The next 10 years will be decisive in building a more resilient, entrepreneurial and fair economy, according to Economy Secretary Kate Forbes.
Speaking ahead of the expected publication of the National Strategy for Economic Transformation, Ms Forbes said the Scottish Government will work with businesses, trade unions, third sector and public bodies to seize Scotland’s economic potential.
The publication later this week follows the recent announcement of the updated Strategic Framework that sets out how Scotland can move forward whilst managing the risks of Coronavirus (COVID-19).
Ahead of the launch the Cabinet Secretary will tomorrow chair the Green Finance Taskforce to help transition Scotland in to a global leader for Green and Sustainable Financial Services.
Building on the legacy of COP26, the group will develop an action plan to cement Scotland’s position as a world leader in green and sustainable financial services, helping to build capability and create new greener jobs.
Ms Forbes said: “From the television to the telephone, penicillin to steam engines, Scotland has a rich history of innovation and invention. In the next decade, Scotland faces a choice to either lead or to lag behind other successful economies all whilst we recover from Covid, deliver net zero, tackle structural inequalities and grow our economy. We choose to lead.
“Over the next ten years, we aim to deliver economic growth that significantly outperforms the last decade, so that the Scottish economy is more prosperous, more productive and more internationally competitive.
“To do that, we must be a country in which the public, private and third sectors respect each other’s strengths, draw on each other’s talents and work together to create and sustain an economy that works for all.
“This strategy is about delivering the best economic performance possible for Scotland within the current constitutional constraints.
There is much more we would do with greater powers, however this strategy takes decisive steps towards the creation of new, well paid, green jobs and will drive an economic recovery that will meet our climate and nature targets while ensuring we maximise the benefits of a just transition.
“We want the Scotland of tomorrow to be a more resilient and more entrepreneurial economy – in which everybody can share in our success.
“As we look beyond the pandemic we must be ready to seize the economic opportunities that come with achieving net-zero and becoming a fairer country.”
The 2022-2023 Scottish Budget will help transition Scotland to becoming more prosperous, fairer and greener, Finance Secretary Kate Forbes has said.
Speaking ahead of delivering the Budget to Parliament today, Ms Forbes said the Scottish Government will deliver a bold and ambitious package of public investment that delivers on the priorities which matter most to the people of Scotland.
Ms Forbes said: “The Scottish Budget will provide taxpayers with stability and support, set out clearly how we will accelerate our Covid recovery, and crucially, how our spending plans will set Scotland on a new ambitious path.
“It has been a challenging Budget due to the continuing impact of the pandemic, and the uncertainty and worry that Covid poses for us all. This has been confounded by the UK Government’s decision to remove necessary Covid consequential funding at a time when we undeniably need to help our public services.
“The Scottish Government has taken spending decisions that prioritise supporting people and our vital public services through the twin crises of Covid and the cost of living. It is a budget for Scotland’s future – one that will help us secure a fairer, greener and more prosperous country.”
Responding to the Scottish Budget, Tracy Black, CBI Scotland Director, said:“While the Finance Secretary has outlined some helpful interventions for business, firms that have been working tirelessly to get back on their feet after two miserable years will be left with little to get excited about.
“The removal of the business rates cliff edge in April for hospitality, retail and tourism firms will be welcomed, however many will be disappointed that the government hasn’t gone further – particularly as uncertainty around Omicron gathers pace.
“Increased funding for employability is clearly a step in the right direction but much more detail is needed on how skills funding will help firms address immediate challenges. Ultimately, greater ambition is needed on upskilling and retraining if we’re to ensure workers are equipped with the skills they need for a modern economy.
“On green investment there were some welcome announcements around green jobs and just transition. However, failing to use the non-domestic rates system to incentivise private sector investment in low carbon infrastructure feels like a missed opportunity that could have helped Scotland push-on towards its net zero target.
“Overall, business shares the Scottish Government’s vision for a fairer, greener and more prosperous economy. Firms will be keen to see how the forthcoming National Economic Transformation Strategy turns ambition into action; setting Scotland on a path towards competitiveness, dynamism and productivity growth – which is the only sustainable route to higher living standards.”
