Care to the Scottish Funding Council in Education & Skills to fund teaching grant for nursing and midwifery students (£7.0 million).