Supplementary memorandum submitted by
the Scotland Office
ANSWERS TO
THE COMMITTEE'S
WRITTEN QUESTIONS,
25 JULY 2007
The Committee Clerk wrote to the Scotland Office
on 25 July 2007 conveying a set of questions following the oral
evidence session held with the Secretary of State, the Minister
of State and the Head of the Scotland Office on 17 July.
The replies to the questions are set out in the following paragraphs.
1. Over the last few years the provision
for the Scottish Consolidated Fund grant has been consistently
under-spent, including by £1 billion in 2006-07. Please clarify
the causes of the 2006-07 under-spend, including which expenditure
programmes and `adjustments to cash requirement' factors (Annual
Report page 33) were mainly involved. What role does the Scotland
Office play in monitoring under-spend or improving forecasts?
(See oral evidence Q43/44 )
The provision for the grant in aid to the Scottish
Consolidated Fund is based on full year expenditure by the Scottish
Executive. Any underspending by Scottish Ministers—and their
causes—on programmes in Scotland is entirely a matter for
the Scottish Parliament and not the Secretary of State for Scotland.
Any unspent monies are accumulated in the Executive's End Year
Flexibility figure and is available to Scottish Ministers in subsequent
years, subject to Treasury Ministers' approval and Parliamentary
approval of the appropriate Scotland Office Estimate.
The Scottish Executive's underspend against
its approved Estimate in 2006-07 was £135 million (as shown
in HM Treasury's Public Expenditure Outturn White Paper 2006-07:
http://www.hm-treasury.gov.uk./media/1/2/peowp—0607—190707.pdf.
As regards accumulated End Year Flexibility, the balance available
to the Scottish Executive, as at the 31 March 2007, was £1.5
billion.
The Scotland Office monitors the monthly draw
down by the Executive for the Scottish Consolidated Fund to ensure
that the aggregate drawdown does not breach the overall funding
provided in the Estimates by Westminster and that the monthly
figure is historically reasonable when compared to drawdown in
previous years. The Office endeavours to ensure that payments
to the Scottish Consolidated Fund are not made in advance of need
while simultaneously recognising that the Scottish Executive needs
to maintain a working balance in the Fund.
2. The Budget 2007 announced a 2.5% a year
real terms increase in education funds for the Comprehensive Spending
Review (Budget 2007, Table 6.3 and para 7.73, page 157). This
is reflected in the Scotland Office Annual Report, which cites
an additional £1.8 billion for the Scottish Executive as
a result of "spending increases in UK government departments
(mostly education)" (2007 Scotland Office Annual Report,
paragraph 7.5). Is this purely a result of applying the Barnett
Formula, or does this represent further funding on top?
(a) Are there any restrictions on the
Scottish Executive's ability to deploy the extra funding arising
from increases in education funds for England, for example on
non-education related expenditure? If not, how are UK wide initiatives
to be driven forward?
The additional funding set out in paragraph
7.5 of the Report reflect the "Barnett" consequentials
of the announcements made by the Chancellor on 21 March 2007.
It does not represent any further funding beyond this. As indicated
in that paragraph, decisions on how to deploy those monies are
entirely a matter for Scottish Executive Ministers. In reserved
areas which apply UK- wide, it is for UK Government Ministers
to decide and fund spending.