Scottish workers bitterly disappointed by pay deal as STUC insists ‘budget will result in robbing Peter to pay Paul’
The Scottish Trades Union Congress (STUC) acknowledged the increase in public sector pay floor to £10.50 and insisted that pay rises must be fully funded by Scottish Government to avoid cash strapped councils having to make other cuts to pay the increased rate.
STUC General Secretary Roz Foyer said: “Workers across Scotland will be bitterly disappointed as they hear about the pay cuts announced today. Below inflation pay increases do nothing to help people deal with escalating costs this winter. Councils will have to rob Peter to pay Paul as services could be cut to meet the gaps in funding.
“There is a desperate need to back our public services. Huge gaps in funding in the NHS and social care have left some of the most vulnerable people in our communities without the treatment and services they urgently need. The Scottish Government have failed to take the opportunity before them to step up and back public sector workers.”
COSLA released its ‘Budget Reality’ document last night in response to the Scottish Budget.
COSLA’s Resources Spokesperson Councillor Gail Macgregor said that COSLA Leaders will meet today to discuss the implications for Local Government and respond more fully then.
In a brief statement Councillor Macgregor, said: “Our ‘Budget Reality’ document is important as it sets out the facts about the Local Government Settlement.
“It appears to be a disappointing budget for the communities that we represent, as it does not give Local Government what we need to survive and nor does it meet our campaign aspiration to help those communities to ‘Live Well Locally’,
“Once more, our core financial settlement has been hit.
“That said, we will take time to consider the finer details of today’s announcement and the full implications for both ourselves and our communities.
“As a membership organisation, our Council Leaders will come together virtually tomorrow to consider the implications, before we make a more formal response following that meeting.”
Responding to the Scottish Government’s budget, which was published today, Peter Kelly (Director, Poverty Alliance), said: “Today’s Scottish Government budget contains a number of welcome commitments.
“Doubling the Scottish Child Payment from April, as we and so many others across Scotland campaigned hard for, will help stem the rising tide of poverty across the country. Introducing free bus travel for young people under 22 is also a positive step toward a transport system that can tackle inequality.
“But with over one million people in Scotland living in the grip of poverty, it is clear that we cannot let up. In 2022 we must see these actions built upon, with further steps taken to build a Scottish social security system that unlocks people from poverty.
“We must also go further in redesigning our public services, like by extending free bus travel available to all under 25s and to everyone on low incomes.”
Scottish debt help charity welcomes the doubling of the Scottish Child Payment in the Scottish Budget
Child poverty is rising in every local authority in Scotland. Even before the pandemic, one in four children in Scotland were growing up in poverty and food bank use has increased by 63% over the last five years.
The pandemic has made things even more difficult for those already struggling as it has disproportionately impacted people living on low incomes.
CAP Scotland National Director, Emma Jackson, says, “We are delighted to hear about the Scottish Government’s commitment to double the Scottish Child Payment for families with children under the age of six.
“This is the single most impactful action that will take us four percentage points closer to reaching our interim child poverty targets and signals that ending child poverty will be a defining priority for Scotland. It is encouraging to see Scotland leading the way with this unique payment for families.
“This additional income will make a significant difference for the families we work with at Christians Against Poverty (CAP) Scotland. Families like Holly’s, who experienced problem debt after an overnight reduction in hours at work. Coupled with ill health and the challenges of being a single parent, debt began to deeply impact all aspects of Holly’s life.
“Through working with CAP Scotland, Holly was able to access the right debt solution for her and begin a debt free fresh start. The additional £40 per month will mean not having to worry as much about keeping her home warm for her and her son or buying him more food.
“Yet the very real challenges of making a low income stretch far enough to meet essential living costs remains. We welcome the news of free bus travel for those under the age of 22, the extension of free school meals to older age groups and the accelerated roll out of the Scottish Child Payment to include all children under the age of 16 by the end of next year. However, we would urge the Scottish Government to do all it can to bring the roll out of the Scottish Child Payment forward.
“With the rising cost of living and the end to the Universal Credit uplift, many families are facing a significant struggle this winter. We’re concerned that even more people will be pushed into poverty. We are keen to hold the Scottish Government to their commitment that “we can’t leave anyone behind”.
