Publication - Corporate report

The Scottish Government Consolidated Accounts for the year ended 31 March 2018

Published: 27 Sep 2018
ISBN:
9781787812574

Annual report of consolidated financial results of the Scottish Government, its Executive Agencies and the Crown Office, prepared in accordance with IFRS

124 page PDF

2.8 MB

124 page PDF

2.8 MB

Contents
The Scottish Government Consolidated Accounts for the year ended 31 March 2018
Performance Report

124 page PDF

2.8 MB

Performance Report

About the Scottish Government

The Scottish Government is the devolved government for Scotland and has a range of responsibilities that include: the economy, education, health, justice, rural affairs, housing, environment, equal opportunities, consumer advocacy and advice, transport and taxation.

Some powers are reserved to the UK Government. These include: immigration, the constitution, foreign policy and defence. Further changes to the responsibilities devolved to the Scottish Government and Scottish Parliament have resulted from the Scotland Act 2012 and the Scotland Act 2016.

After a Scottish Parliamentary election, the First Minister is formally nominated by the Scottish Parliament and appointed by Her Majesty the Queen. The First Minister then appoints the Scottish Ministers to make up the Cabinet with the agreement of the Scottish Parliament and the approval of The Queen.

Scottish Cabinet Ministers and their responsibilities

The Cabinet is the main decision-making body of the Scottish Government. It is made up of the First Minister, all Cabinet Secretaries, Minister for Parliamentary Business and Permanent Secretary.

The First Minister appoints a Cabinet Secretary for each of the core portfolios described below, and additional Ministers to support the work of the Scottish Cabinet, and two Law Officers (Lord Advocate and Solicitor General for Scotland).

The previous parliament was dissolved in 24 March 2016, and following the Scottish Parliamentary election on 5 May 2016, the First Minister announced a new Scottish Cabinet, identifying education and the economy as priorities, along with the reform and improvement of public services and the ability to respond to challenges such as climate change in the years to come.

The Ministers serving in the Cabinet Team during 2017-18 were:

Nicola Sturgeon

First Minister

The First Minister is head of the Scottish Government. Ultimately responsible for all policy and decisions. Nicola Sturgeon became First Minister on 20 November 2014.

The Cabinet Team members serving during 2017-18, who were appointed on 18 May 2016, are as follows:

John Swinney

Deputy First Minister and Cabinet Secretary for Education and Skills

Responsibilities included: Government Strategy, Delivery and outcomes across portfolios, Resilience, School standards, Educational attainment and closing the attainment gap, National Improvement Framework, Quality and improvement, Teaching profession, School infrastructure and staffing, Qualifications, Behaviour, Measures to combat bullying, The Gaelic and Scots languages, Modern languages, Historical Abuse Enquiry, Named person, Cross Government co-ordination of Public Service Reform, Childcare implementation, Early years, Child protection, Social services workforce, Adoption and Fostering, Children's rights, Looked after children, Children's hearings, Protection of vulnerable groups, Children's services, Widening Access, Higher education and universities, Further education and colleges, Student funding, Science and STEM, Youth work, Skills Development Scotland, Implementation of Wood recommendations, Non advanced vocational skills.

Derek Mackay

Cabinet Secretary for Finance and the Constitution

Responsibilities included: Scottish Budget, Fiscal policy, Taxation, Budgetary monitoring and reporting, Scottish Public Finances and their sustainability, Public sector pay and pensions, Scottish Futures Trust, Efficient government, Public Bodies Policy, National Performance Framework, Registers of Scotland, Government procurement, Digital Public Services, Constitution, Government and Parliamentary business, Scottish Parliamentary elections and Local Government Elections, relations with other UK administrations, FOI, Open Government.

Keith Brown

Cabinet Secretary for Economy, Jobs and Fair Work

Responsibilities included: The Scottish economy, infrastructure investment policy, Scottish Enterprise, trade & inward investment, innovation, internationalisation, increasing productivity, fair work and inclusive growth, labour market strategy, living wage, European structural funds, consumer advocacy and advice, employment policy, trades unions, bankruptcy policy and Accountant in Bankruptcy (AiB), business, industry and manufacturing, cities, energy and energy consent, regional economic forums, life sciences, financial services, low carbon economy, renewable energy industries, youth and women's employment, veterans, employability programmes.

Roseanna Cunningham

Cabinet Secretary for Environment, Climate Change and Land Reform

Responsibilities included: Climate change, flood prevention, water quality, land reform, physical and marine environment, sustainable development, biodiversity, natural heritage, environmental protection, environmental and climate justice, national parks, Scottish Water, The Crown Estate.

