Was the Westminster Budget good for Scots? As ever, opinion is sharply divided …
The Chancellor announced a freeze on spirits duty. The freeze will give our world leading distillers the confidence needed to invest and grow their businesses and encourage new firms to enter the market. A bottle of Scotch is now £1.15 cheaper than it would otherwise have been since ending the duty rise in 2014.
The UK Government is also committed to supporting hardworking people across Scotland. Fuel duty has been frozen for the eighth successive year, which will save the average driver in Scotland nearly £9 every time they fill up their car. The UK Government is also extending the rural fuel duty rebate scheme for the Scottish Islands until 2023, allowing drivers in those remote communities to continue to benefit from a 5p per litre reduction in fuel costs.
Scotland’s Oil and Gas industry will benefit from the introduction of a Transferable Tax History, which enables oil companies to pass on their tax history to new buyers when they sell their UK oil and gas fields. This will encourage investment in North Sea oil production, safeguard jobs and ensure that the UK benefits from every last drop of oil.
As well as continuing to support the Tay Cities and Stirling and Clackmannanshire City Deals announced at Autumn Statement 2016, the Chancellor today revealed that the UK Government would begin formal negotiations for a Borderlands Growth Deal. Once agreed, this deal will support local priorities and bolster the region’s economy.
The personal tax allowance – the amount you can earn before you start paying income tax – will rise from £11,500 to £11,850 in April 2018. In 2018-19, increases the UK Government has made to the personal allowance will benefit 2.4 million people in Scotland, compared to 2015-16.
Scotland’s emergency services will also directly benefit by a new move to enable Police Scotland and the Scottish Fire and Rescue Service to claim VAT refunds – saving them more than £40 million annually.
Scottish charities will also reap the rewards of more than £3.3 million of LIBOR funding raised from fines levied on banks. In addition to this, the UK Government will provide £2.2 million to support improvements to the Lady Haig’s Poppy Factory in Edinburgh.
The Chancellor also set out plans – as a result of Barnett consequentials – to boost the Scottish Government’s budget by £2 billion … a figure hotly disputed by the Scottish Government.
Secretary of State for Scotland, David Mundell (above) said: “This Budget demonstrates the UK Government is delivering for Scotland.
“From support for city deals and some of our finest charities to landmark tax measures on oil and gas and whisky, this Budget backs Scotland’s great industries. This is in addition to the £2 billion of extra spending power the Scottish Government will have as a result of this Budget.
“This Budget will directly benefit people right across Scotland as we work to create an economy fit for the future.”
According to Westminster The Scottish Government’s block grant will increase in real terms over the Spending Review Period between 2015 and 2020. The boost will give the Scottish Government even greater spending power to bolster Scotland’s productivity and increase growth, as part of a successful UK economy. The Scottish Government can choose how to spend this increase in its budget alongside the increased tax and borrowing powers that it took on earlier this year. This will mean the Scottish Government is more accountable for its investment decisions.
By the end of the year, the UK Government will publish the first breakdown of changes in devolved administrations’ block grant funding. This will increase transparency and allow greater scrutiny of the UK’s funding arrangement. This breakdown will be published on an annual basis.
But while Westminster maintains it’s a good deal for Scotland, the Holyrood government in Edinburgh has a very different take on the Chancellor’s budget. Finance Secretary Derek Mackay says the deal sells Scotland short.
The Scottish Government says the UK Government’s budget does not represent a good deal for Scotland, as a consequence of a real terms cut to Scotland’s revenue block grant of over £200m next year. Finance Secretary Derek Mackay said that Scotland is being “short changed”.
Despite a commitment of over £300m resource funding for the NHS in England this year, Scotland will receive only £8m in consequentials in 2018-19 due to UK cuts elsewhere.
Of the additional money the UK Government announced as being added to Scotland’s budget, over half of it – £1.1bn – are financial transactions which the Scottish Government cannot spend on frontline public services, and which have to be repaid to the Treasury.
Mr Mackay said: “Scotland’s resource block grant for day to day spending will fall by over £200m in real terms next year and while money for the NHS in England should see a proportionate share come to Scotland, cuts in other UK departments mean that instead of receiving over £30m this year the Scottish Government will receive only £8m – a fraction of that spending.
“The reality is that over £1.1bn of the money being promised to Scotland over the next four years are loans that the Scottish Government cannot spend directly on frontline public services and that have to be paid back to the Treasury.
“Austerity has not ended and over ten years of this UK Government, between 2010-11 and 2019-20, we will continue to see Scotland’s discretionary budget fall in real terms by £2.6bn, that’s 8.1%.
“At the same time this budget has failed to lift the public sector pay cap. The Scottish Government believes all public sector workers deserve a pay rise and we will deliver one.
“On business rates and stamp duty the UK Government are following our lead. We have already moved to make revaluations more frequent and the vast majority of first time buyers are already exempt from tax when they buy a home.
“Ending the VAT obligation on police and fire services and supporting the oil and gas industry is welcome, but in both cases these moves are well overdue, and the UK Government must now pay back the £140m of VAT they have already taken.