“The announcements in today’s budget leave a risk that key groups could experience further hardship. For too many households we work with at CAP, like single adult households, there is insufficient income to cover everyday essentials – rent, food, fuel, toiletries – and borrowing money is often a necessity to survive. No one should be forced into problem debt in order to survive.”
The Scottish budget 2022-23 includes £150 million for walking, wheeling and cycling, an increase of £19.6m.
Living Streets Scotland, part of the UK charity for everyday walking has welcomed the significant funding and the impact it will have to make cleaner and healthier forms of transport.
Stuart Hay, Director, Living Streets Scotland said: “Today marks a fundamental and positive change in how transport is funded with a much greater focus on people walking, wheeling and cycling.
“Walking accounts for 22% of all trips, so it’s great to see spending levels reflecting this reality, switching from a focus on new road schemes that have resulted in congestion and emissions.
“The £150 million investment will make it easier, safer and more attractive for more people to choose cleaner ways to travel. This is vital in the face of a climate emergency and a crisis in public health brought about by inactivity.
“This level of investment means new projects, such as national action to get more children walking to school are possible. It also makes plans to cut traffic on Scotland’s roads and streets by 20% more realistic.”
Responding to the Scottish Government’s Budget for 2022-23, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce said:“Scotland’s economy is recovering from the COVID-19 pandemic faster and stronger than many expected, and this budget offered the Scottish Government an opportunity to accelerate this return to growth.
“Whilst there was much to welcome in this budget the Scottish Government should have gone further to support Scotland’s businesses, the drivers of economic growth.
“Many economic deterrents as a result of the pandemic remain in place, impacting on footfall on our town and city centre high streets, driving down demand in our vital tourism and aviation sectors, and the looming threat of a return to greater level of restrictions is holding back investment. The Scottish Government should have provided assurances for businesses that targeted financial support will be made available to those ongoing affected sectors to deliver a clear pathway to recovery.”
On Non-Domestic Rates:
“Businesses will welcome the extension of rates reliefs afforded to properties in the retail, leisure, and hospitality sectors for an additional three months, however, this should have gone further to give businesses the time they need to recover from this incredibly challenging period.
“Scotland’s town and city centres have already lost thousands of businesses over the past twenty months and prolonged periods of home working have made the trading conditions for brick-and-mortar retailers tougher than ever, and many ratepayers will question if this extension goes far enough to support them.
“It was also disappointing that the Scottish Budget failed to confirm whether or not the long awaited NDR Revaluation due to take place in 2023 will go ahead as planned.”
Training, Skills and Supply Chain:
“Scotland’s businesses are still experiencing challenges through supply chain connectivity problems, rising cost prices, inflationary pressures, and recruitment difficulties.
“Additional funding for training interventions at all levels is welcome news and investment in Scotland’s workforce drive up business capacity and improve investment opportunities.
“Cost pressures and supply chain challenges require urgent action from government and whilst we await further details in the forthcoming National Economic Transformation Strategy, it’s important Scottish Government act now, collaborate with business and begin to resolve these issues as a priority for our economy.”
Energy and Just Transition:
“The energy sector remains a critical part of Scotland’s economy and the funding commitments in the budget to support a Just Transition are a step in the right direction.
“To meet Scotland’s Net Zero ambitions and secure the future of jobs in the energy sector and North and North-East though, this investment and funding needs to continue to be stepped up, at pace, in partnership with industry to enable businesses to pivot successfully.”
Plans will ‘support families through the cost of living crisis’
Initiatives to tackle the climate emergency, support economic recovery and reduce inequalities will be at the heart of this year’s Scottish Budget, Finance secretary Kate Forbes declared yesterday.
The 2022-23 Budget, which will be presented to the Scottish Parliament on Thursday (9 December), will set out how the Scottish Government will forge a path that transitions Scotland towards becoming a fairer, more prosperous and greener country.
Speaking ahead of the Scottish Budget, Finance Secretary Kate Forbes said it comes against a challenging fiscal backdrop and the impacts of the ongoing Coronavirus (COVID-19) pandemic.
