Annex P: Financial resolutions
Where a Private Bill contains particular provisions affecting payments into or out of the Scottish Consolidated Fund (the “SCF”), no proceedings can be taken on the Bill after Preliminary Stage unless the Parliament has, by resolution, agreed to the relevant provisions. That resolution is known as a “financial resolution”. Financial resolutions are governed by Rule 9A.14.
The financial resolution procedure is a means of giving extra control to the Scottish Government over Bills with certain financial implications. Only a member of the Scottish Government or a junior Scottish Minister can lodge a motion for a financial resolution (Rule 9A.14.7), and so the Scottish Government has a veto on whether any Bill that requires such a resolution makes progress. Unless a motion is lodged and the Parliament agrees to it, a Bill that requires a financial resolution falls (Rule 9A.14.8).
Rule 9A.14 is intended to give effect to the principles of the Financial Issues Advisory Group (FIAG) which reported to the Consultative Steering Group (CSG) before the establishment of the Parliament. FIAG was attempting to give effect to the established principle that the executive arm of government has a unique responsibility in relation to the management of public funds. If it is to fulfil this function, the Scottish Government must maintain control both over the raising of revenue and over public spending – hence the need for a mechanism to secure Scottish Government consent for payments either into or out of central funds.
The Presiding Officer decides in relation to every Private Bill whether or not a financial resolution is required (Rule 9A.14.2). This decision is usually made shortly after introduction. It is communicated to the promoter, relevant Ministers and the convener of the Private Bill Committee, and announced on the Bill’s webpage.
The decision is made with reference to the provisions contained in the Bill, the accompanying documents and any other relevant information. The need for a resolution does not just arise in relation to mandatory provisions (e.g. those using “must”) in a Bill, but also in relation to optional provisions (e.g. those using “may”). Budgetary authorisation may be required to ensure that a mechanism provided in the Bill can be used, as well as for what the Bill requires to be done. The question is whether, if the mechanism were resorted to, there would be a legitimate claim against the SCF. Financial resolutions are generally much less likely to be required for Private Bills than for Public Bills.
Rule 9A.14.3: resolutions required due to new or increased expenditure charged on the SCF
A financial resolution is required in every case where a Private Bill contains provisions that “charge expenditure on” the SCF (Rule 9A.14.3(a)). Such charges – which the Scottish Government is required to pay without obtaining further authority from the Parliament by means of a Budget Bill – are provided for only in exceptional cases.
A resolution is also required if the Private Bill is likely to increase significantly existing expenditure “charged on” the SCF (Rule 9A.14.3(b)).
Rule 9A.14.3A: resolutions required due to new or increased expenditure payable out of the SCF
A financial resolution is required if the Private Bill is likely to increase significantly expenditure payable out of the SCF (as opposed to expenditure charged on that Fund) (Rule 9A.14.3A). This applies to expenditure for any purpose, whether a new purpose or an existing one.
Meaning and interpretation of “likely” and “significant”
Whether a financial resolution is required for a Bill under either Rule 9A.14.3(b) or 3A depends on two tests – one about whether the expenditure is “likely” and the other about whether it would be “significant”.
Expenditure is a “likely effect” of a Bill where new or increased expenditure is the likely outcome of the Bill’s implementation, taking into account the wider context in which the Bill operates, not just where the Bill requires expenditure to be incurred.
In addition, expenditure that is likely to arise in the event of a power conferred by the Bill being exercised will be taken into account, even if the power is not certain to be exercised. It is the mechanisms that the Bill provides, not the way in which those mechanisms are expected to be used in practice, that is important. Where there is substantial uncertainty about the level of expenditure that might be involved in a Bill, but there is potential for the expenditure to exceed the “significant” threshold, an approach of erring on the side of caution and saying that a financial resolution is required is likely to be adopted. If, however, the implications of a Bill for expenditure are very indirect or uncertain a resolution may not be required.
The second test is that the expected expenditure must be “significant”. As a result, a resolution may not be required for a Bill which will require expenditure but where the amounts involved are expected to be trivial or easily capable of being absorbed within existing budgets.
Expenditure of over £400,000 in any single financial year (regardless of whether that level of expenditure is ongoing or one-off) is the threshold for what is currently considered “significant” for the purposes of Rules 9A.14.3(b) and 9A.14.3A. Savings arising from provisions in the Bill may be taken into account in determining whether the overall cost of the Bill exceeds the threshold.
A financial resolution is required in every case where a Private Bill imposes – or confers a power to impose (through subordinate legislation) – any tax (Rule 9A.14.3B(a)). This applies regardless of the anticipated amount of revenue from the new tax. A tax is a liability on a person to make a payment. It is distinct from a fee for a service, which a person who wants to use the service must pay.