3. Public Expenditure Statistical Analyses
2007, Table 9.4, shows that the difference in expenditure per
head in Scotland and England was expected to have grown again
in 2006-07 (a difference of 17.1% in 2004-05, 19.7% in 2005-06
and 21.1% in 2006-07)
Table 9.5
TOTAL IDENTIFIABLE EXPENDITURE ON SERVICES
BY COUNTRY AND REGION PER HEAD IN REAL TERMS, [11]2001-02
TO 2006-07
| | |
| accruals, £ per head
|
| National Statistics
|
| 2001-02 | 2002-03
| 2003-04 | 2004-05
| 2005-06 | 2006-07
|
| outturn | outturn
| outturn | outturn
| outturn | outturn
|
| North East | 6,815 |
6,984 | 7,398 | 7,572
| 7,814 | 7,980 |
| North West | 6,360 | 6,567
| 6,954 | 7,228 | 7,481
| 7,610 |
| Yorkshire and Humberside | 5,948
| 6,121 | 6,431 | 6,708
| 6,949 | 7,014 |
| East Midlands | 5,359 | 5,423
| 5,747 | 6,057 | 6,205
| 6,334 |
| West Midlands | 5,687 | 5,838
| 6,223 | 6,512 | 6,757
| 6,894 |
| Eastern | 4,926 | 5,145
| 5,504 | 5,716 | 5,928
| 5,995 |
| London | 6,611 | 6,932
| 7,608 | 7,781 | 8,164
| 8,200 |
| South East | 4,951 | 5,126
| 5,495 | 5,825 | 5,960
| 6,151 |
| South West | 5,519 | 5,536
| 5,931 | 6,200 | 6,398
| 6,516 |
| England | 5,753 | 5,930
| 6,342 | 6,603 | 6,835
| 6,949 |
| Scotland | 6,980 | 7,152
| 7,630 | 7,729 | 8,179
| 8,414 |
| Wales | 6,675 | 7,019
| 7,318 | 7,514 | 7,784
| 7,943 |
| Northern Ireland | 7,792 |
8,016 | 8,240 | 8,451
| 8,713 | 9,158 |
| UK identifiable expenditure | 5,962
| 6,148 | 6,554 | 6,796
| 7,049 | 7,184 |
Is the Barnett formula intended to close the gap between spending
in England and spending in Scotland? Why is the gap widening?
(Oral evidence Q47)
PESA table 9.4 does not separately identify the effect of
the Barnett formula on spending in Scotland over time. The figures
in this table are comprised of both devolved and reserved spend;
the former is Barnett related, the latter is not.
The table 9.4 figures also mainly relate to outturn and as
such year to year variations can in part be due to end of year
under spend. They show what was spent, rather than what was originally
allocated. Instead a better figure to use is that which is delivered
by the Comprehensive Spending review documents1 (see annex for
tables). The figures from the CSR documents show the plans for
DEL allocation which is the basis of the Barnett calculations.
These figures clearly show Scottish spend as a proportion of UK
spend, declining from 7.9% to 7.5% over the period of CSR 2000,
from 7.6% to 7.4% over the course of CSR 2002, and from 7.6% to
7.5% over the course of CSR 2004. [12]In
addition table 9.2 of PESA shows that the Scotland spending per
head index relative to the UK is the same in 2006-07 as 2001-02.
A further complication in trying to use PESA 9.4 figures
to identify the impact of the Barnett formula concerns the impact
of additional acts of devolution (mainly executive devolution)
since 1999. For example the transfer of rail powers to Scottish
Ministers in 2005 led to a significant step increase in the Scottish
budget (around £360 million) to fund these transferred powers.
The intention of the Barnett formula is to provide the devolved
administrations with a population based share of comparable changes
in spending of UK Government departments. The details are set
out in the Statement of Funding Policy.
(a) To what extent does the Barnett Formula, with its
automatic increases in funding for Scotland, take away incentives
for the Executive to be more efficient in its programmes? What
is the Scotland Office's view on the extent to which the Formula
contributes to producing the sort of lax financial discipline
identified by the Howat review?
It is not for the Scotland Office to comment on how the Scottish
Executive spends its money, it is fundamental to the devolution
settlement that the Scottish Executive has the autonomy to make
their own spending decisions over devolved matters. The Scottish
Executive has published details of its own efficiency programme.