Ms Forbes said: “This is a critical time for Scotland – we are still in the grip of the pandemic and families and businesses across the country are bearing the brunt of the cost of living crisis. However, in these times of crisis, we need to go beyond the norm.
“While the pandemic may have defined our lives in recent times, the Scottish Government is determined it does not define our future. The 2022-2023 Scottish Budget that I will present on Thursday is another stepping stone towards a fairer, greener, more prosperous future.
“This Budget will provide certainty and stability for families whilst working to reduce inequalities, the process for which has already begun with the First Minister recently announcing the doubling of the Child Payment to £20 per child per week from April next year, reaching over 105,000 children under age 6 in just four months’ time. When we extend the Scottish Child Payment to all under 16s at the end of next year, over 400,000 children and their families will be eligible.
“We will also invest in infrastructure that allows us to drive down emissions and create the green jobs of the future that come with the transition to a greener Scotland and set out plans to bolster our economic recovery and support our public services.
“This year’s Budget is set against a challenging fiscal backdrop as a result of the UK Government’s decision to reduce Scotland’s day-to-day spending by removing ongoing COVID funding, despite the continuing impacts of the pandemic.
“The Budget I will present on Thursday will enable the Scottish Government to make good on our promise to build a fairer, greener Scotland. That is our social, economic and environmental imperative.”
Finance Secretary Kate Forbes has written to Chancellor of the Exchequer Rishi Sunak calling for additional spending to support households and businesses who are facing a perfect storm of rising prices, reduced support and increasing shortages.
Writing ahead of the UK Autumn Budget and Comprehensive Spending Review, Ms Forbes urged the Chancellor to at least match the Scottish Government’s £500 million Just Transition Fund for the North East and Moray and increase the Scottish Government’s borrowing powers to enable greater investment in decarbonisation schemes.
She also called for an extension of the reduced 12.5% VAT rate for the hospitality sector, which is due to end on 31 March 2022, for a further year, a reversal of the decision not to award the Scottish carbon capture, utilisation and storage project Track-1 status and for the UK Government to “prioritise spending that supports the financial security of low-income households, the wellbeing of children and young people and delivers good, green jobs and fair work.”
The letter states:
Dear Rishi,
I am writing to you in advance of the UK Government announcing the Autumn Budget and Comprehensive Spending Review on 27 October, with a view to constructively progressing the recent dialogue with the Chief Secretary to the Treasury and the First Minister’s meeting with the Prime Minister.
I am conscious that over recent days there has been wide media coverage in relation to Budget and Spending Review content. The reports have contained differing degrees of detail and a lack of clarity on how much of the predicted spend is new. In the absence of direct engagement, I have not reflected this information.
The Scottish Government will work to ensure that our responses to the unprecedented public health, economic and wider challenges presented by Covid deliver for the benefit of all of Scotland. This environment is compounded by the complexity and financial detriment to Scotland of the UK Government’s decision to leave the European Union against the will of the Scottish people, while we continue to work urgently to address the needs of climate change. These challenges will require short and long-term solutions and I set out below how the UK Budget and Spending Review can support priorities in Scotland.
Net Zero
COP 26 in Glasgow will focus international attention on the urgent action needed to tackle the global climate emergency. As outlined in the joint nations letter, and by the UK Climate Change Committee, significant investment is required from the UK Government in reserved areas to meet the Scottish Government’s ambitious emissions reduction targets. Given the requirement for co-ordinated action to address this challenge, it was disappointing that the UK Net Zero Strategy was launched without any meaningful engagement. The UK Net Zero Strategy provides some encouragement in key areas, but overall does not go far enough in many of the critical elements for ensuring the deep decarbonisation that the Scottish Government has repeatedly called for action in.
In Scotland, our climate change targets set their own pace and scale, requiring us to avail ourselves of every lever at our disposal. However, many levers remain at UK level, even where they affect Scotland directly. Following on from our recent meetings, it is worth highlighting again those actions which would most benefit our delivery in relation to funding key climate change commitments:
Removal of the capital borrowing cap, replacing this with a prudential borrowing scheme to help leverage the greater volume of capital investment required;
Agreement that all new spending will reflect the devolution settlement, enabling us to address Scotland’s specific challenges in making the transition to net zero (such as the needs of rural populations);
Meaningful and consistent dialogue between UK Government and Devolved Governments to allow consideration of all relevant input in advance of key green policy and regulatory decisions;
Engagement in relation to the net zero roadmap and other key strategies.