A resolution is also required where a Private Bill either increases or reduces – or confers a power to increase or reduce – an existing tax; but in this case, the resolution is required only if the likely effect is to increase or (as the case may be) reduce revenue from the tax “significantly” (Rule 9A.14.3B(b), Rule 9A.14.3C). Here, too, a total net increase (or, as the case may be, reduction) counts as “significant” only if it is expected to exceed £400,000 in any financial year.
Rule 9A.14.4: resolutions required on grounds of charges or other payments into the SCF
A financial resolution is required if a Private Bill satisfies the two tests set out in Rule 9A.14.4(a) and (b). The first test is that it would impose or increase a charge (other than a tax), or otherwise require a payment to be made, including by provision that is to be made by subordinate legislation. It is assumed for the purposes of Rule 9A.14.4 that a power to impose or increase a charge will be used.
The second test is that the charge or payment must be made – with one exception – to persons with a statutory duty to pay the amounts involved into the Scottish Consolidated Fund. In practice, this means the Scottish Ministers and other office-holders in the Scottish Administration, together with directly-funded bodies. It excludes most non-departmental public bodies (NDPBs), whose income is not payable into the Fund.
The exception (set out in brackets in Rule 9A.14.4(b)) relates to bodies which are not required to pay income received (e.g. from charges or payments) into the SCF, but who are only not so required because a provision in an Act of the Scottish Parliament (or in subordinate legislation made under such an Act) allows them instead to keep that income. Bodies in that position, in other words, have the power to “recycle” income – offsetting it directly against money they would otherwise require to be given from the SCF for expenditure purposes.
The purpose of the exception is to ensure that a Private Bill which authorises such a body to levy charges or payments is not automatically exempted from the need for a financial resolution just because the body is not required to pay the income into the SCF. Without this exception, an arbitrary distinction would be drawn between public bodies which have this limited type of financial autonomy and those which don’t – even though the impact on the SCF of a Private Bill authorising either type of body to raise new income would be essentially the same.
Rule 9A.14.5 provides two exemptions from the application of Rule 9A.14.4. The first is a similar exemption for insignificant amounts as is provided in relation to expenditure by Rule 9A.14.3. The income produced by a Private Bill is currently considered “significant” for the purposes of Rule 9A.14.4 if it is likely to exceed £400,000 in any single financial year. As with Rule 9A.14.3(b), an approach of erring on the side of caution and saying that a financial resolution is required is likely to be taken in cases where there is substantial uncertainty about the level of income that will be produced by a Bill but where there is potential for it to exceed the “significant” threshold.
The second exemption is for charges or payments which are levied to recover the cost of goods or a service provided, or otherwise where there is no significant net gain or loss for the SCF. Charges for goods that are reasonable and charges for services that are limited to approximately cost recovery level do not require financial resolution cover (provided in either case that the restriction is contained in the Private Bill or existing legislation). This would cover, for example, a charge for providing someone required to register information with a copy of their entry in the register. It would allow the charge levied to be at a higher level than would be justified only in terms of marginal cost recovery (i.e. the cost of the paper, photocopier toner and staff time making the copy) – but not substantially higher. The underlying intention is that a financial resolution should only be required in cases where charges or payments can be levied in such a way as to generate substantial profit or to contribute significantly to the income of the body in question.
Under Rule 9A.14.7, a motion for a resolution may be lodged and moved only by a member of the Scottish Government or a junior Scottish Minister. (The Minister who moves such a motion need not be the one who lodged it, and may move it without having added his or her name as a supporter (Rule 8.3.2).) For Private Bills, it is for the promoter (or agent) to approach the Scottish Government, once it has been decided that a resolution is required, to request the relevant Minister to lodge and move a suitable motion. The motion must be lodged within six months of the completion of Preliminary Stage (Rule 9A.14.8(a)) and amendments to such a motion are not admissible (Rule 9A.14.7). If no motion is lodged within this time or if such a motion is lodged but not agreed to by the Parliament when it is taken, the Bill falls (Rule 9A.14.8).
Rule 9A.14.6 prevents there being any proceedings taken on an amendment to a Private Bill (or a number of such amendments lodged together) if the effect of the amendment (or amendments) would be that the Bill, had it been introduced in that form, would need a resolution that it doesn’t have. Rule 9A.14.6 does not affect the admissibility of amendments, and an amendment (or amendments) to which it applies may be lodged and published in the Business Bulletin and in a Marshalled List. But unless the necessary resolution is first agreed to, the amendment (or amendments) may not be called, moved or debated, and the question cannot be put.
Motions for financial resolutions are usually broadly worded, which allows many cost-bearing amendments to be debated and decided on at later stages without a further financial resolution being required. Sometimes, however, a motion may be more narrowly worded, making it more likely that any cost-bearing amendments may require a new financial resolution.