The Budget Development Process
We are committed to continuing to advance our approach to equality and human rights budgeting, including through improvements to the Equality and Fairer Scotland Budget Statement (EFSBS). We will ensure that equality analysis is further strengthened and used through the policy making and resource allocation processes.
We are also committed to working with EHRBAG to ensure that we employ best practice and that our plans and their implementation are appropriately scrutinised.
Current and planned activity
The policy-making and resource allocation cycle
The annual Scottish Budget remains an important part of our fiscal calendar, and is required to secure Parliamentary authority for public spending each financial year. We continue to ensure that there is appropriate assessment of the potential equality and human rights impact of both the annual budget and future spending reviews, using learning from the annual EFSBS process, Emergency Budget Review and the Equality and Fairer Scotland Statement, which was published alongside the Resource Spending Review in 2022.
During the budget process, portfolios are encouraged to use equalities impact analysis to inform decision-making, including decisions that may require negative effects to be mitigated. This analysis is used at both official and Ministerial levels. For the 2023-24 budget draft, high-level cumulative analysis was developed, for consideration at a cross-government level. We are taking steps to improve how analysis is used and further increase the transparency of decision making, where those decisions have been impacted by this work.
We continue to develop and refine the EFSBS process and are working iteratively, drawing on the learning from each cycle to improve analysis and the available information and, ultimately, improve decision making. This will include considering how impacts on the public and third sectors can be appropriately anticipated in the analysis of spending commitments that support Scottish Government priorities.
The majority of policies are not announced as part of the budget process; rather, there is a cycle of development of individual policies. Therefore, the most effective place to ensure that lived experience views are considered is at portfolio level when developing policies. For each policy, we identify the relevant commitments that form part of the annual Programme for Government (PfG), we also review the equality and human rights dimensions of any proposals, along with making links to the National Performance Framework. We continue to refine this process and build on the learning from each cycle.
We are currently ensuring better alignment of the upcoming PfG and Budget processes. As part of this, we are piloting a more integrated approach to equality assessment across the processes to develop these publications. This will ensure that equality evidence is considered and regularly reviewed, throughout the whole strategic cycle of government policymaking and resource allocation.
We recognise the opportunities to improve our strategic system of policy-making and resource allocation (including Medium-Term Financial Strategy, Programme for Government, Budget, and Accounts). Making change in these areas can be complex and is likely to require a significant amount of resource and time. The first step we are taking is improving the alignment of the Programme for Government to the Budget process. In addition to this, we established a Senior Leadership Group, of senior officials across Government, which will scrutinise and bring challenge to our strategic approach to embedding equality and human rights. We will use this Group to drive forward improvements across systems in budgeting, policy and operations.
We have established an Impact Assessments improvement programme that includes child rights and wellbeing impact assessments. This improvement programme is focussed on: opportunities to embed best practice in impact assessments, a stronger approach to intersectionality, and practical means to implement impact assessments (including exploring how this aligns to the current budget process). A separate strand of work to strengthen accountability and oversight, to ensure effective high quality impact assessments are produced, is also underway.
The improvement programme includes support to officials on policy making, guidance and training. A key element of this project will be to more strongly embed impact assessments into our corporate systems and processes. This embedding of impact assessments will also ensure that there is alignment with the Programme for Government, National Performance Framework and other tools. This involves exploring closer links with the Certificates of Assurance process, Accountable Officer templates and the Equality and Fairer Scotland Budget Statement to better link impact assessments with budgetary processes and financial decisions. This project will be delivered throughout 2023, and beyond.
We have also created a human rights impact assessment framework (HRIA) as part of the development of the wider equality, inclusion and human rights mainstreaming strategy. The intention is for the HRIA to further aid the embedding of human rights principles and standards into all policy and legislative work. We are currently piloting this approach to ensure that it is fit for purpose and complements our other impact assessments.
Linking to outcomes
The National Performance Framework (NPF) brings a whole government approach to improving outcomes, including through budget. It sets a clear long-term purpose and offers outcomes for Scotland’s wellbeing beyond important, but narrow, economic measures of success. The Scottish Budget, and our wider policy-making process, is underpinned by our commitment to deliver against the National Outcomes. The Budget describes the primary and secondary National Outcomes which are supported by the Government’s investment. The Scottish Government also publishes information on the progress towards the National Outcomes through regular reporting on the National Performance Framework website. In addition to this, in order to augment our reporting and offer evidence on the progress made towards the National Outcomes, we published wellbeing reports in 2019 and 2020.