The Scottish Government has committed to working with partners, communities and other stakeholders to take forward a ten-year £500m Just Transition Fund for the North East and Moray. Given the UK Treasury has, over decades, benefited from billions of pounds of revenue from activity in the North Sea, I ask that you at least match our commitment to help secure jobs the North East of Scotland, support the energy transition, and reduce emissions.
There are a number of areas where we need the UK Government to take more action and act faster, including support for carbon capture, utilisation and storage (CCUS). Scotland represents the most cost-effective and deliverable opportunity for CCS in the UK by the mid-2020s. Therefore, the recent UK Government announcement failing to award the Scottish Cluster clear and definitive Track-1 project status as part of your CCUS cluster sequencing process is illogical.
We have previously advised the UK Government that we would help to support the Scottish Cluster, and stand ready to do so. However, we do not hold all the necessary legislative and regulatory levers which are retained by the UK Government. We are therefore calling upon the UK Government to reverse this decision, and accelerate the Scottish Cluster to full Track-1 status without delay.
Health & Social Care
I welcome the approach from UK Government officials to Scottish Government equivalents to form a working group in relation to the implementation of the levy, however this rise will have a notable impact on taxpayers in Scotland. Without necessary investments in supporting low-income households, this regressive approach to revenue generation will further compound the financial hardship many families already face as detailed above.
Whilst the UK Government has provided indications of the consequentials we will receive as a result of this tax rise, I remain concerned that reductions will be made in other areas giving rise to negative consequentials overall, and ask that this is ruled out in the forthcoming Budget and spending review. As part of this, I expect the allocation to devolved administrations will cover the full costs of the levy that will be incurred by our public sector employers including local government.
It is imperative that the UK budget delivers on your commitment to ensure that the NHS receives whatever support it needs throughout this pandemic. While the Health and Social Care Levy will go some way to supporting services, it is clear in particular that this will be insufficient to address the scale of social care pressure and consequent impact on NHS services.
I reiterate my previous call for a comprehensive package of investment, taking the whole health and social care system into account, both in terms of delivery of services and addressing specific Covid-19 pressures. I would also reaffirm the need for increased transparency of UK Government spending arrangements, so that the Scottish Government is clear on the funding that will arise from key programmes such as testing and vaccinations.
As I have previously highlighted, it will continue to be necessary for the UK Government to accommodate flexibility across the UK in these programmes of activity, so that devolved administrations can deploy resources in a manner that best meets spending profiles and specific needs in Scotland.
Recovery from the Combined Impacts of Covid and EU Exit
The Barnett guarantee provided in 2020-21 was a successful demonstration of the benefits of fiscal flexibility. UK fiscal policy and any new fiscal rules should be flexible as well as credible. This is something the Institute for Fiscal Studies has recently advocated to ensure fiscal policy can continue to respond to temporary economic shocks and help ensure fairness across generations. It is essential that the UK Government adopt such an approach.
As I have previously communicated, the Scottish Government is strongly opposed to any return to austerity and strongly urge you to reinstate the £20-per week uplift to Universal Credit. A real cost-of-living crisis is emerging as a result of this cut, combined with the escalating energy costs and upcoming rise in National Insurance Contributions. The Universal Credit cut alone will push an extra 60,000 people in Scotland, including 20,000 children, into poverty and hundreds of thousands more into hardship, whilst also reducing social security expenditure in Scotland by £461m by 2023-24.
I cannot accept that these cuts to individual income, alongside other poverty-inducing policies such as the benefit cap, or the two child limit for child tax credit are justifiable at this time. The UK Budget must prioritise spending that supports the financial security of low-income households, the wellbeing of children and young people, and delivers good, green jobs and fair work.
