A new study has revealed how a lack of financial education has left people across the United Kingdom confused by their own money with detrimental effects on their confidence, mental health and financial wellbeing.
Investment app Freetrade created the Great British Financial Literacy Test – 18 questions about savings, investment, ISAs and retirement that everybody will likely encounter at some point in their lives.
How did Britons perform in the financial literacy test?
Asking 2,000 British people to complete the test, Freetrade discovered that almost half of them (48%) could not answer basic questions about personal finance including what an ISA stands for, the difference between fixed rates and variable rates, and what your annuity provider does when you retire.
Retirement was the area of personal finance that people struggled to understand the most with 80% of Brits unable to correctly answer this part of the test. This figure was 81% among respondents aged 55+ approaching retirement age.
The pass rates for questions about investment were the second lowest at 44%. This was followed by savings at 34% and ISAs at 32%.
Do British people lack confidence in their finances?
Equally as alarming as the low pass rates across the UK were people’s lack of confidence around aspects of personal finance. Overall, 88% of Brits say they lack confidence with their money, and one third of Britons (32%) said this also led to a negative impact on their mental health.
An overwhelming majority of respondents (91%) told Freetrade they lack confidence in investment. 90% of Brits similarly lack confidence in managing their retirement money, according to the study. 88% of the UK also lack confidence when it comes to ISAs.
Dan Lane, senior analyst at Freetrade, said: “The greatest advantage you can give your investments is time. So it’s concerning that the cohort with the most time on their hands feels so ill-equipped.
“Whether we realise it or not, investing early on in life could be the difference between reaching our eventual financial goals or missing them entirely. Getting to grips with the basic concepts later in life might just be too late.
“There should be alarm bells ringing about the fact that 90% of Brits lack confidence with their pensions. With advances in medical technology and increased life expectancies we’re likely to live longer in retirement than ever before.
“But a massive gap in our understanding of how to invest for our third age, or even how to access those investments suitably later on, means we really aren’t prepared for a sizable portion of our lives. Unless we’re thinking about investing for retirement long before we get there, we could end up in the awful position of regretting the simple financial decisions we made 30 years ago.
“It’s a real sign of the nation’s lack of financial education when a huge portion of the population doesn’t know the name of one of the most common savings products. The frustrating thing about the lack of confidence around ISAs is just how helpful, accessible and easy to use ISAs can be. Chances are, if we’re unsure about the headline facts around ISAs, we’re not using them to help us as much as we could.”
Which areas of the UK have the highest and lowest financial literacy rates?
Brighton was the city discovered to be the most financially literate, according to Freetrade’s study. Pass rates there were 55%, much higher than the national average. Sheffield, however, was discovered to be the city with the lowest financial literacy with only a 47.6% pass rate.
The five highest and lowest scoring cities in the UK are:
Top 5 Cities
Pass Rate
Bottom 5 Cities
Pass Rate
Brighton
55%
Sheffield
47.6%
Manchester
54.1%
Belfast
48.5%
Edinburgh
53.8%
Birmingham
51.8%
Southampton
53.5%
Nottingham
51.9%
Cardiff
53.5%
London
52.4%
Dan Lane, senior analyst at Freetrade, continued: “There are regional differences on show but the overall takeaway is that we still need a greater focus on financial literacy all across the UK.
“Basic concepts like compound interest might be ticked off in the National Curriculum but setting us up to deal with that in the real world takes more than a textbook exercise.
“These results should be a wake-up call for the nation’s education system to equip young people well enough to put theory into practice.”
Where are we turning to for financial education?
Struggling to understand finance, Britons are turning to the internet for help. 23% of us make Google their first stop for learning about personal finance—the most popular answer among respondents. The second most common answer was social media with 16% of people saying they would get financial education from platforms like Instagram, TikTok or Facebook.
Dan Lane, senior analyst at Freetrade, concluded: “Young people are taking their future into their own hands and being proactive in addressing the gap in their financial knowledge.
“The results show that previous generations have clearly muddled through to retirement without ever getting a firm grip on their money management and the youngest Brits have said enough is enough.
“Social media can make the headlines for the strangest of reasons but dismissing these platforms means ignoring the truly valuable educational content young people are finding on them. These are free resources and guidance tools dealing with money matters in a way that engages and informs a generation who left school without a firm financial foundation.
“Those who diminish the efficacy of these resources have to ask themselves ‘what else is on offer to help?’”
New research from Yolt, the award-winning smart money app, reveals that almost 20 million UK adults have experienced a financial shock, such as a pay decrease, job loss or a drastic change in financial situation, since the beginning of the pandemic.
Those who have had to deal with a financial shock saw their income decrease by over £530 per month on average – which almost equates to one full week of spending for the average family in the UK, according to the Office for National Statistics (ONS). Despite this, over half (51%) of UK consumers revealed they have not taken steps to protect themselves against a sudden change in income, or a shift in their finances that would mean they couldn’t cover their usual outgoings.