Angela Constance

Cabinet Secretary for Communities, Social Security and Equalities

Responsibilities included: Welfare policy, community empowerment, devolution to communities and reform of local government, equalities, religious and faith organisations, protection and development of social and human rights, third sector and social economy, democratic renewal, local government, housing, homelessness, community planning, planning, business improvement districts, town centres, building standards, social security, implementation of new powers, measures against poverty, disabilities, older people, tackling inequalities, social justice, regeneration.

Shona Robison

Cabinet Secretary for Health & Sport

Responsibilities included: NHS, Elective centres, Health and social care integration, Carers, Adult care and support, Implementing 2020 Vision and National Clinical Strategy, Patient services, NHS staff and pay, Problem alcohol use and recovery, Healthy working lives, National service planning, NHS performance, Acute services, Sporting events and legacy, Patient safety, Quality strategy, Public health, Health protection, Sport and physical activity, Primary care, Mental health, Allied healthcare services, Dentistry, Sexual health, medical records, Health improvement, Drugs policy, Child and maternal health.

Michael Matheson

Cabinet Secretary for Justice

Responsibilities included: The justice system, criminal law procedure, civil law, police, fire and rescue services, legal profession, violence reduction, anti-sectarianism, courts, sentencing, security, human rights, access to justice, community safety, anti-social behaviour, prisons and prisoners, female offenders, criminal justice social work, victims and witnesses, reducing reoffending, youth justice, liquor licensing.

Fiona Hyslop

Cabinet Secretary for Culture, Tourism & External Affairs

Responsibilities included: Culture and the arts, broadcasting, architecture, built heritage, national identity, cross government co-ordination on bringing major events to Scotland, national records, fair trade, tourism, international development, cross-government co-ordination on European Union and international relations, Scottish diaspora, creative industries.

Fergus Ewing

Cabinet Secretary for Rural Economy and Connectivity

Responsibilities included: Rural Scotland, Highlands Islands Enterprise, agriculture, forestry, fisheries, aquaculture, food and drink, crofting, transport, connectivity including 100 per cent broadband, cross government co-ordination on Islands, public transport.

Additional Government Ministers during 2017-18

The Cabinet was supported by the following ministerial team:

Mark McDonald (until Nov 2017) Minister for Childcare and Early Years

Maree Todd (from Nov 2017) Minister for Childcare and Early Years

Shirley-Anne Somerville Minister for Further Education, Higher Education and Science

Jamie Hepburn Minister for Employability and Training

Joe Fitzpatrick Minister for Parliamentary Business

Aileen Campbell Minister for Public Health and Sport

Maureen Watt Minister for Mental Health

Alasdair Allan Minister for International Development and Europe

Kevin Stewart Minister for Local Government and Housing

Jeane Freeman Minister for Social Security

Annabelle Ewing Minister for Community Safety and Legal Affairs

Paul Wheelhouse Minister for Business, Innovation and Energy

Humza Yousaf Minister for Transport and the Islands

Michael Russell Minister for UK Negotiations on Scotland's Place in Europe

Law Officers during 2017-18

James Wolffe QC Lord Advocate

Alison Di Rollo Solicitor General

Further information on Cabinet and Ministerial responsibilities is available from the Scottish Parliament and Scottish Government websites, at parliament.scot and gov.scot respectively.

The Civil Service and Government Officials

The First Minister leads the Scottish Government, with the support of the Scottish Cabinet and Ministers. The civil service helps the government of the day develop and implement its policies as well as deliver public services. Civil servants are accountable to Ministers, who in turn are accountable to Parliament.

The Permanent Secretary leads the civil service in Scotland and supports the government in developing, implementing and communicating its policies; and is the principal policy adviser to the First Minister and Secretary to the Scottish Cabinet. The Permanent Secretary is also the Principal Accountable Officer with responsibility to ensure that the government's money and resources are used effectively and properly.

The government is structured into a number of directorates and their related public bodies. Directorates and agencies are managed by six Directors-General (DGs).

Scottish Government Senior Management Team (Corporate Board)

The Scottish Government Senior Management Team are responsible for ensuring that the Scottish Government is organised and managed in the most effective way to support Ministers in the implementation of their policies. The senior management team, formerly recognised as the Executive Board became the Corporate Board in January 2018. Further information on the management structure of the Scottish Government is available on the Scottish Government website at gov.scot.

The Non-Executive Directors provide strategic challenge, advice and assurance to Scottish Government core business. Janet Hamblin, Non-Executive Director, is the Chair of the Scottish Government Audit and Assurance Committee.