The choices made by the UK Government following Brexit are contributing to labour and skills shortages in Scotland. As predicted by Scottish Government modelling, severe impacts are disproportionately concentrated on the food and drink sector, particularly seafood, meat and dairy, as well as beverages and textiles. Evidence is mounting, including from BICs and HMRC Regional Trade Statistics to illustrate the detrimental impact on our trading performance, and supporting my call for the UK Government to re-engage in good faith with the EU and find pragmatic solutions to the blockages confronting businesses.
Where these create additional new costs or obstacles, I ask that the UK Budget and Spending Review is transparent about the impact and provides additional financial support to help compensate businesses for the losses incurred as a direct result of EU Exit.
Public Sector Pay
Decisions on public sector pay by the UK Government in this Budget and Spending Review are a material factor in setting pay awards for the public sector workforce in Scotland. Any continuation of the UK Government pay freeze has a material impact on our block grant settlement, within which we must balance reward and affordability. Public sector pay awards must be progressive, fair and allow valued workers to maintain their standard of living, as they continue to deliver the strong and innovative public services our people deserve.
Capital Investment
There is much common ground between UK and Scottish Government infrastructure priorities in delivering our net zero targets, delivering new jobs and securing Covid recovery. However, our economic recovery could be damaged if this spend is not prioritised and committed within the UK Budget. The decision taken by the UK Government to disburse the Levelling-Up Fund directly across the UK, despite previous commitments otherwise, impacts on the level of devolved funding available to the Scottish Government for Scotland.
To help achieve our Net Zero aims and grow our economy, I would welcome your assurance that the Scottish Government will receive a fair share of future years’ Capital and Financial Transactions allocations; that the gap in the Scottish Budget resulting from the change in approach to the Levelling Up Fund will be filled and that there will be appropriate governance arrangements for the UK Infrastructure Bank and other partnerships or funding routes to ensure that all interested parties have an appropriate ability to influence and control spend in the relevant areas of the UK.
VAT
I believe that the UK Government must make responsible tax policy decisions that will support the sectors and businesses economy throughout this challenging period, and I welcome measures taken on VAT to date. However, I am convinced that the increase in VAT from 1 October comes too soon.
This will affect many businesses that have been hit hardest by the Covid pandemic, potentially leading to their closure and therefore slowing the economic recovery in Scotland. It is vital that the UK Government takes account of the needs of all parts of the UK when deciding how best to support the recovery through its taxation levers, and I urge you to consider extending the reduced rate of VAT for the next financial year.
Air Passenger Duty
As you will be aware, the Scottish Government has a strong interest in the UK Government’s consideration of next steps for Air Passenger Duty following this year’s consultation on aviation tax reform. We accordingly asked to be fully consulted on any decisions before they are made, to ensure that any implications for devolution and the interests of Scotland are taken fully into account.
In that regard, it is concerning to see that the media appears to have been briefed on those decisions, without any discussion with the Scottish Government having occurred. Moving forwards, I would welcome your full commitment to meaningful dialogue on this, and indeed on all relevant tax matters, in advance of media briefings.
Replacement of EU Funding
In common with my counterparts in the Devolved Administrations, I expect full replacement of EU funds to ensure no detriment to Scotland’s finances, and I expect the UK Government to fully respect the devolution settlement in any future arrangements.
The current approach to the replacement of and participation in EU programmes leaves Scotland worse off. The ability to undertake long-term strategic planning has been significantly undermined as the flexible seven-year multi-annual funding mechanisms of EU funding are being replaced by annually managed allocations. Furthermore, the proposed methodology for determining farm funding allocations effectively penalises the use of the remaining flexibilities from legacy funding. I have written to you jointly with other finance ministers from the Devolved Administrations in order to express our concerns about this methodology and our expectations regarding future allocations.
With regards to fisheries, I consider the existing settlement to be vastly insufficient, given past underfunding and the significant impacts of Brexit on the sector. We provided clear evidence for a multi-year £62m allocation for Scottish fisheries, as opposed £14m allocation we received in the 20/21 Spending Review. Additionally, it appears that the yearly £5.5m top up which was previously provided to Scotland on the basis that the EU EMFF allocation was insufficient will no longer continue, increasing an already significant funding shortfall.