The research found that in many cases (19%) people had seen their income decrease and one in ten (11%) have been furloughed during the pandemic. In responses to these shocks, over a third (34%) have dipped into their savings and a quarter have turned to credit card spending (26%). One in five people who experienced a financial shock (20%) tried to raise money by selling things online and one in seven (16%) borrowed money from their family.
Experiencing a financial shock makespeople much more likely to put precautions in place in the future, as three out of four (74%) who had previously experienced a financial shock have taken action – compared to a third (33%) who hadn’t faced a shock.
Amongst all UK adults, these preventative steps included, reviewing theirmonthly outgoingstosee where cutbackscanbe made (23%), putting money aside in a rainy day fund (15%) and a focused approach to paying off debts (12%) to help ease financial pressure.
In fact, one in four of Brits (25%) said that the pandemic has made them finally look totackle their debt – as evidenced by recent data from the Bank of England which found that UK households repaid a total of £16.6bn on credit cards and loans in 20205.
Financial uncertainty continues to fuel consumer anxiety in the UK. Almost two out of five UK adults (38%) are extremely worried about their financial future and half (54%) want to protect their family financially more now, than ever before.
PaulinevanBrakel,ChiefProductOfficeratYolt,said:“Our research shows that the impact of the pandemic on people’s finances has been far reaching.
“There is no uniform financial experience or response tothe current economic climate and we’re unfortunately seeing a widening wealth gap, with some people able to save during this period, as the opportunity to spend has declined, and other people unfortunately having suffered a significant reduction in income at an average cost of £538 per month.
“With the UK still experiencing great levels of uncertainty there could be further financial shocks on the horizon for many – especially with government support schemes such as furlough due to come to an end in the coming months.
It’s no doubt a challenging time for all but engaging with your finances and looking to see where you could make cutbacks to save even a small financial cushion can be a lifeline if you do experience a financial shock.
“At Yolt, our recently launched evolution of the app is designed to help you manage your finances and take the hassle out of saving – by helping people save while they spend and making creating savings habits easier.”
A new £30 million fund is being established to support small businesses within the third sector, helping them to grow as Scotland recovers from the impacts of coronavirus.
The fund will be designed to respond to a need for third sector organisations to access loans to help grow and explore new forms of social investment and finance. It will also help support the sector to meet the challenge of the pandemic and to become more sustainable in the long-term.
Communities Secretary Aileen Campbell said: “We have worked hard to support the third sector throughout the pandemic. This new fund will focus on those organisations with the potential to grow, contributing to jobs and making a positive contribution to our communities and the wellbeing economy.
“It also goes some way towards our commitment to explore other strands of social investment, including capital loans, to build upon Scotland’s world leading position in social enterprise.
“The fund will help this sector to ensure that it not only supports our communities, but is at the very forefront of our recovery, leading our communities and our country through recovery.”
Yvonne Greeves, Board member at Firstport & Chair of Catalyst Fund, said: “The Catalyst Fund is an exciting new addition to the social investment arena in Scotland.
“The patient, revenue-based repayment model is well placed to help certain social enterprises obtain the capital they need to start-up and grow, whilst offering them a more flexible repayment approach to match their ambitions.
“We welcome the support from the Scottish Government in backing this innovative model and we look forward to supporting social enterprises with potential for high-growth to enter new markets and deliver significant social impact.”
The Third Sector Growth Fund will build on more than £1 billion which has been invested in communities since the start of the pandemic, which includes a recent commitment to a further £14 million to allow the Communities and Third Sector Recovery Programme to continue to the end of June.
The Third Sector Growth Fund will have three elements:
The Social Catalyst fund, which totals £15 million, will help growing organisations which are not able to access finance through standard loans, offering investment which can be repaid based on turnover, rather than growing interest rates. This would suit small businesses and start-ups whose income is variable.
The Circular Economy Fund will support activity which builds on sustainability of social enterprises and enables growth through investment loans. Together with The Long Term Third Sector Finance Fund which will offer loans for social enterprises and Third Sector organisations over a period of 18-24 months. a total of £10 million will be available.
The Social Impact Venture Portfolio will offer investments of equity into mission-driven businesses, encouraging organisations to adopt a social enterprise model. This is worth £5 million.
The delivery partners are The Social Impact Venture Portfolio and Social Investment Scotland, a social enterprise and a charity offering loan funding and business support across the sector to make a positive impact on lives, society and the environment.
Social Investment Scotland will manage The Circular Economy Social Enterprise Fund and Long Term Third Sector Finance Fund.
The Impact Investment Partnership Scotland (IIPS), an entity owned equally by Firstport and Social Enterprise Scotland (SES), will manage the Social Catalyst Fund.
Access to the funds will be by application. Further details of the funds and how to apply will be published on the partner organisations websites later this Spring.
Cashback apps and coupon sites can provide a quick boost when times are tough, but how do you sort the savers from the scammers?
Due to the disruption of Covid-19, purse strings are a little tighter right now for many, meaning people are using cashback apps to claw back some much-needed cash.
However, not every app is worth investing your time in, with some not being exactly what they appear.