The Executive Team was reshaped during 2017-18, with changes to DG roles and responsibilities coming into effect on the 1st of July 2017. Therefore the members of the Corporate Board in 2017-18 were:

Leslie Evans Permanent Secretary

Sarah Davidson DG Organisational Development and Operations

Liz Ditchburn DG Economy

Paul Gray DG Health & Social Care

Paul Johnston DG Education, Communities & Justice

Alyson Stafford CBE DG Scottish Exchequer

Ken Thomson DG Constitution & External Affairs

The aforementioned move to become the Corporate Board in January 2018 resulted in the formal recognition of the following directors whom were a functional part of the senior management team for the full year:

Barbara Allison Director of Communications, Ministerial Support and Facilities

Nicky Richards Director of People

Gordon Wales Chief Financial Officer

Non-executive members of the Corporate Board during 2017-18 were:

Janet Hamblin

Linda McKay

Ronnie Hinds

Hugh McKay (from January 2018)

Annie Gunner Logan (from January 2018)

Register of Interests

Non-Executive Directors of the Corporate Board whom held company directorships and other significant interests during 2017-18 were:

Janet Hamblin: Partner of RSM; and Member of the Education Board of Merchant Company of Edinburgh
Ronnie Hinds: Deputy Chair of the Accounts Commission for Scotland and Chair of the Local Government Boundary Commission for Scotland
Hugh McKay: Non-Executive Director - Lloyds Development Capital; and Non-Executive Director - Trustee at The Chartered Bankers Institute (non-remunerated position).
Annie Gunner Logan: Director Coalition of Care and Support Providers in Scotland (CCPS)

SG2020 Transformation Programme

Over the next parliament the Scottish Government faces the biggest ever shift in responsibilities - raising taxes as well as spending them. To meet the challenges ahead, the organisation is committed to being:

Open

  • accessible, trusted, an engaged and credible partner
  • clear about roles and expectations of others
  • valuing diversity and representative of the communities served

Capable

  • world class in the approach to government, transforming Scotland by designing and delivering excellent public services and supporting ministers
  • accountable, efficient and effective in performance and approach to tax-raising and spending
  • competent, professional, inclusive, skilled and knowledgeable: an exemplar of fair work and an employer of choice
  • well-led with consistently good management of people and change

Responsive

  • ambitious for Scotland and confident about improving outcomes
  • focused on priorities, flexible and effective in matching resources and capabilities
  • designing better places, networks and systems

More detailed information about the actions planned by the Scottish Government to meet the challenges ahead is provided in the publication of the Government's Programme for Scotland 2017-2018[1].

How the Scottish Budget is funded

There are a number of sources of funding to support the expenditure planned and approved by the Scottish Parliament in the Scottish Budget Act. The majority of the receipts reported in these accounts are transferred to bodies within the Scottish Consolidated Accounting Boundary from the Scottish Consolidated Fund.

The Scottish Consolidated Fund was set up following devolution in 1999 and received its statutory powers under the Scotland Act 1998. The Scottish Consolidated Fund receives, from the Office of the Secretary of State for Scotland, sums which have been voted by the UK Parliament for the purpose of "grant payable to the Fund". Funding is drawn down by the Scottish Government from the Scottish Consolidated Fund to support the spending plans laid out in the draft budget.

The primary receipts to the Scottish Consolidated Fund are from: the block grant from HM Treasury; receipts collected by HMRC on behalf of the Scottish Government under the provisions for Scottish Income Tax; Devolved taxes collected by Revenue Scotland which are currently Land and Buildings Transaction Tax and Landfill Tax; and borrowing.

The block grant from UK Government is allocated to the Secretary of State for Scotland through the approval of the UK Parliament, and forms part of the UK public expenditure control regime. This requires the Scottish Government to plan, monitor and report its spending against the control aggregates set by the UK Parliament and HM Treasury alongside those set by the Scottish Parliament.

The Scotland Act 2016 empowered the Scottish Parliament to set Scottish Income Tax rates and bands. During 2017-18, £11.9 billion in income tax revenues derived from Scottish Income Tax were assigned to the Scottish Administration and paid to the Scottish Consolidated Fund. Identification of Scottish taxpayers and administering the tax are matters for the UK Government and Her Majesty's Revenue and Customs (HMRC).

Under devolved powers from the 2012 Scotland Act, 2017-18 was the third year in which devolved taxes in respect of Land and Buildings Transactions and Landfill Tax have been managed in Scotland. A total of £707 million has been collected, £51 million above the initial estimates, which has been managed within the in-year budget. The block grant has been adjusted to take account of these locally raised tax receipts.

Revenue Scotland was established by the Revenue Scotland and Tax Powers Act 2014 to administer and collect both fully devolved taxes. Revenue Scotland is responsible for preparing an account of the devolved taxes (The Devolved Taxes Account). The taxes collected by Revenue Scotland are paid to the Scottish Consolidated Fund. The Devolved Taxes Account and the Scottish Consolidated Fund Account are prepared and published separately and can be accessed at gov.scot.