The Scottish Executive adheres to the Scottish Public Finance
Manual, which was issued by the Scottish Ministers to provide
guidance to the Scottish Executive and other relevant bodies on
the proper handling and reporting of public funds. It sets out
the relevant statutory, parliamentary and administrative requirements,
emphasises the need for economy, efficiency and effectiveness,
and promotes good practice and high standards of propriety. It
also includes details of the duty of best value placed on all
accountable officers to make arrangements to secure continuous
improvement in performance whilst maintaining an appropriate balance
between quality and cost.
The Barnett formula is transparent and fair and the Government
has no plans to change it.
(a) The Scottish Executive can increase funding
for additional programmes or higher expenditure through its facility
to increase income tax by 3% or by increasing rate levels for
Non-domestic Rates. But what incentives are there in the Barnett
Formula for a Scottish Executive opting for generally lower overall
expenditure levels?
It is not for the Scotland Office to speculate on the factors
which might influence decisions on these tax varying matters.
The powers for such variations are specified in the Scotland Act
and a matter for the Scottish Executive and Parliament.
4. In determining the provision for the Scottish Consolidated
Fund grant, account is taken of a planned £1,406 million
funding from the National Insurance Fund for the NHS in Scotland,
for each year of the current Spending Review period (Annual Report
pp 32-34). Why was the actual funding in 2006-07 from this source—£1,799m—so
much higher than planned?
HM Revenue and Customs are responsible for providing notification
of expected funding from the National Insurance Fund to the Scottish
Executive. This notification was not provided until the latter
end of 2006-07. At the beginning of 2006-07, the Scottish Executive
estimated that £1,406 million, which was based on the 2005-06
figure, would be transferred but, due to changes in contributions,
the sum realised was £1,799 million.
5. Annually Managed Expenditure (AME) in Scotland is planned
to increase in 2007-08 to £3,489 million, from £2,530
million the year before (Annual Report, pp 33-34). What are the
main factors behind this increase?
The AME figures are subject to considerable volatility as
they are influenced by the costs of the NHS and Teachers Pension
Schemes. The figure of £2,530 million relates to the estimated
outturn for 2006-07 whereas the figure of £3,489 million
is an estimate of the provision that will be required for 2007-08.
Annually Managed Expenditure forecasts are agreed with the Treasury
for publication alongside the Pre-Budget Report and the Spring
Budget.
6. Please provide figures which indicate how much the
funding allocated to the Scottish Parliament has grown since its
establishment. (Oral evidence Q53)
The funds allocated to the Scottish Parliament—and
the relevant expenditure—from the Scottish Block are matters
for the Scottish Parliament and Scottish Ministers, not the Secretary
of State for Scotland. HM Treasury publishes data in PESA table
1.12 covering 2001-02 to 2007-08; data for prior years is not
available on a consistent basis. In addition, a number of functions
have been devolved since 1999, eg Rail, and thus direct comparisons
are not possible.
7. What proportion of the funding provided by the Scottish
Executive to local authorities is ring-fenced for Executive-specified
purposes and programmes? What proportion of local authorities'
overall expenditure is supported by ring-fenced funding from the
Executive? (Oral evidence Q57)
The allocation of funds to local authorities in Scotland
is a matter for the Scottish Parliament and Scottish Ministers,
and not the Secretary of State for Scotland. The Committee may,
however, wish to read the Executive's Draft Budget for 2007-08
which was published in September 2006 and which provides considerable
detail about the Executive's plans for local authority spending.
This is available at:
http://www.scotland.gov.uk/Resource/Doc/146893/0038508.pdf
8. The Scotland Office's main function is to represent
Scotland's interests within UK government. Is there also a reverse
function of representing policies driven from Westminster to the
Scottish Executive and Scottish Parliament? If so, what are the
mechanisms for doing this?
The Scotland Office fulfils the function of representing
Government driven policies to the Scottish Executive. This is
complemented by the necessary and frequent bilateral exchanges—ministerial
and official—that take place between UK departments which
deal on a day-to-day basis with the issues at stake and the Scottish
Executive.
The key area where the Scotland Office represents policies
driven from Westminster is in our management of the Sewel Convention.