Watch out for sites that charge a hefty sign-up fee, or that ask for more personal information than you should need to provide. If a site doesn’t have clear, easy to read FAQs that spell out how to get your money and what their privacy policy is, don’t trust them.
To help consumers get the from their apps, the personal finance experts at money.co.uk have provided expert tips on some of the best cashback apps to download now. The definitive guidance will help save money on your online shopping, sorting the must have apps from the technical time wasters.
One of the most popular new reward apps, Shoppix works by building up tokens that can be exchanged for gift vouchers or cash prizes. To earn tokens, users have to take pictures of their receipts on their phone and upload them. Additionally, you can complete surveys each day to collect tokens. Tokens can be exchanged for £5, £10, or £20 prizes on the app, which are paid into your account via PayPal or in gift card format.
Top Tip: Bonus tokens are awarded for scanning receipts on the same day you make your purchase, so snap them quickly to save more!
Unlike other apps which require you to snap receipts, TopCashBack is remarkably low effort. To earn cashback, you simply have to make purchases from select retailers (brands include everything from Carphone Warehouse, to Plusnet, Sky, PrettyLittleThing, RAC and more), and you’ll receive your reward via gift cards or PayPal. The percentage of cashback you receive varies depending on the brand you’re shopping with and can also be affected by seasonal offers – so make sure to check the site regularly for the latest deals.
Top Tip: Cash isn’t always better – the amount you earn using vouchers can be 20% more than the cash equivalent, so check both options before you pick your reward.
Quidco is TopCashBack’s main rival and works in much the same way – giving you cashback on purchases through major retailers. The only real difference between the two apps is the brands that are available: Quidco has a number of household names as partners including Amazon, Argos, Boots, Just Eat and more. If you can, it’s more than worth downloading both Quidco and TopCashBack, to ensure you don’t miss out on any savings.
Top Tip: Check the estimated times on your cashback – some brands take longer than others when going through Quidco to process rewards, so make sure to factor this in when budgeting to avoid being caught short.
SwagBucks is another app that gives you rewards (or ‘SB points’) through online purchases that can then be redeemed for cash or vouchers. The big difference with SwagBucks is that as well as cashback through purchases, SB points can be awarded from completing a huge variety of surveys, games and reviews.
Top Tip: Many of the surveys and video reviews are incredibly short, so you don’t have to dedicate hours in order to save, just check in a few times a day and spend a few minutes on the app each time.
Honey is completely different to other cashback apps, in fact it’s not even an app at all – it’s a free Chrome extension – that automatically searches for discount codes and coupons when you checkout at major retailers. In essence, you don’t have to do any work at all, just download and start saving.
Top Tip: Aside from the discount code function, Honey also sends you rewards such as gift cards based on your purchases – make sure to check your inbox (and your junk) to avoid missing out.
Ask the Expert
On cashback apps, Salman Haqqi, personal finance expert at Money.co.uk says: “Cashback apps make their own money in a variety of ways; some get a commission on transactions made via major retailers, and some sell shopping trends data to third parties to make profit.
“Whichever app you use, make sure you check out their website first to identify how they use your data to check you’re happy with the terms.
“While it is possible to earn hundreds, or even thousands in some cases via cashback apps, the total saving usually boils down to how much time you’re willing to commit to using them.
“If you are time poor, try one of the apps that gives rewards on direct purchases such as TopCashBack or Quidco. However, if you do have the time to organise and scan your receipts, Shoppix or a similar receipt scanning brand will be the most profitable for you in the long run.
“Finally, if you take your rewards in gift card form, always make a note of the expiry dates, as the date might not be the same as a physical card bought in store. If you take your rewards in cash via PayPal, make sure to transfer it into another account immediately, to avoid being caught out by a refund or cancelled transaction.”
For more information on how you can use mobile apps to keep track of your cash, make money or even boost your credit rating, visit this handy guide put together by the personal finance experts at money.co.uk:
A new £15 million fund has been announced to support affordable lending services.
The fund will support Credit Unions and Community Development Financial Institutions (CDFIs) which offer financial help to those who have poor credit and are often turned away from high street banks.
Communities Secretary Aileen Campbell said: “We know the pandemic has had a financial impact on many people in Scotland and we want to strengthen services that support people with managing their money.
“Credit unions and CDFIs provide ways of saving, lending, and accessing affordable credit.
“They can be a financial lifeline for people who can’t always access what they need from high street banks, helping them to avoid riskier ways of dealing with debt, like going to pay day loan companies.”
The funding will support work which:
promotes the availability of affordable credit
strengthens the balance sheet of affordable credit providers
Organisations are being invited to submit applications by 3 March 2021, and they will be informed of funding decisions during the week commencing 8 March.
Successful applicants will receive funding by 31 March.
UNISON: ‘Local government is at the point of collapse’
UNISON City of Edinburgh branch, has raised fears about the further budget cuts being presented to the city’s full council meeting today and condemns both the Scottish and UK governments for the continuing underfunding of Local Government.
Over the past 10 years the council has seen hundreds of millions of pounds slashed from its budget resulting in hundreds of job losses, cuts to services, and the closing of third sector organisations.