A Scottish Cash Reserve facility was created in 2015-16 to support any future fluctuations in tax income, and the surplus of £74 million from cash receipts in 2015-16 was deposited in the Reserve. There was no change in the Scottish Cash Reserve in 2016-17, and the balance of £74 million was transferred to the Scotland Reserve on 1 April 2017 and is available for future deployment. The opening balance was supplemented by the £453 million provisional cash underspend reported to the Scottish Parliament by the Cabinet Secretary for Finance and The Constitution in June 2018. The provisional balance at 31 March 2018 is sufficient to cover the additional spending commitments announced for 2018-19, leaving a modest amount available to support management of future budget volatility.

As further powers are devolved to Scotland, and the ability to use the existing fiscal levers to influence the funds available is increasing, the impact of accurate tax forecasting becomes greater. As a consequence, the institutional landscape of Scotland required a new body to support this growing fiscal responsibility and The Scottish Fiscal Commission was established in June 2014 as a non-statutory body to provide independent scrutiny of Scottish Government forecasts of receipts from taxes devolved to Scotland. By March 2016 the Scotland Act 2016 devolving more fiscal powers to Scotland was passed, and associated Fiscal Framework was agreed between the Scottish Government and UK Government. The Fiscal Framework changed the remit of the Scottish Fiscal Commission as reflected in the Scottish Fiscal Commission Act 2016 which received Royal Assent on 14 April 2016. Further information about the Scottish Fiscal Commission can be found at fiscal.scot.

Further information can be found in the Scotland's Budget: Draft Budget for 2017-18[2].

The total budget approved by the Scottish Parliament includes activities not included in these accounts. Note 21 to these accounts (page 120) provides a reconciliation to the total budget.

The fiscal activity of the Scottish Government is described in a suite of accounts information: the Scottish Consolidated Fund account, incorporating additional reporting on the use of borrowing powers and the related Devolved Taxes Account report on the funding available to the Scottish Government in the financial year; the Scottish Government Consolidated Accounts, the annual accounts of the other bodies within the Scottish Administration and of the bodies funded directly from the Scottish Budget together report on the use of resources authorised by the Scottish Parliament for the financial year.

Accounting Boundary

These accounts reflect the consolidated assets and liabilities and the results of all entities within the Scottish Government consolidation accounting boundary as required by and defined in the Government Financial Reporting Manual (FReM). This consists of ten internal Portfolios, supported by Administration, their Executive Agencies (each linked to a specific portfolio), the Crown Office and Procurator Fiscal Service and the NHS Bodies responsible for the planning, promotion, commissioning and the delivery of healthcare. The portfolio analysis in these accounts reflects the portfolios designated by the First Minister from 18 May 2016. The consolidation boundary includes the following:

Finance and the Constitution Portfolio

Executive Agency : Scottish Public Pensions Agency (www.sppa.gov.uk)

Health and Sport Portfolio

Other Consolidated Bodies : The NHS Bodies in Scotland
Mental Welfare Commission (www.mwcscot.org.uk)

Education and Skills Portfolio

Executive Agencies : Disclosure Scotland (www.mygov.scot/organisations/disclosure-scotland)
Education Scotland (education.gov.scot)
Student Awards Agency for Scotland (www.saas.gov.uk)

Economy, Jobs and Fair Work Portfolio

Executive Agency : Accountant in Bankruptcy (www.aib.gov.uk)

Justice Portfolio

Executive Agency : Scottish Prison Service (www.sps.gov.uk)

Communities, Social Security and Equalities Portfolio

Environment, Climate Change and Land Reform Portfolio

Culture, Tourism and External Affairs Portfolio

Rural Economy and Connectivity Portfolio

Executive Agency : Transport Scotland (www.transportscotland.gov.uk)

Other Consolidated Bodies: The Crown Office and Procurator Fiscal Service (www.copfs.gov.uk)

In addition to inclusion within these consolidated accounts, the executive agencies and other bodies detailed above also publish separate accounts providing greater detail about their income and expenditure and assets and liabilities. The accounts can be accessed at the websites noted above.

The Scottish Government is also the sole shareholder of Caledonian Maritime Assets Ltd, David MacBrayne Ltd, Highland and Islands Airports Limited, Scottish Futures Trust and Prestwick Holdco Limited, and sponsor of a number of executive, advisory and tribunal Non-Departmental Public Bodies. These bodies are regarded as related parties with which the Scottish Government has had various transactions during the year, but do not fall within the Scottish Government consolidation accounting boundary. Further details of Scottish Public Bodies are available on our website[3].

The financial statements of NHS Boards include NHS Endowment Funds. These Endowment Funds are Registered Charities with the Office of the Scottish Charity Regulator (OSCR) and they are also required by OSCR to prepare audited financial statements. NHS Endowment Funds are not part of the Scottish Government accounting boundary, and therefore they have not been included in Scottish Government consolidated accounts. These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The Scottish Government also routinely reports to Parliament each year on the Final Outturn for the Scottish Administration in an additional statement, and the report is published at the same time as these accounts. This brings together the audited information from the bodies within the Scottish Administration to show this against the Budget limit authorised by the Scottish Parliament.

