Chamber and committees

The Budget 2015 represented an admission by the chancellor that his policy for the North Sea has been wrong and that the poor stewardship by successive UK governments has had a detrimental impact on our oil and gas sector. The measures announced by the chancellor are a step in the right direction for our oil and gas sector and reflect the types of reforms that both the Scottish Government and the industry, have been demanding for a number of years.

As yet the full impact of the March 2015 Budget measures is not clear, for example the Finance Bill 2015 permits the Treasury broaden the scope of the Investment Allowance by introducing subsequent regulations. I sought clarity from the UK Government on this matter when attending the Oil & Gas Council on 24 March 2015.

The Scottish Government will analyse the fiscal changes that the Chancellor of the Exchequer announced in the Budget, in collaboration with stakeholders in the industry, and assess the impact that the reforms will have on future investment and production, and in turn tax revenues. When this analysis is complete we will publish an updated oil and gas Analytical Bulletin, as soon as is feasible.

The Scottish Government has not yet announced a specific date on which responses to The Scottish Independence Bill: A Consultation on an Interim Constitution for Scotland will be published.

The UK Government has reduced funding to Scottish local authorities for discretionary housing payments (DHPs) by £1.9 million, from £15.2 million in 2014-15 to £13.3 million in 2015-16.

The Department for Work and Pensions (DWP) provides DHP funding based on housing benefit caseload and the impact of certain aspects of welfare reform on local authorities. The DWP has reduced the total core funding, as well as the funding linked to the benefit cap and changes to local housing allowance. The total funding available in Scotland linked to the bedroom tax has increased by £118,000 for 2015-16 compared to 2014-15.

The DWP publishes details of the UK Government’s contribution to local authorities for DHPs. Details of funding for 2015-16 are contained in the housing benefit circular S1/2015 which is available at:

https://www.gov.uk/government/publications/hb-subsidy-circular-s12015-discretionary-housing-payments-government-contribution-for-tax-year-2015-to-2016

Details of expenditure on discretionary housing payments by local authority in Scotland are published on the Scottish Government website at:

http://www.gov.scot/Topics/Statistics/Browse/Social-Welfare/dhp

The budget for funding local authorities for discretionary housing payments (DHPs) in both 2014-15 and 2015-16 is £35 million. The Scottish Government has provided local authorities with £26,028,194 for DHPs from 1 April 2015 and has retained £8,971,806 to be paid out at the end of 2015-16, according to local authorities’ housing benefit caseload data and actual levels of DHP expenditure.

This approach was agreed with COSLA to ensure each local authority receives sufficient funding to fully mitigate the bedroom tax in 2015-16.

The final account and out-turn costs will be agreed by the end of November 2015.

Barnett consequentials arising from the UK Budget announcement amounted to £31.5 million, £29.9 million of resource DEL and £1.6 million of capital DEL. The consequentials arising from health expenditure in the rest of the UK will be passed on in full to health in Scotland. Other decisions on deployment of the consequentials will be taken in due course as part of our budget management processes.

The assumptions underpinning the modelling scenarios are outlined on page 1 of the report published on 9 March 2015 and are quoted below:

“The first scenario reflects the situation under the Smith Commission powers where the majority of additional tax revenue generated by increased economic activity are retained by the UK Government and cannot be directly reinvested back into the Scottish economy.

Under the second scenario, all additional tax revenue generated by the expansion in the economy are assumed to be retained in Scotland and reinvested back into Scotland’s public finances and public services. This scenario is referred to in the paper as ‘Full Revenue Retention’.”

The full report can be accessed via the following link:

http://news.scotland.gov.uk/imagelibrary/downloadmedia.ashx?MediaDetailsID=3417&SizeId=-1

As in previous years, I will provide details of the expected Departmental Expenditure Limit outturn by portfolio alongside my provisional outturn statement in June 2015.

We are looking at different options of how best to deliver a Scottish development bank, working jointly with enterprise agencies and public and private sector stakeholders. This work includes agreement on the best scope, scale and structure. Once this work is completed, indicative set-up costs including capitalisation can be estimated.