SPENDING REVIEWS
Scope
1. This section provides guidance on the biennial spending review process in which Scottish Ministers undertake a detailed examination of portfolio budgets and set spending plans and targets for the forward three year period.
Key Points
2. The spending review process in Scotland is normally undertaken every two years, scheduled around the timeframe of UK spending reviews. The precise arrangements for the spending review process vary from one review to the next.
3. The spending review process is managed by officials in Scottish Executive Finance who scrutinise and challenge expenditure proposals and provide advice to portfolios and Ministers.
4. At the end of the Spending Review, each portfolio is set an agreed three year budget, with the strong expectation that this will not be reopened until the next spending review.
5. Access to the Contingency Fund is granted only in exceptional circumstances, when it is clear that the relevant portfolio cannot meet the pressures it faces from within its existing resources
Background
6. Spending plans are set during biennial spending reviews, with the last year of one spending review becoming the first year of the next. Thus Spending Review 2002 set plans for 2003-04, 2004-05 and 2005-06, while Spending Review 2004 revised plans for 2005-06 and set new plans for 2006-07 and 2007-08.
7. The overall size of the Scottish Budget (or Block) is set in the UK spending review and is largely derived by applying the population-based Barnett formula to changes in planned spending on comparable services by UK government departments. Further details are contained in the Statement of Funding Policy. After deduction has been made for the costs of the Scotland Office plus the Scottish Parliament Corporate Body and Audit Scotland the Scottish Spending Review allocates the Block between the Executive's portfolios.
8. At the end of the Spending Review, each portfolio is set an agreed three year budget, with the strong expectation that this will not be reopened until the next spending review. The portfolio is expected to manage within this budget, absorbing additional pressures and funding new initiatives from within its agreed spending review settlement.
9. The outcome of the spending review is announced around September and forms part of Phase 2 of the budgeting process. The spending review publication gives details of Level 2 budgets, with the following Draft Budget breaking these down further to Level 3. The spending review outcome is also reflected in future Annual Expenditure Reports which set out the planned budget allocations for those 'forward' financial years covered by the most recent spending review.
Contingency Fund
10. The Scottish Executive maintains a small central reserve known as the Contingency Fund in order to allow Ministers to provide resources for genuinely unforeseen or unavoidable contingencies. Portfolio Ministers may seek access to this reserve by writing to the Minister for Finance and Public Service Reform. Officials should discuss the details of any potential claim with their departmental Finance Team, and Finance Co-ordination if considered necessary, before access is formally sought. Access to the Contingency Fund is granted only in exceptional circumstances, when it is clear that the relevant portfolio cannot meet the pressures it faces from within its existing resources, including any undrawn end-year flexibility (EYF) allocation or central unallocated provision (CUP), and where there is no scope for offsetting savings elsewhere in the portfolio budget.
11. Any access to the Contingency Fund is taken into account in the calculation of budgetary provision available to be carried forward by the portfolio to the following financial year under the EYF arrangements. EYF allocations are calculated as if any such access had not been granted.
12. Since the Contingency Fund is not included in the Budget Act portfolios granted access must draw down the additional provision at the next Budget Revision in the normal way before it can be spent. This ensures allocations from the Contingency Fund are notified to and authorised by the Parliament, in a similar way to all other spending.
Page Published/ Updated on: July 2005