Performance Overview

The Budget Framework

The Scottish Government set out its spending plans for 2017-18 in December 2016 in Scottish Budget: Draft Budget 2017-18. Approval for a detailed budget for 2017-18 was given by the Parliament in March 2017 in the Budget (Scotland) Act 2017. The annual Budget is refined through in-year budget revisions, Parliamentary approval for which is given by statutory instrument.

Scotland's Economic Strategy

The Scottish Government's Purpose is 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.

This remains the Government's ambition to which all our efforts and actions are directed and is at the core of Scotland's Economic Strategy (SES), published in March 2015. The SES is built around two interdependent pillars: increasing competitiveness and tackling inequality. The Scottish Government's National Economic Strategy is available online[4].

Infrastructure Investment

Infrastructure investment in support of better and modern public services and growth in the Scottish economy is a top priority for the Scottish Government.

The Scottish Government is taking forward a comprehensive infrastructure investment programme and further detail about the infrastructure investment plan can be found online[5].

Exit from the EU

Following the referendum held on UK membership of the EU held in June 2016, in which the UK voted to leave the EU by 52% to 48%, the UK Government has given notice of intention to withdraw from the European Union-the triggering of article 50.

As negotiations between the UK government and the European Union around the settlement arrangements continue, It is not yet possible to fully quantify the impact of this decision on Scotland, but the fluctuations in exchange rates and other economic features will inevitably be reflected in the financial performance reported in these and future accounts.

There remains a level of uncertainty on the impact of the referendum result on jobs and the economy in the medium to long-term.

The Scottish Government has been engaging with the UK Government to ensure that Scotland's fiscal interests are safeguarded as the UK leaves the European Union.

At present Scotland remains part of the EU and current EU-funding remains in place. All programmes that have been approved by the European Commission up to March 2019 will continue as they do now.

The First Minister appointed Michael Russell as Minister for UK in Negotiations on Scotland's Place in Europe, and he leads the discussions with the UK Government on our future relationship with Europe.

Further information can be found online[6].

National Performance Framework

Introduced in 2007 and refreshed in 2011 and 2016, the Scottish Government's National Performance Framework (NPF) sets out in the Purpose and the National Outcomes, a clear, unified vision for Scotland and how our actions would improve the quality of life for the people of Scotland. The vision for a successful Scotland was described and measured in five parts which supported and reinforced each other:

  • The Scottish Government's Purpose set out the direction and ambition for Scotland.
  • Purpose Targets were high level targets that show progress towards the Purpose.
  • Strategic Objectives described where we focused our actions.
  • National Outcomes described what the Scottish Government wanted to achieve and the kind of Scotland we wanted to see.
  • National Indicators enabled us to track progress towards the Purpose and National Outcomes.

Following the introduction of the Community Empowerment (Scotland) Act 2015, Scottish Ministers now have a duty to consult on, develop and publish a new set of National Outcomes for Scotland and to review them at least every five years.

A series of public, expert and internal consultation exercises were conducted in 2017-18 and significant changes to the National Outcomes led to a review of the overall framework, including the National Indicator set and overarching Purpose. The new NPF was formally launched in June 2018.

During the 2017-18 financial year however, the previously published NPF was in operation and therefore the Purpose, Purpose targets, Strategic Objectives, National Outcomes and National Indicators were set out as per the 2016 published NPF[7]

Strategic Objectives, National Outcomes and National Indicators

For 2017-18 financial year the five Strategic Objectives supported delivery of the Government's overarching Purpose to focus government and public services on creating a more successful country, with opportunities for all Scotland to flourish, through increasing economic sustainable growth. These Objectives were supported by 16 National Outcomes which described in more detail what the Scottish Government wanted to achieve. The Five Strategic Objectives were:

Wealthier and Fairer
Enable businesses and people to increase their wealth and more people to share fairly in that wealth.

