Departmental Spending

Grant to Scottish Government and Scotland Office funding Scottish Government

Day-to-day Spending (Resource DEL) Breakdown of increase to in-year budget, £m

Trends Since the 2015 SR, the Scottish Government’s Resource DEL has been reduced to reflect the devolution of taxes (stamp duty, landfill tax and income tax). The reductions (known as “block grant adjustments”).

The Scottish Government now determines its own policies and rates for devolved taxes, although in the case of income tax, the amounts collected under rates set by the Scottish Government is collected by HMRC and passed over to the Scottish Government separately Increase in budget: 8% 1 2 Scottish Govt represents 5% of total Resource DEL Long-term spending trends (£m, nominal) In-year changes The largest change in the Supplementary Estimates come from £724 million in HM Treasury funding. The majority of this (76%) comes from student loans ring-fence funding of £550 million. This figure also includes £11 million funding in respect of the Apprenticeship Levy, £42 million Block Grant Adjustment in respect of the fiscal framework (which is in turn determined by Barnett Consequentials) and £21 million for re-profiling of Business Rates.

There is a £321 million increase as a result of Barnett Consequentials. This is mainly driven by Budget 2018 announcements feeding through the Barnett formula. Notably, however, this also includes £78 million for NHS pay awards and a number of Departmental Reserve Claims (DHSC, MOJ, DfT) that amount to around £135 million.

On 4 March 2019 the Government announced a £1.6 billion ‘Stronger Towns Fund’ to boost growth and give communities a greater say in their future after Brexit. IFS analysis indicates that this is in fact not additional funding but a re-allocation of existing funding. As a result, it does not feature in the 1 Final budget at Supplementary Estimates 2018-19 Supplementary Estimate as a Barnett Consequential. 2 Initial budget as at Main Estimates 2018-19 Scottish Government Investment Spending (Capital DEL) Scottish Govt 6 % of total Capital DEL Breakdown of changes to in-year budget, £m Trends

Since the 2015 Spending Review settlement, the capital budget has increased by 20% in real-terms, driven partially by additional funds for City Deals and overall increases from UK Government funding that has fed through into Barnett Consequentials.

Funding is expected to continue to increase in the 2019-20 period, rising to £4.2 billion.

Overall, there has been a real terms increase of 20% in the Scottish Government’s capital DEL budget since 2015-16 Increase in budget: 3% 1 2

Long-term spending trends (£m, nominal)

In-year change

Barnett Consequentials of £165 million are the biggest driver of capital changes in the Supplementary Estimate, which in itself iflargely driven by changes made in the Budget 2018 (resulting in a £90 million uplift for Scotland).

Other funding of £35 million is most made up of additional City Deal funding (£15 million for Glasgow, £15 million for re-profiled Aberdeen City Deal expenditure and £3 million for Stirling).

The capital increases were slightly offset by an £87 million re-profiling of capital transactions, due to financial transactions spending re-profiled from 2018-19 to 2020-21.

1 Initial budget as at Main Estimates 2018-19 (April 2018) 2 Final budget at Supplementary Estimates 2018-19 (Feb 2019) Scottish Government

The Barnett Formula Change (rise or fall) in Resource DEL budget determined by UK government

Extra funding available Population share to the governments of Share of change related to Share of change related to (compared to England or DEVOLVED FUNCTIONS Scotland, Wales and functions RESERVED TO England and Wales) Northern Ireland (e.g., health) UK GOVERNMENT (may also be a (e.g., defence) spending cut) Scotland’s population compared to England’s: 2010 Spending Review: 10.03% 2015 Spending Review: 9.85% This reduction in population share will mean slightly smaller increases and decreases in funding for Scotland from the Barnett Formula than would have resulted if These funds can be spent on the share had remained as before. ANY DEVOLVED FUNCTION

Example: Extra Increase of £100m in 75% relates to NO CHANGE TO THE UK Departments’ functions which are 9.85% £7.388m BLOCK GRANT Resource DEL budget. devolved; 25% are UK (Scotland’s population to Scottish provided to Scotland, reserved functions. compared to England) government Wales and Northern Block grant adjustments: in addition block grant adjustments can be made: reductions where taxes are Ireland devolved or additions where welfare is devolved.