The Scotland Office ensures the Scottish Executive is aware of
the Government's legislative plans and is responsible for settling
any outstanding Scottish devolution issues before a Bill is introduced
at Westminster. The mechanisms that exist to do this include regular
dialogue at official level and ministerial discussions between
the Secretary of State and First Minister, Minister of State and
Scottish Executive Minister for Parliamentary Business and Scotland
Office Ministers and lead UK Ministers (as well as bilateral exchanges—in
writing and orally—between the relevant subject ministers
in the Government and Scottish Executive).
The Scotland Office also engages directly with wider stakeholders
and the public in Scotland as the Government does across the UK,
particularly in relation to the delivery of its reserved responsibilities.
For example, the Scotland Office is currently seeking via its
website views from the Scottish people on the Government's draft
legislative programme.
While the Scotland Office's primary relationship in terms
of representing Government policy is with the Scottish Executive,
we also engage with the Scottish Parliament. Annually we provide
the Scottish Parliament with a copy of the Secretary of State's
statement on the application to Scotland of the Government's legislative
programme. The then Parliamentary Under Secretary of State, Anne
McGuire MP, also gave evidence to the Scottish Parliament's Procedures
Committee on the Sewel Convention in March 2005. UK Ministers
(eg Minister for Europe) have also addressed the Scottish Parliament
or have submitted written contributions to Scottish Parliamentary
committee inquiries (eg on the Constitutional Reform Act 2005).
9. What is the role of the Scotland Office in monitoring
and policing the devolution settlement? What role does the Ministry
of Justice play? How will this process be affected by the change
of Scottish Executive administration in Edinburgh?
(a) How does the Scotland Office ensure that Scottish
Executive driven policies don't undermine UK wide initiatives?
(b) Do you anticipate that greater use will be made
of the Joint Ministerial Committees (JMCs) now that there is an
SNP led administration in the Scottish Executive? What discussion
has there been so far?
(c) Joint Ministerial Committees are not mentioned
in the Scotland Office Annual Report. What is the role of the
Scotland Office in supporting JMCs?
Scotland's devolution settlement is designed to allow the
Scottish Executive to take their own decisions on matters within
the Scottish Parliament's legislative competence without seeking
agreement from the UK Government.
The Scotland Office's responsibility for maintaining a stable
settlement includes the monitoring of policy developments emerging
from the Scottish Executive and where appropriate we ensure bilateral
contact with the relevant UK department where these developments
have a bearing on their responsibilities, particularly in relation
to reserved matters, where cross border issues arise or simply
to share best practice.
The Scotland Office also monitor all legislation going through
the Scottish Parliament in line with statutory functions under
the Scotland Act. The Scotland Office does so in line with the
powers available at section 35 of the Scotland Act, which allow
the Secretary of State (which could be any Secretary of State)
to make an Order prohibiting the Scottish Parliament's Presiding
Officer from submitting a Scottish Bill for Royal Assent, which
the Secretary of State has reasonable grounds to believe would
be incompatible with any international obligations, the interests
of defence or the interests of national security. There has never
been a requirement to exercise this power.
The Secretary of State may also make an Order under section
35 if he or she reasonably believes that the Scottish Parliament
Bill makes modifications to, and would have an adverse effect
on, the operation of the law as it applies to reserved matters.
There has never been a requirement to exercise this power. The
Secretary of State has further powers at section 58 of the Scotland
Act to prevent or require action by a member of the Scottish Executive
in relation to compliance with international obligations. Again
this power has not been exercised.