Smarter
Expand opportunities for Scots 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 and 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 sixteen National Outcomes described what the Government wanted to achieve over the ten years, articulating more fully the Government's Purpose. They helped to sharpen the focus of government, enabled our priorities to be clearly understood and provided a clear structure for delivery. The sixteen national outcomes were:

  • We live in a Scotland that is the most attractive place for doing business in Europe.
  • We realise our full economic potential with more and better employment opportunities for our people.
  • We are better educated, more skilled and more successful, renowned for our research and innovation.
  • Our young people are successful learners, confident individuals, effective contributors and responsible citizens.
  • Our children have the best start in life and are ready to succeed.
  • We live longer, healthier lives.
  • We have tackled the significant inequalities in Scottish society.
  • We have improved the life chances for children, young people and families at risk.
  • We live our lives safe from crime, disorder and danger.
  • We live in well-designed, sustainable places where we are able to access the amenities and services we need.
  • We have strong, resilient and supportive communities where people take responsibility for their own actions and how they affect others.
  • We value and enjoy our built and natural environment and protect it and enhance it for future generations.
  • We take pride in a strong, fair and inclusive national identity.
  • We reduce the local and global environmental impact of our consumption and production.
  • Our people are able to maintain their independence as they get older and are able to access appropriate support when they need it.
  • Our public services are high quality, continually improving, efficient and responsive to local people's needs.

The new NPF launched in June 2018 now comprises;

  • Our Purpose which sets out the direction and ambition for Scotland. It is a simple statement that is inclusive beyond government and public services, and gives equal prominence to economic, environmental and social progress, and focuses on reducing inequalities.
  • Our Values describes the underpinning principles that we share as a nation, and the particular approach that we take to government and the delivery of public services in Scotland.
  • 11 National Outcomes describe what the Scottish Government wants to achieve and the kind of Scotland we want to see. These Outcomes were selected after extensive review in 2016-2017; and
  • a set of 81 National Indicators will enable us to track progress towards the Purpose and National Outcomes. The set provides a broad measure of national wellbeing, incorporating a range of economic, social and environmental indicators.

Performance is reported on the new NPF website[8] which is updated as soon as new data becomes available. It includes performance on equality groups and area based inequalities, the last publication of performance data was 23 August 2018.

Performance Analysis

Outturn against Budget

These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The annual budget authorised by the Scottish Parliament is the budget for the wider Scottish Administration and includes the funding of activities which are not within the Scottish Government, and therefore outside the required accounting boundary of these accounts. There are also some differences between the HMT required budgeting rules and the government financial reporting accounting requirements that have to be accommodated in any comparison. These accounts therefore compare the actual outturn to the budget, both stated on the same accounting basis. There is a reconciliation and explanation of the budget reflected in the accounts with that shown in the annual budget documents provided in Note 21.

As described above, spending plans for financial year 2017-18 were set out in Scottish Budget: Draft Budget 2017-18 published in December 2016. After consideration by the Scottish Parliament Finance and Constitution Committee and other Committees, these plans were presented in the Budget Bill introduced in January 2017 and received Royal Assent as the Budget (Scotland) Act 2017 in March 2017. Parliamentary approval for the in-year revisions to the plans set out in the Budget (Scotland) Act was granted in the Autumn Budget Revision made in September 2017 and Spring Budget Revision, made in February 2018.

The budget of £34,800 million reported in these accounts is net of adjustments to reflect those activities not included in the accounting boundary as described above. This is made up of an operating budget of £32,736 million and a capital budget of £2,064 million.

The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of £32,449 million resulting in an underspend of £287 million. The Net Capital Outturn for the year was £2,012 million resulting in an underspend of £52 million. Total underspend of £339 million represents approximately 0.97 per cent of the total budget. An explanation of the major variances is included in these accounts in the portfolio outturn statements. Of the total resource outturn of £32,449 million, £10,462 million (32%) is funding to local government.

Under the current devolution settlement, the Scottish Parliament is not allowed to overspend its budget. As a consequence, the Scottish Government consistently adopted a position of controlling public expenditure to ensure we live within the budget caps that apply, but remain able to carry forward some spending power resources for use in a future year.

The provisional outturn announcement made by the Cabinet Secretary for Finance and the Constitution in June 2018 indicated that the fiscal cash budget in 2017-18 would be underspent by £453 million. The announcement reported the position in terms of Scottish Government expenditure against totals as set by HM Treasury. The two sets of outturn information are not strictly comparable. The scope of what is included in these accounts is determined by the requirements of the Government's Financial Reporting Manual (FReM) and covers elements that are not included in the HM Treasury figures.

Statement of Financial Position

The primary purpose of these accounts is to reflect the use of resources. The Statement of Financial Position reflects the assets held and liabilities arising from the spending plans which support policy choices. Assets are held not for their income generation capability or their inherent value but for their service potential or as a direct consequence of particular policies, for example providing healthcare in hospitals and the provision of funding to students in the form of loans. Similarly, liabilities arise as a consequence of the timing of commitments relating to spending and policy choices.

The Consolidated Statement of Financial Position, known previously as the balance sheet, (page 64) is one of the primary financial statements in the Consolidated Accounts. It summarises what is owned and owed by the Scottish Government. This shows taxpayers' equity – an accounting measurement of the amount invested by taxpayers that has continuing public benefit. It shows how much of this has arisen from the application of revenues (including the Scottish Block Grant) and that which has resulted through changes over time in the value of physical assets.

