Scottish Spending Plans 2005-08
Building a Better Scotland
Budget Brief

Briefing No. 97 September 2004

Introduction

The Finance Minister has announced the Scottish Executive's spending proposals for 2005-2008 Building a Better Scotland. This document is a broad outline of spending plans. The detail will be set out in departmental announcements and confirmed in the draft Budget next month. This briefing outlines the key issues in the plans for UNSON Scotland.

Overview

Executive spending will rise from £25 billion this year to £30 billion in 2007-8. This equates to an average increase of 3.6% after inflation. Overall this increase is welcome and reflects the significant investment in Scotland's public services by this government. It stands in stark contrast to the cuts imposed by the previous Conservative government and their planned cuts if elected at the next UK general election.

As always there are some services that have gained more than others. The big gainers are health, education and transport. Less welcome is the tighter spending plans for local government.

The Total Managed Expenditure by portfolio is as follows:

Justice

Most of this budget relates to services directed by the Executive such as the Prison Service. Most police and fire expenditure is accounted for in the local government plans. Those plans assume an above average increase for police. Fire gets slightly more than the average to cover the fire service pay agreement.

Education

The education budget again largely covers central initiatives with schools funded through local government. Universities get a 30% increase over 3 years largely to address the higher income English universities attract through tuition fees. There is a similar increase for further education, which should go someway towards addressing the current financial problems in the sector.

Health

A headline 28% increase in the NHSiS over the next three years is good news for hard pressed health boards. We will need to see the detailed budgets to identify how much will be available for real improvements and how much simply to address rising health costs including medical pay and the drugs bill.

Local Government

This is the most disappointing aspect of the spending plans. A 9.7% increase over three years' compares unfavourably with the 23.6% rise in non-council spending. After inflation this is only 1% growth and makes it increasingly difficult for local authorities to meet the Executive's service aspirations. Very little of the additional housing money will find its way to local authorities. Local authorities will be facing further financial pressures when addressing pay inequalities under the single status agreement. There is nothing in this settlement towards those costs.

Transport & Environment

Transport gets the bumper 47% increase with the biggest increase to fund the promised concessionary fare schemes and new road building. The water budget is at standstill pending decisions on investment plans.

Capital Investment

The Finance Minister highlighted substantial increases in capital expenditure – up 40% to £3.2bn by 2007/8. The detail will be published later in the Capital Investment Plan. However, local authority capital is only increasing by 7% over the same period. As highlighted in the water investment plans there is a very real issue over the capacity of the construction industry to manage capital investment at this level. In these circumstances it is likely that building costs will increase.

UNISON has highlighted the need for a level playing field between public authorities conventional borrowing and PFI when financing capital investment. We will be looking for the new treasury guidance on this issue to be reflected in the Capital Investment Plan. For the future it is worth noting that whilst the Finance minister was speaking, the Labour Party Conference was voting to support a level playing field in housing investment between local authorities and stock transfer.

Efficient Government

The spending plans reiterate previous announcements on this issue (see P&I Briefing 86). Local government is singled out for specific targets of £247.4m by 2007-8. The bulk of this will fall on non-education spending that will have to find the equivalent of 5-6% savings. We await the detailed explanation for these targets.

Further Information

Building a Better Scotland - The Spending Proposals 2005-06 can be viewed at http://www.scotland.gov.uk/library5/enterprise/babs-00.asp.