“Local government is at the point of collapse and the Scottish and UK Governments have done very little to prevent its demise while at the same time due to COVID-19 has asked it to do more,” said the union’s branch secretary Tom Connolly.
“Providing services from the cradle to the grave, local government and the services it provides impact on all citizens. The continuing underfunding can have a serious impact on the effectiveness of the services being provided.”
UNISON, the biggest union representing workers in Edinburgh council, says that those employed in local government are fire fighting to keep services running, they feel undervalued and the increasing high levels of stress amongst staff is an example of the negative impact on the health and wellbeing of those staff.
UNISON’s Plug the Gap campaign https://www.unison-scotland.org/protect-our-council-services/ has called on the government to bridge the £1 billion funding gap in local Government. COSLA has also called for the action to be taken to bridge the Funding Gap.
“Everyone suffers if Local Government is not provided the funding that it needs to provide meaningful services across our communities,” added Tom Connolly.
“Staff in local government need to be rewarded and paid well for the jobs that they do, there are many low paid workers in local government providing face to face support to or most vulnerable children and adults, in school, care homes etc.
“Other council staff keep our public buildings clean, keep our roads clear, clean our streets and empty our bins, administrative and clerical workers dealing with benefits and other essential administrative tasks, all examples of low paid and undervalued workers who have continued to keep the city running.
“These workers now need to be given the value that they have always deserved and rewarded with decent pay and conditions. Clapping does not pay the bills.”
As the city council’s budget meeting gets underway, some images from budgets past:
The FCA has published a report on change and innovation in the unsecured consumer credit market following a Review by its former Interim Chief Executive, Christopher Woolard CBE.
The Woolard Review sets out how regulation can better support a healthy market for unsecured lending, taking into account the impact of the coronavirus (Covid-19) pandemic, changing business models and new developments in unregulated buy-now pay-later (BNPL) unsecured lending. The Review was commissioned by the FCA Board.
Christopher Woolard, Chair of the Review, said: ‘Most of us will use credit at some point in our lives. So, it’s vital that we have a fair market that works for everyone. New ways of borrowing and the impact of the pandemic are changing the market, with billions of pounds now in unregulated transactions and millions of consumers at greater risk of financial difficulty.
‘Changes are urgently needed: to bring BNPL into regulation to protect consumers; to ensure that there is secure provision of debt advice to help all those who may need it; and to maintain a sustained regulatory response to the pandemic.
‘Alongside these urgent issues the Review sets out a series of recommendations for how the FCA, working with partners, can build a better market in future.’
UK households have nearly £250 billion of outstanding consumer credit debt and more than 42.5 million people used consumer credit in 2019.
The Review sets out 26 recommendations to the FCA, sometimes working with Government and other bodies, to make the unsecured credit market fit for the future, including:
The regulation of unregulated buy-now pay-later: BNPL products which are currently exempt from regulation should be brought within the regulatory perimeter as a matter of urgency. The use of BNPL products nearly quadrupled in 2020 and is now at £2.7 billion, with 5 million people using these products since the beginning of the coronavirus pandemic. The emergence and expansion of unregulated BNPL products gives consumers a significant alternative to more expensive credit, but this also comes with significant potential for consumer harm. For example, more than one in ten customers of a major bank using BNPL were already in arrears. Regulation would protect people who use BNPL products and make the market sustainable.
Debt advice: The provision of debt advice will be critical to a sustainable market in the long term, especially through the recovery from coronavirus. Free debt advice services need secure, long-term funding as demand increases to as many as 1.5 million additional cases, following the pandemic. Funding needs to be in place to help the poorest pay fees when applying for debt relief orders.
Forbearance: The FCA responded quickly and effectively in the emergency phase of the pandemic – it needs to sustain this response through the recovery, for example by looking at whether it should revise its rules and guidance to drive greater consistency in the type of support firms offer consumers struggling to pay.
Alternatives to high-cost credit: A sustainable credit market needs more alternatives to high-cost credit. The FCA should work with the Government and Bank of England to reform the regulation of credit unions and Community Development Finance Institutions. More should be done to encourage mainstream lenders into this space.
Outcomes focused: Regulation should be driven by the outcome being sought and how consumers use products in the real world. Regulation should deliver similar protections where consumers face similar harms. In addition to making sure products are affordable, there should be an increased focus on lenders meeting consumers needs’ for as long as they hold the product. The FCA should review repeat lending.
The FCA welcomes the Woolard Review report into change and innovation in the unsecured credit market and supports the recommendations directed to the FCA.The Board agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation.
Charles Randell has written to the Economic Secretary to the Treasury setting out the Board’s view and proposing that the FCA works with the Government to design the appropriate regulation.
Ensuring consumer credit markets work well is one of the FCA’s five priorities. The Board has asked the FCA executive to build the Review’s recommendations into its business planning. The FCA will publish its 2021/22 Business Plan in April, and will give further details of the response to the Review.