It is important to note that the consolidated accounts bring together the "balance sheets" of bodies that are significant in their own right. Detailed financial and narrative information on the major items, for example the road network, is available in the accounts and related reports of the relevant body - Transport Scotland; similarly, information about NHS bodies is in the detailed accounts for each body; the Student Awards Agency also provides separate reporting around student loans i.e. the loans are not within SAAS' accounts but they do provide information about their administration, and the loans themselves are reported within these consolidated accounts.

The Statement of Financial Position includes:

  • items which are owned, have already been funded from revenues and will provide continuing economic benefit in future periods. These increase taxpayers' equity.
  • items which are owed and expected to require to be funded from future revenues. These decrease taxpayers' equity.
  • items owed to the Scottish Government.
  • an analysis between amounts that will release or require funding within a year and those which will be carried into future years.

Assets and liabilities

Physical assets are the highest value group of assets in the Consolidated Accounts with a value of £29,380 million at 31 March 2018, of which 66 per cent (£19,395 million) relates specifically to the road network. The Consolidated Accounts provide details of changes in the year. There were additions of £883 million that resulted from capital investment, offset by disposals and the net effect of depreciation and revaluations.

Most physical assets are valued by professional valuers in line with recognised methodologies. This provides an assessment of the continuing benefit they provide in financial terms. Where these assets have been funded by traditional means through capital then there are no continuing liabilities relating to them (maintenance and repair costs will arise). Those funded through other means (such as Public Finance Initiatives, Non Profit Distributing Projects and Scottish Government borrowed funds) also lead to liabilities representing the amounts that will require to be met from future budgets. Only physical assets that are deemed surplus and 'held for sale' (£17 million, page 86) will release resources previously invested for future use.

Financial assets include loans made directly to other organisations and individuals, investment funds used to deliver development programmes and investments in nationalised industries plus fully or part owned companies. These assets are of continuing benefit to the Scottish Government, and have the potential over time to release the resources currently invested for future use – including reinvestment, in accordance with the terms of the loan or other investment made.

The Scottish Government brokered an agreement in April 2018 to secure the long term future of Burntisland Fabrications (BiFab), a major fabrication supplier to the oil and gas sector; offshore renewables and wider infrastructure industries. As part of this agreement the Scottish Government will increase a previous loan facility made available to BiFab and convert that loan to a minority equity stake in the new company. That loan facility has been made on a fully commercial basis. The extent of that shareholding will be determined by the extent to which the loan facility is utilised but will not exceed 38%.

The Scottish Government is also supporting commercial shipbuilding through the provision of two loan facilities to Ferguson Marine Engineering Limited (FMEL). A £15 million loan facility was made available in September 2017 and drawn down in financial year 2017/18. A further loan facility of £30 million was provided in June 2018 to provide working capital to help FMEL diversify its business. This is a strategic investment in Scotland's industrial capability as both the marine engineering sector and commercial shipbuilding have vital roles to play in Scotland's economic future.

The Consolidated Accounts show that the largest financial assets are voted loans of £2,875 million that have been made to Scottish Water, to finance its capital investment programmes (an increase of £167 million from 31 March 2017), and student loans valued at £3,691 million (an increase of £434 million from 31 March 2017). The latter are made under the terms of the student loans scheme, administered by the Student Loans Company Limited. Loans to Prestwick Airport, a wholly owned subsidiary of Transport Scotland, of £38 million are also included here.

The total value of taxpayers' equity, reported in the Statement of Financial Position, is £32,606 million at 31 March 2018, an increase of £1,435 million (4.6%) from 31 March 2017.

The elements of the Statement of Financial Position are measured and disclosed in accordance with accounting standards and notes to the accounts provide analysis and explanation. More detailed information on the Statements of Financial Position of the individual entities included within these consolidated accounts can also be found in the entity's published accounts by following the links provided on page 11 above.

Pensions

The SG consolidated accounts include as expenditure the employers' contributions payable for the financial year. Staff in the Core Scottish Government, Executive Agencies and Crown and Procurator Fiscal Service are members of the Principal Civil Service Pension Scheme (PCSPS). There is no pension liability in respect of the PCSPS within the SG consolidated accounts, because it is a UK scheme, administered by the Cabinet Office and it is not possible to identify the "Scottish share" of the underlying assets and liabilities of the scheme. The Cabinet Office produces separate pension scheme accounts, covering all members across the UK.

Staff in the NHS consolidated bodies can choose between the PCSPS and the NHS Superannuation Scheme for Scotland, which is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The NHS scheme is administered by the Scottish Public Pensions Agency and annual scheme accounts are produced.