The Scottish Government reports on progress towards its equality outcomes and NPF indicators through the Mainstreaming report. We will explore how to include further meaningful financial information in these reports, with the aim of working towards including cumulative commitments. Additionally, the Equality and Fairer Scotland Budget Statement provides information on the anticipated impact of cumulative and ongoing spending commitments and funded programmes.
Linking policy development more effectively with budget decisions (and vice versa), improving outcomes data and better supporting longer term financial planning are priorities for the Scottish Government. Work is underway across portfolios: key examples include multi-year programmes on child poverty and climate change, which are undertaking a range of work to scrutinise the potential effectiveness of actions and interventions in the delivery of outcomes and overall objectives. For example:
- On climate change and transition to net zero, the Scottish Government and Parliament concluded, in December 2022, a Joint Budget Review on Climate Change, laying out a series of reforms to identify and present climate impact during the budget process. These reforms include developing an enhanced taxonomy to classify climate impact in a uniform manner across both resource and capital, alongside development of a Net Zero Assessment to better align carbon reduction outcomes with their associated policies and spending commitments. Ministers have updated Parliament on both these areas of work in June and will do so again in September this year. The Joint Budget Review work will also reinforce development of the next draft Climate Change Plan, due to be laid with Parliament in November 2023. The CCP is, for the first time, required by law to provide costs and benefits of the policies within the plan.
- With child poverty, the development of actions set out in Best Start, Bright Futures – Tackling Child Poverty Delivery Plan 2022-26 and the approach to the Resource Spending Review were underpinned by robust evidence and analysis, including a Cumulative Impact Assessment setting out the projected impact of action against future child poverty levels. The impact of action will be monitored through both progress towards the four targets set in statute by the Child Poverty (Scotland) Act 2017 and the revised Child Poverty Measurement Framework, which monitors changes in the drivers of poverty reduction over time. In addition, we have now established The Tackling Child Poverty Programme Board, to oversee progress on the delivery of the Plan as well as its impact on outcomes. Scottish Ministers will provide annual updates to Parliament in relation to the implementation of the Plan and progress toward the targets with annual Budget considerations being informed by this evidence.
We acknowledge the importance of providing certainty to key delivery partners, especially local government and we aim to do so, as much as possible within devolved competence. As set out in the Medium Term Financial Strategy published in May 2023, the Scottish Government will adopt a multi-year outlook, publishing refreshed multi-year spending envelopes for both resource and capital alongside the 2024-25 Budget and extend the Capital Spending Review and Infrastructure Investment Plan period by one year, taking these to 2026-27. This will recalibrate the portfolio spending envelopes set in the Resource and Capital Spending Reviews to reflect the new economic reality and ensure that spending is aligned to the three missions for this Parliament.
The multi-year Resource Spending Review was published in 2022, which set out spending plans to 2026-27 and was the first spending review under the framework agreement with the Finance and Public Administration Committee, which followed the recommendations of the Budget Process Review Group. It followed the multi-year capital spending review which was published in 2021. As part of both of these processes we produced framework documents in line with the recommendations of the Budget Process Review Group, undertook wider engagement (including a formal consultation exercise on the Resource Spending Review Framework), and published an Equality and Fairer Scotland Statement alongside the Resource Spending Review.
Other finance publications
As part of our response to the 2017 Budget Process Review Group’s recommendations, we introduced the Medium-Term Financial Strategy. This annual document provides the context for the Scottish Budget. It sets out the medium-term economic and fiscal outlook and provides context for the spending decisions made in the Budget. It includes an assessment of the key fiscal risks the Scottish Government faces and how we will manage them. It also sets out the principles for how we will exercise our limited resource, borrowing and reserve powers. The regular publication of the Medium Term Financial Strategy supports scrutiny from Parliament, stakeholders and the public.
The Scottish Government has also produced the Fiscal Framework Outturn Report annually since 2018. It was also recommended in the final report of the 2017 Budget Process Review Group. The key purpose of the Outturn Report is to report on outturn for tax revenue and social security expenditure, as well as the calculation of outturn Block Grant Adjustments and their comparison with forecast. The report also sets out the net effect of each tax and social security benefit on the Budget, implications of reconciliations for the next financial year, detail on payments and withdrawals from the Scottish Reserve and borrowing figures.