“The reality of today’s budget is that Scotland continues to be hit by UK austerity and the decision to leave the EU. Compared with the £1bn awarded to the DUP, the funding settlement for Scotland unveiled today is disappointing.
“I have consistently argued for a better settlement for Scotland, and this budget does not reflect that.”
Politicians of all sides have been quick to offer their opinions on the budget.
While the Chancellor praised his Scottish Conservative MPs for their intense lobbying on the subject, the SNP has claimed the credit for finally getting VAT relief for Scotland’s emergency services – although the ‘win’ won’t be backdated.
The SNP say their Intense pressure on the UK government has paid off for Scotland’s emergency services after the Chancellor finally backed down to allow Police Scotland and Scottish Fire and Rescue to reclaim VAT after years of unfairness.
Scotland’s emergency services had been the only territorial forces in the UK unable to reclaim VAT – which costs the forces £35 million annually. While the overdue reversal is welcomed by the SNP, the refusal to repay the £140 million already paid by Police Scotland and Scottish Fire and Rescue means the Tories continue to short-change Scotland’s emergency services.
SNP MSP for Edinburgh Northern and Leith, Ben Macpherson, has criticised the UK government for this betrayal of Scottish Fire and Rescue and Police Scotland – and is calling on them to give Scotland the £140 million we are owed to help bolster police and fire services in Edinburgh, as well as right across Scotland.
Ben Macpherson MSP said: “I of course welcome the news that the UK government will no longer unfairly take £35 million every year from our Police and Fire services – the SNP has campaigned from the very beginning to end this unfair and unnecessary VAT levy and the Tories were both in denial about this issue for a long time and embarrassingly slow to act.
“Also, the Chancellor hasn’t yet gone far enough to rectify this issue – the VAT burden may have been lifted on Police and Fire services going forward but those services also deserve to be repaid the £140m unjustly taken over the last 4 years. To do one without the other would be inconsistent and unfair.
“Now that the UK Government have finally agreed that it is unfair for Police Scotland and Scottish Fire and Rescue to pay VAT, something the Tories have previously denied, it would only be right for the Tories to also repay the £140m already unfairly taken away from our Police and Fire services.”
SNP MP Deidre Brock has also welcomed the Chancellor’s U-turn on VAT for Scotland’s Police and Fire services. She said: “Philip Hammond has accepted that he was wrong to be charging Scotland’s Fire and Police services VAT and I welcome that. It’s always good to see a politician prepared to accept that he was wrong.
“Now we need to see him refunding the VAT he has already charged the services so that the money can go into frontline police and frontline fire and rescue work.”
Edinburgh and Lothians Conservative list MSP Miles Briggs said: “I am delighted that the UK budget has exempted Police Scotland and Scotland Fire and Rescue Service from VAT. The Scottish Conservatives have campaigned hard to tidy up the mess created by the SNP.
“I welcome the additional £2 billion in funding for Scotland set out in the UK budget and I urge the Scottish Government to use the funds effectively to strengthen Scotland’s economy and improve public services.”
There was some surprise that the Tory government has at last accepted that the introduction of Universal Credit has caused misery and heartache to tens of thousands of people across the UK. The Chancellor announced changes costing £1.5 billion which will see the waiting period for first payments cut from six weeks to five – although that’s from next February – and it will be easier for new claimants facing hardship to access up to a full month’s payment-in-advance within five days of applying.
The decision has been universally welcomed, but former Labour health minister Malcolm Chisholm pointed out: “Minor changes to universal credit don’t change appalling fact of one million more children in poverty as a result of this Government.”
Small businesses received some welcome backing in today’s Budget, according to a local tax specialist.
Alan Johnston who runs TaxAssist Accountants in Goldenacre said: “Local business owners have grown used to bearing the brunt of Budget changes and new legislation and receiving little in return, but the Autumn Budget has at last given them some good news to encourage investment and growth.
“The £44 billion housing investment announcement will be a welcome contribution to local economies, with many local businesses, particularly in the construction industry, reaping benefits.
“Many local business owners will also be looking at available opportunities under the £2.5 billion scaled-up British Business Bank, the £500 million investment announced for new technologies including 5G mobile networks and fibre broadband and £2.3 billion investment in research and development.
“The Government has clearly listened to the Federation of Small Businesses and halted plans to lower the VAT threshold. Keeping that at £85,000 for the next two years will be welcome news for many small firms and self-employed business people. The personal allowance will increase to £11,850 from April and the higher rate threshold moves to £46,350.
“Cancelling the planned rise in fuel duty will help those businesses which deliver products and services to our homes, where cars and vans are essential not a luxury. Many business owners will also be relieved that vans are excluded from the planned increase in vehicle excise duty for diesel vehicles. In the future, local business owners will want to look closely at the potential benefits of electric cars as company vehicles.
“We will be looking in more detail at the many announcements made by the Chancellor which will impact on small businesses, but overall there has at last been some recognition for the over five million small businesses across the U.K. who contribute a massive £1.8 trillion to our economy.”
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