The Advocate General for Scotland also exercises statutory
functions under the Scotland Act. In particular, under section
33 of the Scotland Act, he may refer to the Judicial Committee
of the Privy Council the question of whether a Bill passed by
the Scottish Parliament, or a provision of it, would be within
the legislative competence of the Parliament. The making of such
a reference prevents the Presiding Officer of the Scottish Parliament
from submitting the Bill for Royal Assent, until the matter has
been resolved. By virtue of Schedule 6 to the Scotland Act, the
Advocate General can also raise proceedings in the courts, or
require or make a referral to the Judicial Committee, on a devolution
issue (ie in broad terms, a question whether legislation of the
Scottish Parliament or acts of the Scottish Ministers are, respectively,
within legislative or devolved competence, which may include the
question whether the legislation or act is compliant with human
rights or EC law). Statute requires that the Advocate General
should receive notice of all devolution issues raised in court
cases and he can intervene in them. The Advocate General's functions
are entirely distinct from, and independent of, those of the Secretary
of State.
The Ministry of Justice is responsible for the overall management
of relations between the Government and the devolved administrations
in Scotland, Wales and Northern Ireland and works closely with
the territorial offices to ensure that Government departments
receive guidance and advice on working with the devolved administrations.
The Government is publicly committed to considering the use
of Joint Ministerial Committees. The Memorandum of Understanding
itself tells us that most contact "should be carried out
on a bilateral or multi-lateral basis, between departments which
deal on a day-to-day basis with the issues at stake", and
that is the way things worked in practice with the previous administration
and continue to work with the new Scottish Executive (eg on climate
change, the response to the recent terrorist incidents in London
and Glasgow or in the response to the outbreak of Foot and Mouth
Disease).
The Secretary of State for Scotland is a member of the JMC
in its plenary form and can participate in functional JMCs as
appropriate (eg as he or the Minister of State do in JMC Europe,
which continues to meet regularly). Likewise, Scotland Office
officials participate as appropriate in any official level forum
that shadows the JMC.
10. The Scotland Office Annual Report states in the Forward
Objectives chapter that a substantive task facing the Briefing
Services and Support Division will be the "implementation
of all relevant secondary legislation connected with the funding
and conduct of the May 2007 elections" (2.9). What implementation
remains to be done?
As of the beginning of April 2007, four administrative Orders
required to be approved and signed by the Secretary of State.
These were:
(i) The Scottish Parliamentary Elections (Returning Officers'
Charges) Order 2007;
(ii) The Scottish Parliamentary General Election 2007
and Local Government Election—Determination by the Secretary
of State;
(iii) The Returning Officers' Accounts (Scottish Parliamentary
Elections) Regulations 2007; and
(iv) The Scottish Parliamentary Elections (Designation
of Constituency Returning Officers and Sheriff Clerks) Order 2007.
These were signed on 22 April 2007.
Detailed guidance on the completion of accounts was created
and a small working party of Returning Officers were consulted
on its content. Advances were made to Returning Officers (ROs)
in early April and we await the submission of accounts from ROs
of the costs involved. Such costs will be subject to the Charges
Order noted above.
11. The Scotland Office Annual Report states that the
"boundary between reserved and devolved competencies is complex
in many aspects of energy policy whilst Scottish interests have
a significant bearing on UK policy" (2.14). What are the
respective responsibilities and functions of the Scottish Executive
and the UK Government in this policy area?
In terms of energy matters the following are reserved: policy
on the generation, transmission, distribution and supply of electricity;
oil and gas policy; coal, including its ownership and exploitation,
deep and opencast mining and coal mining subsidence; policy on
nuclear energy; and energy conservation by prohibition or legislation.
The key devolved matters are: energy efficiency promotion (other
than by prohibition or legislation); the promotion of renewables
including the Scottish Renewables Obligation; consents for power
stations over 50 megawatts and for overhead lines; and consents
for gas pipelines.
12. The Scotland Office has only three targets and these
relate not to the Office's high level objectives, but to mainly
administrative tasks. What consideration have you given to possible
targets that would measure other, more fundamentally important,
aspects of your performance? Without specific targets for your
core tasks, how are you able to demonstrate that "Scotland's
interests... are known and represented" or that you are fully
undertaking your "constitutional functions under the Scotland
Act"? [Objective-1 and Objective-2]
We have considered carefully the possibility of introducing
targets that more directly measure the degree to which our high
level targets are achieved. However, given that the main activities
of the Office involve advice, coordination and influence it is
difficult to identify appropriate measures. Nonetheless we keep
this aspect of performance measurement closely under review, including
the way staff tasks are assessed in relation to the high level
objectives.
