The Chief Secretary to the Treasury, Danny Alexander, today set out a new system of budgetary flexibility for the Devolved Administrations.
In Budget 2011 the UK Government announced a new Budget Exchange scheme to replace the previous End Year Flexibility (EYF) scheme for managing public spending across years.
Recognising their unique circumstances, and following a proposal by Sammy Wilson, Northern Ireland Executive Finance Minister, the Treasury has agreed with the Devolved Administrations that a modified version of the Budget Exchange system will apply to their underspends during the Spending Review period.
The Devolved Administrations will be able to carry forward underspends up to an agreed cap. Unlike Whitehall departments, there will be no requirement to inform the Treasury in advance of the following year of the expected under spend in order to carry over the funding.
The Chief Secretary, Danny Alexander said:
I am pleased to announce this new system of budgetary flexibility which recognises the unique situation of the Devolved Administrations. This agreement will give Devolved Administrations greater flexibility and certainty, allowing them to plan their budgets more effectively.
Notes for Editors
The former End Year Flexibility (EYF) system had led to accumulated stocks of around £20 billion across the entire UK Government (including the three Devolved Administrations) that would further increase the deficit if they were spent.
At Spending Review 2010 this scheme was abolished, along with all accumulated stocks and replaced in Budget 2011 with the new system of Budget Exchange from 2011-12.
The Budget Exchange system gives departments the flexibility to deal with slippage in expenditure while strengthening spending control. It allows departments to surrender an under spend in advance of the end of the financial year in return for a corresponding increase in their budget in the following year, subject to a prudent limit.
The Devolved Administrations will be able to carry forward underspends up to an agreed cap of 0.6 per cent of their total Resource DEL (RDEL) budget or 1.5 per cent of their Capital DEL (CDEL) budget each year.
For 2011-12 each Devolved Administration the caps are equal to £153m RDEL and £38m CDEL for Scotland, £83m RDEL and £19m CDEL for Wales and £59m RDEL and £14m CDEL for Northern Ireland. These amounts will vary depending on the administration’s budget in any given year.
Under spends which are in excess of the limit will be forfeited and not carried forward.
The Scotland, Wales and Northern Ireland Office Estimates are subject to Parliamentary approval.
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