We also produce in-year budget revisions which provide information on in-year changes to the annual budget, including both planned spending and anticipated funding (i.e. Autumn Budget Revision, Emergency Budget Revision, Spring Budget Revision). We will continue to work closely with EHRBAG to understand what might be published alongside future iterations of these documents to improve equality analysis in-year. This review is planned for summer 2024 and we will take our findings and proposed next steps to EHRBAG when available. We will also review and, where appropriate, improve the information included in the Budget Revision guidance notes in line with our Open Government Partnership Action Plan.
The Public Sector Equality Duty
Last year, we consulted on the operation of the Public Sector Equality Duty and, in November, we published the analysis of the responses. This year, we will engage further with stakeholders to ensure that revised regulations – and the implementation environment around them – can help to deliver our goal of better outcomes for those who continue to experience inequality. We intend for regulatory changes to start to come into effect in 2025, in line with the current reporting period.
We are considering how best to support public sector organisations to include spending commitments when reporting on their equality outcomes. We have, as part of the consultation on the review of the Public Sector Equality Duty in Scotland, proposed making the mainstreaming reporting duty more prescriptive. We will, as part of the proposed changes, explore whether this can include reporting on the impact of past spend and budget allocations on equality outcomes. While this would provide a structural framework for reporting, we recognise that this will also require careful consideration in the implementation alongside developing capacity and capability building within public authorities to enable them to effectively achieve this. We will also explore how reporting requirements can align with the new Human Rights Bill.
Approach to the EFSBS
Last year we took a risk based approach with our Resource Spending Review, for both the Emergency Budget Review and the Equality and Fairer Scotland Budget Statement, however the circumstances meant that we focused on the response to the cost of living crisis. We will review these different approaches, in line with our budget process, to explore the potential improvements we can make in future budget cycles. This will include considering the most effective framework and tools to support staff in these decisions. We will engage with EHRBAG on the approach.
Engagement and participation
In relation to the Budget, a range of views are provided through the pre-budget scrutiny process - carried out by the Scottish Parliament’s Committees. Each Committee usually writes to their relevant portfolio minister(s) at least 6 weeks prior to the publication of the Budget, setting out the Committee’s views for the Budget. Almost all of the Committees then hold evidence sessions to ensure that a variety of views are represented.
The Scottish Government supports participatory budgeting as both a tool for community empowerment and as a means to build on the wider development of participatory democracy in Scotland. Participatory budgeting is supported through our Investing in Communities Fund, and we continue to work with COSLA to help local authorities reach the target of having at least 1% of their budget subject to participatory budgeting.
The National Participatory Budgeting Strategic Group have co-designed and published a framework for the future of participatory budgeting in Scotland. The Scottish Government will work with this group to operationalise this new framework and will, in particular, focus on health and wellbeing, education, housing and climate justice.
Prior to, or for, the 2024-2025 Budget
- Agree in partnership with EHRBAG an approach to the 2024-25 EFSBS and wider framework for equality budgeting.
- Take forward a more integrated approach to the equality analysis of PfG and Budget, which will be discussed with EHRBAG.
- Undertake an internal campaign to raise awareness of the Equality and Fairer Scotland Budget Statement, alongside work to raise awareness of the revised guidance on equality impact assessments. As part of this campaign we will highlight the importance of the other tools and resources that are available, including the Equality Evidence Finder. This will support colleagues as they develop policies and consider budgetary decisions. This campaign will include highlighting guidance that was issued previously on ‘Tackling inequality: guidance on making budget decisions’.
- Conclude the Impact Assessments Improvement Programme.
- Engage the newly formed Senior Leadership Group on improvements to the system of strategic Scottish Government budget publications.
Prior to, or for, the 2025-2026 Budget
- Undertake a review of the Scottish Government in-year budget revisions to identify improvements to reporting on potential impacts addressing inequalities. The findings from this review will be discussed with EHRBAG.
- Undertake a structured review of the 2024-25 EFSBS and discuss the findings with EHRBAG with a view to identifying and agreeing improvements for the 2025-26 process.
- Regulatory changes relating to the Public Sector Equality Duty to come into effect in 2025, in line with the current reporting period.
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