Charles Randell, Chair at the FCA, said: ‘Unaffordable credit can damage the lives of people who are already struggling to manage everyday expenses. While we have made progress in reducing unaffordable debt in the years before coronavirus, the pandemic has had an unequal impact on households.
“Many people have been able to reduce their debts, but some of the poorest in our society have exhausted any savings or run up more debts. All the authorities which cover debt and debt advice must act together systematically to prevent problem debt and to help people get out of a spiral of debt through properly funded debt advice.
‘Regulation should be consistent and the Review shows how we can ensure high standards in consumer credit regardless of the form of credit.
‘The Review has powerful recommendations on debt advice and insolvency including on the IVA market. We are ready to work with other regulators to reduce the harm that IVAs can produce for people that use them, and to reduce the scope for unscrupulous operators to prey on vulnerable indebted people through for-profit debt packaging.
‘As the market innovates and changes, regulators and legislators need to respond quickly and decisively to protect consumers by facilitating credit where it is beneficial and clamping down on it when it does harm. The FCA agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation.’
Details of how £11.6 billion of funding from the Scottish Government will be distributed to individual local authorities in 2021-22 have been published.
The settlement provides councils with an increase in day to day revenue spending of £335.6 million, including £90 million to compensate local authorities which choose to freeze council tax and a further £259 million will be added in one-off funding to support ongoing COVID-19 pressures.
In total, councils will receive additional revenue funding of almost £600 million to support vital local government services in 2021-22.
The Scottish Government will also increase a scheme which compensates councils for the loss of income from sales, fees and charges due to the pandemic from £90 million to £200 million in 2020-21.
Finance Secretary Kate Forbes said: “This budget is being delivered in exceptional circumstances as we continue to battle a pandemic that has shaken our society and economy to the core.
“The local government settlement will help to fund those vital public services that are much valued and needed.
“It includes additional funding of £59 million to complete the expansion of early learning and childcare to 1,140 hours a year, £72.6 million for investment in health and social care and £7.7 million to support the inter-island ferries in Shetland, Orkney and Argyll and Bute.
“Just as we have chosen not to increase tax rates, ensuring people pay no more than last year, I have taken the significant step of offering funding equivalent to a council tax increase of around 3% to councils who choose to freeze council tax. I look to local government to join with me in providing the much needed financial reassurance to those who are struggling.
“We need to focus on how we rebuild and renew our country, and the funding I am providing to local authorities reflects the key role that they will continue to play in that journey.”
LOCAL GOVERNMENT FINANCE 2021-22: TOTAL REVENUE SUPPORT
Local Authority
2020-21
2021-22
Change
Change.
£m
£m
£m
%
Aberdeen City
364.6
376.0
11.4
3.1
Aberdeenshire
460.2
479.2
19.0
4.1
Angus
220.2
226.9
6.7
3.1
Argyll & Bute
208.8
213.3
4.6
2.2
Clackmannanshire
103.0
105.7
2.7
2.6
Dumfries & Galloway
306.8
314.6
7.9
2.6
Dundee City
320.1
327.7
7.7
2.4
East Ayrshire
249.9
256.9
7.0
2.8
East Dunbartonshire
202.1
208.0
5.9
2.9
East Lothian
189.2
194.7
5.5
2.9
East Renfrewshire
191.3
196.1
4.8
2.5
Edinburgh, City of
799.6
831.9
32.3
4.0
Eilean Siar
99.8
101.6
1.8
1.8
Falkirk
308.2
315.7
7.5
2.4
Fife
702.4
725.3
22.9
3.3
Glasgow City
1,333.1
1,362.9
29.8
2.2
Highland
493.0
506.3
13.3
2.7
Inverclyde
177.6
181.9
4.3
2.4
Midlothian
178.9
183.7
4.8
2.7
Moray
173.6
180.2
6.6
3.8
North Ayrshire
296.7
303.9
7.2
2.4
North Lanarkshire
673.1
691.2
18.1
2.7
Orkney Islands
78.2
82.7
4.5
5.7
Perth & Kinross
271.0
281.3
10.3
3.8
Renfrewshire
341.9
351.2
9.3
2.7
Scottish Borders
224.0
233.2
9.2
4.1
Shetland Islands
90.0
97.3
7.3
8.1
South Ayrshire
217.4
223.7
6.3
2.9
South Lanarkshire
610.4
625.8
15.5
2.5
Stirling
183.5
188.7
5.2
2.9
West Dunbartonshire
203.0
207.4
4.4
2.2
West Lothian
344.5
353.3
8.8
2.6
Undistributed
51.9
75.1
23.2
44.8
SCOTLAND
10,667.8
11,003.4
335.6
3.1
Speaking after last week’s Budget announcement, COSLA’s Resources Spokesperson, Councillor Gail Macgregor, said: “Given the context this year, perhaps it is not overly surprising that the Budget is very much a mixed bag for Local Government –the main issue is that the overall allocation adds very little into our core financial settlement which has been eroded over the years.
“The Cabinet Secretary, in her speech, recognised Councils’ role as deliverers of vital services and yes on the face of it there is more money but that is predominantly for Government priorities.
