I am grateful for the opportunity to inform the Parliament of the Scottish Government’s provisional financial outturn for 2013-14.
The Government attaches the greatest priority to the effective management of the public finances and the information that I will set out to the Parliament today is further demonstration of the Government fulfilling that commitment. It is essential that we maximise the value of every public pound as we take forward programmes to support economic recovery and deliver high-quality, efficient public services.
Today’s outturn figures must also be set in the context of continued United Kingdom Government reductions to the Scottish budget. Since 2010-11, the Scottish Government has managed an almost 8 per cent real-terms decline in public spending while supporting our economy and investing in public services.
As a demonstration of this Government’s sound financial management, I can report to the Parliament that within the fiscal departmental expenditure limit—the resources over which this Parliament has discretion—the provisional outturn for 2013-14 is expenditure of £28,238 million against a limit of £28,383 million, delivering an overall cash underspend of £145 million. That reflects an underspend of £144 million on resource and £1 million on capital budgets.
There is also a provisional outturn underspend of £31 million in respect of financial transactions. As I confirmed in the draft budget 2014-15 last September, those resources will be carried forward to support help to buy in 2014-15, reflecting the fact that the scheme commenced part way through financial year 2013-14.
Finally, in respect of non-cash DEL, there is a provisional outturn underspend of £111 million, after taking account of the pre-planned budget exchange carry-forward of £42 million to support our plans in 2014-15. That non-cash underspend reflects differences between expected accounting adjustments and actual amounts. For example, £56 million of that total relates to less than anticipated write-down of the carrying value of the income-contingent repayment student loan book. The non-cash underspend does not reflect resources that could be spent on public services.
To summarise, by using the budget exchange mechanism to carry forward £218 million, the overall underspend based on the provisional outturn for 2013-14 is £111 million of non-cash resources, which represents less than 0.4 per cent of the total 2013-14 budgets of Her Majesty’s Treasury. None of that underspend represents any loss of spending power on behalf of the Scottish Government.
At the time of the spending review in 2011, I made it clear to the Parliament that I would plan our public expenditure using budget exchange facilities over a three-year period to level out fluctuations in the resources available to us. I estimated that that would require my having to find £57 million to support our plans in 2014-15 and I confirm that that has been achieved as part of the £145 million fiscal DEL underspend.
As the spending review has progressed, other financial commitments have emerged that the Parliament has agreed that we must try to address. One of the most significant has been the mitigation of welfare reform measures. In 2013-14 and 2014-15, those measures include funding for the council tax reduction scheme, which is benefiting over 500,000 people, support for the Scottish welfare fund and the increased funding of discretionary housing payments. We will use resources carried forward in the budget exchange mechanism to fulfil our commitment to mitigate the effects of welfare reform where we are able to do so. Our financial commitment to welfare mitigation is now £260 million over the period 2013-14 to 2015-16. I welcome the broad support that the Parliament has shown for this area of our activity.
Our choices about public spending continue to be focused on the economy. We have seen continual growth for almost two years and rising confidence across both households and the private sector. The economy is growing, employment is rising and business confidence continues to increase.
We are continuing to support employment, including by maintaining our record commitment to modern apprenticeships and working with our local authority partners to take forward our commitment to early learning and childcare. A priority will be to work with our delivery partners in following up the report of the Wood review. I have already confirmed that additional resources of £12 million will be available in 2014-15 to support initial work in that area.
Although the outlook remains positive, Scotland’s economy will face headwinds, such as the relatively subdued recovery in key export markets such as the European Union, as well as legacy effects from the financial crisis that continue to take time to unwind.
In response to continuing challenges in the housing market, we confirmed in April and May further allocations that amount to £50.3 million in financial transactions funding for the help to buy scheme in 2014-15. That brings overall investment in the help to buy (Scotland) scheme to £275 million. That investment has brought substantial support to the construction sector in Scotland.