Ensuring that Scotland's interests in relation to reserved
areas are known and represented within the UK Government involves
both determining what Scotland's interests are and representing
those interests to UK Government Departments. We do the former
by engaging closely with stakeholders and interest groupings in
Scotland on a regular and systematic basis and the latter through
bilateral exchanges with Departments and through our briefing
for SO Ministers' active involvement in Cabinet Committee meetings.
While numbers of meetings with stakeholders or numbers of Cabinet
Committee meetings attended might give some standard of input,
it does not measure the degree to which the target is achieved
and neither is it easy to find a suitable grouping from whom to
seek a qualitative judgement on degree of achievement. In addition
much of what we may achieve is necessarily "behind the scenes"
and therefore not readily available as public information.
Fulfilling all requirements in relation to the UK Government
and Parliament activities concerning Scotland and in relation
to constitutional functions under the Scotland Act is less subjective
because it will have a visible process-driven base. But plain
references to the incidence or type of process does not indicate
the quality of the input—or still less the outcome. In addition
it is largely demand-led in the sense that it depends upon the
number of Orders that the Scottish Executive might want as well
as their complexity. A simple list of such Orders, or indeed the
number of Bills that require Legislative Consent (Sewel) Motions,
can only ever be a partial measure of the degree to which the
target is achieved.
The third target—handling all financial matters timeously
and with propriety—is more measurable. One of our three
specific measures is a financial one which addresses the timeous
payment of accounts. Payments into the Scottish Consolidated Fund
we view as an essential task which would have critical consequences
if mishandled. There has been no case of mishandling since these
payment arrangements began in 1999.
J R Wildgoose
Accounting Officer
Scotland Office
12 September 2007
Annex
Scotland Office memorandum to the Scottish Affairs
Committee
CSR 200 DEL (£ BILLION, NOMINAL TERMS)
| 1999-2000 | 2000-01
| 2001-02 | 2002-03
| 2003-04 |
| Total UK DEL | 176.8 | 195.2
| 212.1 | 229.3 | 245.7
|
| Scotland DEL | 13.9 | 15
| 16.2 | 17.4 | 18.4
|
| Scottish DEL as a % of UK DEL | 7.9%
| 7.7% | 7.6% | 7.6%
| 7.5% |
CSR 2002 DEL (ADJUSTED FOR FULL RESOURCE BUDGETING)
| 2002-03 | 2003-04
| 2004-05 | 2005-06
|
| Total UK DEL | 239.7 | 263.4
| 279.8 | 301 |
| Scotland DEL | 18.2 | 19.7
| 20.9 | 22.3 |
| Scottish DEL as a % of UK DEL | 7.6%
| 7.5% | 7.5% | 7.4%
|
CSR 2004 SPENDING PROJECTIONS TOTAL DEL
| 2004-05 | 2005-06
| 2006-07 | 2007-08
| |
| Total UK DEL | 279.3 |
301.9 | 321.4 | 340.5
| |
| Scotland DEL | 21.3 | 22.8
| 24.2 | 25.5 |
|
| Scottish DEL as a % of UK DEL | 7.6%
| 7.6% | 7.5% | 7.5%
| |
11
CSR 2000-table A2-http://www.hm-treasury.gov.uk/spending_review/spending_review_2000/spending_review_report/spend_sr00_repannexa.cfmCSR
2002_table A3-http://www.hm-treasury.gov.uk/Spending_Review/spend_sr02/report/spend_sr02_repannexa.cfm Back
12
CSR 2002 saw the introduction of full resource budgeting-a change
in accounting system to reflect issues such as depreciation, the
cost of capital, and provisions for future payments. As such the
DEL values given before this change are not directly comparable
with those following the change. Back
|