“The addition of £259 million flexible funding for 2021/22 will help councils address Covid related costs next year, including providing the support that the most vulnerable in our communities will require but we need solid assurances that if this figure falls short, as is expected, that further funding will be forthcoming.
“To deal with pressures this year, the announcement of an additional £110 million to help compensate Councils for loss of income, which when added to the money we have already had, makes £200 million, is to be welcomed.
“However, for many councils this won’t be enough – income loss will leave a very large hole in their finances for years to come. We welcome that the Cabinet Secretary for Finance has listened to Leaders requests for further funding to cover loss of income but there is still work to do where there is a shortfall.
“We welcome elements of today’s announcement but overall this budget falls short of what we would consider a fair settlement for Local Government. We would anticipate further constructive discussions with the Cabinet Secretary in the next few weeks.”
Significant new investment to drive economic recovery, bolster public services and support families underpins the Scottish Government’s spending and taxation plans for the coming year.
Presenting the Scottish Budget 2021-22 yesterday, Finance Secretary Kate Forbes announced support for jobs and skills totalling around £1.1 billion.
Job creation is a priority, with measures including a commitment to launch a new Green Workforce Academy to help people secure work in the low carbon economy, a £100 million Green Jobs Fund over the next parliament, £7 million towards making Scotland a world class hub for digital business and an additional £125 million for the Young Person’s Guarantee, employability and skills.
Health receives record funding of over £16 billion, an increase of 5.3% on 2020-21, along with a further £869 million to continue tackling coronavirus (COVID-19), including funding for the vaccination and test and trace programmes. This means that, over the course of this parliament, investment in health has increased by £1.8 billion in real terms – more than tripling the commitment to increase health funding by £500 million more than inflation.
To support family budgets, £90 million is being made available for local authorities to freeze council tax.
Public sector workers earning up to £25,000 can receive at least a 3% pay increase via a £750 cash underpin, while there is a 1% rise for those earning above that amount, capped at £800 above £80,000.
Economic recovery, supporting public services and helping families are at the heart of this year’s Scottish Budget.
£11.6 billion for local government, which represents a £335.6 million increase in core revenue funding, including the £90 million to compensate local authorities which choose to freeze Council Tax, plus £259 million in one-off funding
£1.9 billion for primary health care to help deliver more services in the community. A further £550 million is earmarked to build new Elective Care Centres and the Baird Family Hospital and Anchor Centre in Aberdeen
£98.2 million to improve Scotland’s digital infrastructure and deliver access to high quality broadband and mobile coverage.
£711.6 million for affordable housing and £68 million for the first full year of the Scottish Child Payment, tackling child poverty
a new £55 million programme to support town centres and community-led regeneration projects
more than £3.1 billion in resource and capital investment for education and skills, and £567 million to provide 1,140 hours of early learning and childcare, supporting implementation of the UK’s most ambitious childcare programme
£1.3 billion for the Scottish Police Authority, including a £60 million increase in Police Scotland’s revenue budget – exceeding an earlier pledge of a £100 million boost over five years
£1.6 billion for rail and bus services and £100.5 million for active travel to consolidate changes to healthy, green travel options seen during the pandemic
doubling the Rural Tourism Infrastructure Fund, helping tourist attractions and local communities make improvements to cope with increased visitors
an additional £27 million to expand woodland creation and the associated infrastructure, supporting green jobs
Business support remains a priority and the Finance Secretary confirmed that the Local Authority Discretionary Fund will be doubled to £60 million in this financial year to allow councils to respond to local needs. In addition, businesses eligible for the Strategic Framework Business Fund will receive full Level 4 payments on 22 February, regardless of any future changes to local restrictions.
The Scottish Government will also increase a scheme which compensates councils for the loss of income from sales, fees and charges due to the pandemic from £90 million to £200 million in 2020-21.
Ms Forbes said: “This budget is being delivered in exceptional circumstances as we continue to battle a pandemic that has shaken our society and economy to the core, and as we face the harmful impacts of Brexit.
“It promotes innovation and reform, new beginnings, new directions. And while it continues to target support in the immediate term, it also tracks a course over the next year to build a fairer, stronger and greener country.
“To help drive our green economic recovery I am providing the stability and certainty that businesses have asked for through the most competitive reliefs packages in the UK. There are innovative measures to promote sustainable growth and we are investing more than £1 billion in jobs and training.
“The budget sets out a distinctive Scottish pay policy that again supports the lowest paid, charting a different course to the ill-judged pay freeze announced by the UK Government. It also bolsters our health service, delivers more affordable homes, provides additional childcare places and helps young people into work.
“Throughout these dark times we have never given up hope. This budget seeks to build on that hope and, by focusing on how we rebuild and renew our country, make the light at the end of the tunnel shine that bit brighter.”
Our budget helps to deliver stability now, but it also looks forward to the future.
Watch Finance Secretary @KateForbesMSP explain our priorities for the coming year ⬇
The STUC has expressed its disappointment at what effectively amounts to a real-terms pay freeze for thousands of public sector workers as the Budget offers 1% for those earning pay above £25,000 per year including most teaching staff, firefighter and civil servants.