The liabilities to be met over time are not met from investments but paid out each year from the funding of the relevant schemes. The NHS scheme is funded within the Scottish Administration in the Scottish Budget; the PCSPS is dealt with through the UK annual process.

National Accounts Classification

Changes in EU statistical accounts classification rules (ESA10) in September 2014 triggered a review of the classification of some Non Profit Distributing (NPD) projects. There are no issues around the accounting entries, as infrastructure assets are recorded in the accounts in accordance with international accounting standards, which largely reflect the statistical national accounts rules. However the ESA10 rules have impacted on how public expenditure is measured against budgets.

The Office of National Statistics reclassification of some NPD projects has resulted in the initial capital value of some NPD projects during their construction period being charged against the capital outturn budget (CDEL), rather than the associated revenue funding over the contractual period when cash payments are made.

Capital Borrowing

Under Section 32 of the Scotland Act 2012, as amended by Scotland Act 2016 Section 20, additional borrowing powers were conferred on Scottish Ministers with effect from 1 April 2015. Any sums borrowed and repaid under these provisions must do so via the Scottish Consolidated Fund and hence be reflected in those accounts. The first exercise of the borrowing powers took place in 2017-18 where £450 million (the maximum available) has been drawn down to the Scottish Consolidated Fund from the National Loans Fund.

The repayment of borrowing is scheduled as follows:

  Principal
£m
Interest
£m
Total
£m
<1 year 7.1 7.7 14.8
1 – 5 years 59.0 31.7 90.7
>5 years 383.9 81.4 465.3
Total 450.0 120.8 570.8

An arrangement was agreed with HM Treasury for notional borrowing in 2015-16 and 2016-17 to meet the budget implications of the classification decision related to the introduction of ESA10 which required the capital value of a small number of NPD projects to be budgeted for in the years of asset construction. This required the notional amounts borrowed to be recorded against the Scottish Government's borrowing cap in each of these years, however no actual borrowing was undertaken.

Payment Policy

The Scottish Government policy requires that all suppliers' invoices not in dispute are paid within the terms of the relevant contract. The Scottish Government aims to pay 100% of invoices, including disputed invoices once the dispute has been settled, on time in these terms.

As part of its plan for supporting economic recovery in Scotland, the First Minister announced on 9 October 2008 that the Scottish Government would aspire to a 10-day target for paying bills to businesses in Scotland. This aspiration is above and beyond our contractual commitment to pay suppliers within 30 days. Paying supplier bills within ten working days is seen as a key objective, and an important expression of the Scottish Government's commitment to supporting business through the current economic downturn.

For financial year 2017-18, the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service made 98.2% of all payments within 10 days (2016-17: 98.6%). The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 98.8% of payments within 10 days (2016-17: 99.0%).The NHS bodies in Scotland made 82.9% of all payments within 10 days (2016-17: 84.6%).

The payment performance of the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service for 2017-18 was 99.5% (2016-17: 99.8%) of all transactions settled within the terms of its contractual 30 day payment policy. The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 99.7% (2016-17: 99.8%) of all payments within the terms of its contractual 30 day payment policy. The NHS bodies in Scotland made 92.7% (2016-17: 93.6%) of all payments within the terms of their contractual 30 day payment policy.

Sustainability and Environmental Reporting

The Scottish Government has developed guidance for central government and the wider public sector on the preparation of sustainability reports to complement Annual Reports and Accounts. The guidance is intended to form a key element of a sustainability reporting framework for the Scottish public sector (referred to as the Scottish Sustainability Reporting Framework). The Framework will aim to inform best-practice across the public sector and demonstrate a coherent approach which meets statutory and non-statutory sustainability reporting requirements in the most cost effective and least burdensome manner to help drive improvements in sustainability performance.

The guidance relates specifically to information to be included in Scottish Public Sector Sustainability Reports intended to complement Annual Reports and Accounts and expected to be consistent with the reporting requirements flowing from the Climate Change (Scotland) Act 2009 and the principles for sustainability reporting contained in HM Treasury guidance.

The Scottish Government's current reporting on sustainability is focused on the environmental aspects of sustainability; it currently publishes an annual report on environmental performance against a range of targets in respect of the core estate including emissions from energy use, waste arisings and recycling rates, transport & travel emissions, water consumption and biodiversity. The development of the Scottish Sustainability Reporting Framework includes consideration of how the current reporting format can be enhanced to embrace other aspects of sustainability performance.

Environmental reporting for the Scottish Government can be found on the Government On-Line Sustainable Performance Information Exchange (GOLSPIE) portal[9]. GOLSPIE is a dynamic platform which provides up-to-date access and reporting on the Scottish Government's environmental targets, indicators and performance.

The Scottish Government annually publishes a high level Carbon Assessment alongside the Scottish Government's Draft Budget[10].

Principal Accountable Officer
24 September 2018


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