At the same time, the Scottish Government has continued to provide support to Scottish businesses and households through the small business bonus scheme and our support for a social wage and a council tax freeze.
Throughout the recession and the recovery, the Government has taken the firm view that infrastructure investment has a central part to play in boosting the economy. Today’s outturn figures demonstrate how we are maximising the impact of our capital budget each year in the face of the real-terms reduction of 26 per cent that the chancellor has made to our capital budget over the current spending review period.
In 2013-14, we expanded the infrastructure programme by switching from resource budgets to capital budgets. I will write to the Finance Committee to set out the final details of the 2013-14 resource-to-capital switches.
We also remain fully committed to the non-profit-distributing pipeline of infrastructure projects. The Aberdeen health village, which was the first revenue-funded finance project, was opened in 2013-14; £750 million-worth of projects are in construction and another £1.35 billion of projects are in procurement. We expect all major NPD projects to begin construction in the coming financial year. For example, the £46 million acute mental health and North Ayrshire community hospital project will start construction on the site of Ayrshire central hospital in Irvine shortly.
In April, I announced to the Parliament that we will continue that approach with a £1 billion increase in the NPD pipeline, extending it to 2019-20. That will provide the construction sector with the long-term certainty of a pipeline of work. That expansion is taking place within the framework that we have established that future revenue payments in support of NPD should not exceed 5 per cent of revenue budgets. That ensures that we can deliver now for the economy without overconstraining future budget choices.
The Scottish Futures Trust is considering a range of infrastructure investments. I will confirm in the draft budget in the autumn the full detail of the planned extension, which will build on the successes of our current programmes in delivering colleges, schools, roads, hospitals and community health facilities across Scotland. However, where we are able to make progress now, I am clear that we should do so.
I am pleased to confirm today two significant decisions about that additional investment at Aberdeen royal infirmary and in our schools programme.
We will allocate £120 million in NPD investment to fund two developments at the Aberdeen royal infirmary campus. We will fund a new maternity hospital on the ARI site. NHS Grampian has identified in its maternity services strategy that Aberdeen maternity hospital will continue to provide a specialist obstetrics and neonatal service, accommodate a community maternity unit for Aberdeen and the surrounding area, and provide support for maternity services across Grampian. A new hospital will provide high-quality new facilities as well as remove £4.2 million-worth of backlog maintenance and reduce estates and facilities costs. NHS Grampian’s plan is that the new hospital would be designated a women’s hospital and would include accommodation for all existing services as well as the neonatal unit, theatres and gynaecology in-patient and out-patient services.
The new maternity hospital will be followed by the development of a cancer centre, which is another important element of the development of the campus. That centre will enable the co-location of our cancer services, which are currently spread across the Aberdeen royal infirmary site, and enable the delivery of care that is patient centred, safe and effective in the face of increases in population and forecast demand.
The development would complement existing investment that has been pursued through national radiotherapy programme funding. That has provided replacement linear accelerators and bunkers in a new radiotherapy department, which has been sited to be consistent with the future development of the cancer centre.
The second major decision, which I am also pleased to announce, is the immediate release of a further £100 million of NPD investment in school infrastructure through the Government’s “Scotland’s schools for the future” school building programme. The Government and our local authority partners share the objective of working to improve the quality of the school estate and ensuring that young people are educated in appropriate conditions in the 21st century.
We are making progress on that objective, as I saw at first hand when I opened Invergowrie primary school in my constituency earlier this week. The Cabinet Secretary for Education and Lifelong Learning and I will work with local authorities over the coming weeks to agree the most effective use of the additional investment of £100 million and to agree precise funding allocations. I know that the Parliament will welcome these announcements on the quality of our health and education infrastructure.
Today’s outturn figures and the extension of our NPD programme demonstrate once again the firm grip that this Government has on Scotland’s public finances, our focus on supporting Scotland’s economy, our approach to investing in our public services and our determination to deliver on the priorities that we share with the people of Scotland.