The STUC General Secretary, Roz Foyer pointed to the real terms increase in the Scottish Budget of nearly 4% and contrasted that with today’s pay offer.
“Whilst it is right and proper that the pay of low paid workers should be underpinned, for most workers this increase is still below the budget uplift received by Holyrood from Westminster. Far too many of our key workers have been left out in the cold.
While supporting Scottish Government calls for greater borrowing powers, Foyer also questioned whether tax cuts for high earners were the right priority and whether funding for Local Government was sufficient.
“We strongly support the Scottish Government’s calls for greater borrowing powers. However, the Cabinet Secretary has managed to find wiggle room to provide £125 million in blanket tax cuts. She has also reduced income taxes for high earners – a policy that raised £51 million last year. Given this, it is deeply disappointing that she hasn’t been able to better reward key workers.
“While the Cabinet Secretary spoke about an increase in funding for Local Government, it appears this amounts to less than a 1% increase, a level that is nowhere near sufficient to cover gaping cuts to services from years of austerity.”
Responding to the Budget announcement, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce, said:“The position of Scottish businesses has never been so precarious. The Scottish Government’s announcements today are welcome but do not go nearly as far enough to avoid risk of widespread business collapse and job losses.
“Yes, there is light at the end of the tunnel with the vaccination programme but restrictions to prevent the spread of the virus have been devastating. We understand that the Cabinet Secretary for Finance faces difficult choices in setting the budget particularly ahead of that of the UK, in a time when the country faces extraordinary challenges.
“Business will be disappointed that further details on an economic route map on how we will exit this crisis aligned with the roll out of the vaccine were not provided today. This is a critical component if businesses are to unleash the investment our country so desperately needs.”
On Non-Domestic Rates:
“The Cabinet Secretary has listened to us and has delivered a reduction in the Non-Domestic Rate (NDR) poundage rate. However, longer-term, we believe the system is unfair and needs significant reform.
“Plans for a three months extension of rates relief is a too short a reprieve. We need commitment to a 12-month reliefs package to provide the certainty business needs. Clearly there is more to do, and we await further announcements from the Chancellor to see what further support can be made available and expect Scottish Government to pass on the equivalent consequential funding to businesses.”
On Business Support:
“The doubling of the discretionary fund is good news particularly for those businesses who have fallen through the gaps of other support packages. However, it is imperative that the process for businesses is clear, transparent and quick across all local authorities to ensure funding is available for businesses quickly and immediately.
“Now is the time to pull out the stops and redouble efforts to ensure business support comes through. We need to see a significant ramping up to get those funds that have been promised out the door and to businesses.”
On Infrastructure:
“The Scottish Government’s commitment to infrastructure investment is absolutely necessary for Scotland and the UK to be in a position to build back better and meet net zero ambitions. Now is the time for a vision driven by ambition and a willingness to collaborate like never before. This must be put first and foremost ahead of any political point scoring this year.”
On skills and training:
“SCC welcomes these important steps to support jobs, employment and training. We called for training academies and we are pleased to see the Cabinet Secretary has acted on our recommendations, particularly the focus on green jobs. It is now critical that the government and academia works in partnership with the private sector to ensure benefits are fully realised.”
On Protecting Jobs:
“We maintain our call to the Chancellor of the Exchequer to extend the furlough scheme beyond April 2021 and outline further initiatives to protect business and jobs at the UK Budget in March.”
On mental health support:
“Business will welcome this as we understand the toll the pandemic has taken on our customers, employees and communities.
“Recovery of our wellbeing is just as important as economic recovery, with many employers investing in their own employee support programmes. This commitment from the Scottish Government will enhance these efforts.”
Responding to Kate Forbes’ announcement that public sector workers on salaries up to £25,000 a year will receive a 3 per cent increase, GMB Scotland Senior Organiser Drew Duffy said: “This will be met with fury among the lowest paid in Scotland’s public sector.
“Kate Forbes was among the many politicians applauding our frontline heroes, now she is saying ‘thank you’ with a rise that won’t amount to more than a tenner a week for most.
“There is no value here, and it’s an insulting response from the Scottish Government to the ongoing struggles of our key workers in this pandemic.”
Tracy Black, CBI Scotland Director, said:“The Finance Secretary is right to put business support and economic recovery front and centre of this year’s draft Budget. With jobs, firms and livelihoods still hanging by a thread, Scotland can’t afford to wait until the pandemic is over before initiating plans for a sustained recovery.
“Health must come first and lowering transmission rates remains the priority. Yet with so many struggling companies across Scotland, it’s only right that proper consideration is given to reopening the economy when it is safe to do so. This should be driven by data and done in dialogue with business.
“The private sector is critical to a successful recovery and moves to protect firms’ immediate futures are welcome. Continuing rates reliefs for the hard-hit hospitality, retail and tourism sectors is welcome, however a three-month window remains a challenging timetable for firms under real pressure. Companies will also be relieved to see a continued commitment to Covid business support and no further changes on income tax.