This process seems to mirror our experience with the Bew review, where commitments made in 20/21 are then being downgraded within the life of this parliament. In the case of the Bew review, this was to agree a process of engagement ahead of the upcoming Spending Review to address the issue of Bew funding from 2022/23 onwards. While the initial recommendations of the Bew review have been met, the proposed funding does not include any additional budget cover beyond 2021-22. This leaves Scotland in the same position as in 2019 where the inequality in distribution of land remains an issue.
Further discussions need to take place on the principle of intra-UK allocations in line with the wider observations of the Bew review. In the absence of such a review we would expect at least the £25.7m funding to continue beyond 2021-22 to address the funding inequality included in the previous ceiling levels. A failure to do so would result in a cut of £77.1m in our budget up to 2025. I require assurance that the UK Budget and Spending Review will redress these issues to ensure no detriment to Scotland’s finances.
Internal Market Act
The financial assistance powers in the Internal Market Act (IMA) confer new powers on UK ministers to spend directly in a wide range of devolved matters, bypassing parliamentary scrutiny and accountability at Holyrood. This also, in effect, gives the UK Government the power to bypass the Barnett Formula. Aside from being a profound departure from the existing devolution settlement, it introduces considerable additional uncertainty to future devolved funding and fundamentally alters the devolution landscape.
I ask for assurance that the powers will not be used without the prior consent of the Devolved Governments, and for clarity on how decisions on use of IMA financial assistance powers will be made, and under what circumstances. Without this it is difficult to see how the principles of consent, transparency, and stability and predictability espoused in the Statement of Funding Policy can be met. Moreover, it risks poor value for money as a result of incoherent policy and disjointed spending decisions.
As a minimum I would ask that the forthcoming spending review set out details on any plans to spend under the IMA over the course of the period (and beyond where known), and that the implications for devolved funding arrangements and decision-making are addressed in the planned update to the Statement of Funding Policy.
I trust that you will consider the suggestions made above and that we can work collaboratively to address the matters raised in order to provide certainty to the wider public sector, boost the economy and support our most vulnerable at this challenging time.
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.”
Action to ensure businesses across Scotland impacted by level 4 restrictions get additional and faster access to financial support have been announced by the Finance Secretary Kate Forbes.
This is in addition to the £570 million package of support, including the Strategic Framework Business Fund which has been open since November.
Businesses that are required to close or modify their operations by law can apply for a Temporary Closure Grant or a Business Restrictions Grant through their local authority website. Grants of up to £3,000 are available for every four weeks of restrictions, payable in arrears while restrictions last.
An additional £41 million will top up support for non-essential retail and gyms, which are required to close in level 4. This is in addition to top up grants for hospitality that were announced earlier this month.
Non-essential retail and gyms will be given up to an additional £3,000 and can claim this funding through their local authority website if they have not already submitted an application.
The cap on the maximum support available through the Strategic Framework Business Fund will also be lifted from 1 January for businesses that operate from multiple premises.
To accelerate the distribution of financial support, a further £7 million will help all local authorities recruit additional staff or backfill positions to meet increased demand for coronavirus (COVID-19) grants and speed up the payment process.
Ms Forbes said: “With mainland Scotland now entering level 4, the Strategic Framework Business Fund is already open to businesses required to close or modify their operations by law.
“In recognition of the substantial increase in the number of businesses eligible for support, I have provided additional financial resources of £7 million to local authorities to upscale operations and streamline grants. Work is already underway to ensure businesses get support as quickly as possible.
“I recently announced a top up grant to hospitality businesses, and today I can confirm that a further top up grant will be provided to non-essential retail businesses and gyms.
“Since March the Scottish Government has allocated more than £2.3 billion to business support and more than £1.2 billion to economic recovery.
“On top of the additional £570 million package of support announced at the start of this month, these changes will manage that increased demand, accelerating the grant application process and in turn getting these essential payments to businesses as quickly as possible.
“We welcome the news of further consequentials and will set out shortly how these will be utilised to meet the needs of business. It is likely that a significant amount will be used to meet the substantial increase in businesses applying to the Strategic Framework Business Fund at Level 4.”