“The UK and Scottish governments must now work together to provide certainty over business support, ensuring that the firms we need to drive economic recovery survive the tough weeks and months ahead.
“Longer term, the figures from the Scottish Fiscal Commission paint a worrying picture and highlight the scale of the challenge ahead. Maintaining a laser focus on boosting productivity and protecting competitiveness are key.”
Responding to the Scottish Government’s Budget statement delivered today by Finance Secretary Kate Forbes MSP, Director of CAMRA Scotland Joe Crawford said: “Extending the business rates holiday for pubs and social clubs for a further three months into the next financial year is a desperately-needed lifeline for pubs who have struggled for almost a year now.
“But three months won’t be enough. CAMRA will be joining the Scottish Government in calling on the Chancellor to use his Budget on 3rd March to give the Scottish Government enough money to extend this Business Rates holiday for the entire 2021/22 financial year.
“Pub-goers and licensees will now want to see the Scottish and UK Governments work together to make sure pubs and breweries get enough long-term financial support to thrive when they can reopen. This must include grants, furlough support as long as there are restrictions on trading, extending the VAT cut on beer to help pubs that don’t serve food, and cutting tax on beer served in pubs to help them compete with supermarket booze.
“Pubs and social clubs are a force for good in our communities, bringing people together and tackling loneliness and social isolation. They will be a crucial part of our national healing process after COVID and deserve to be supported until they can trade again.”
SLTA Managing Director, Colin Wilkinson said:“The Scottish Licensed Trade Association welcomes today’s announcement by Finance Secretary Kate Forbes that the Scottish Government will extend 100% non-domestic rates relief for retail, hospitality and leisure for at least the first three months of the new financial year. However, it doesn’t go far enough.
“Today’s announcement is good news, as is the promise of further ongoing business support and it gives us a much-needed stay of execution. The reduction in the poundage rate, from 49.8 pence to 49 pence, is also very welcomed.
“Further support from the Westminster Government is crucial and our hope is that UK Chancellor, Rishi Sunak, steps up to the mark by extending the current furlough scheme, committing to retain the Commercial Rates Relief and the temporary 5% reduced rate of VAT for hospitality beyond March 31 and well in to 2022.
“Our sector is battered and bruised and the sooner both the Scottish and UK Governments can provide clarity on support and an indication of an exit strategy out of this pandemic the better.”
Chief Constable Iain Livingstone has welcomed the Scottish Government’s Budget announcement.
Mr Livingstone said: “I welcome the announcement to eliminate the structural deficit in policing’s funding.
“The reform of policing in Scotland has brought many benefits to all communities across the country, while £200m has been returned to the public purse every year compared to legacy arrangements.
“The last 12 months have demonstrated the relentless nature of policing. Our mission to prevent harm, support communities and keep people safe has been evident throughout the pandemic.
“We will continue to enhance capacity and capability to protect the people of Scotland in the public, private and virtual spaces.
“Responsive and accessible local policing is deeply valued by our fellow citizens and will always lie at the heart of Police Scotland’s purpose and approach.”
Measures promoting recovery and renewal will be at the heart of the Scottish Budget tomorrow.
New initiatives to drive economic growth, create jobs and tackle inequality will be included alongside further support for business, public services and families.
This Thursday 28 January, we’ll be sharing our plans for the Scottish Budget.
Finance Secretary Kate Forbes said: “The budget on Thursday will create the conditions for Scotland to recover and renew.
“We remain in the grip of a pandemic which continues to put pressure on our economy, health services and each of us as individuals. But the vaccine is providing a route back to normality and we must now sharpen our focus on rebuilding for the future.
“The budget will include innovative, targeted measures to help businesses and families get back on their feet and bolster our vital public services. I have already ruled out following the UK Government’s public sector pay freeze and will set out details of a pay settlement that is both fair and affordable.
“It is vital that we rebuild our economy in a way that provides equal opportunities for all, delivers on our green commitments and creates the kind of Scotland we all want to see.”
“This process has already started. For instance we have established a National Transition Training Fund providing targeted support for up to 10,000 people, set out our £60 million Young Person’s Guarantee and committed £2 billion in low carbon funding. The budget will set out how we intend to further these ambitions.
“Ahead of the budget we sought views on the role of Scotland’s devolved taxes and our fiscal framework in supporting the recovery. There was clear feedback regarding the need for stability and targeted support and that has also been a particularly strong message in my meetings with businesses and their representative organisations. The budget will deliver on those priorities
“Despite the UK Government’s budget being delayed until March, and the uncertainty that causes, the Scottish Budget 2021-22 will confirm funding allocations for local government. It will also detail how, within our limited resources, we will go as far as we can to support businesses in receipt of non-domestic rates relief.
“The global pandemic and the problems arising from Brexit combine to make these uniquely challenging times. This budget will help Scotland emerge as a globally competitive, fairer and greener country and I urge all parties to work in the national interest to ensure it is passed by the Scottish Parliament.”
