FORMER Prime Minister Boris Johnson issued the following statement last night:
Johnson’s final acceptance that the anticipated support just isn’t there for him clears the way for a run-off between hot favourite Rishi Sunak and Penny Mordaunt – but only if the latter can attract enough votes among her fellow Tory MPs. That’s looking increasingly unlikely.
If she can’t reach the 100 vote target, we can look forward to the anointing of Rishi Sunak as our new Prime Minister, with the Tory party membership having no say.
TOM Tugenhadt was the latest candidate to be eliminated from the Conservative Party leadership contest when results of yesterday’s ballot was announced last night.
FOUR candidates now go through to the next round of voting. They are:
KEMI BADENOCH (58)
PENNY MORDAUNT (82)
RISHI SUNAK (115)
LIZ TRUSS (71)
The next round of voting takes place today – we’ll know the result at 3pm – and the shortlist will be reduced to two candidates before parliament breaks up on Thursday. Tory Party members will then choose between these final two candidates in a ballot that will take place over the summer recess.
The winner – and the UK’s next Prime Minister – will be announced on 5 September.
3pm UPDATE
KEMI Badenoch is the latest candidate to be eliminated following today’s vote. Exactly where Ms Badenoch’s votes go now will be crucial in determining which two of the final three candidates will fight it out for the votes of Tory party members over the summer to become our next Prime Minister.
30 million people across the UK will benefit from the biggest personal tax cut in a decade from today
‘Hard working Brits’ will save up to £330 per year – 2.2 million lifted out of personal tax altogether
70% of UK workers now paying less National Insurance, even after accounting for the Health and Social Care Levy
30 million people across the UK will benefit from the biggest personal tax in a decade from today – with hard working Brits saving up to £330 per year.
The £6 billion tax cut will see the level at which people start paying National Insurance rise to £12,570 – lifting 2.2 million people out of paying any personal tax and ensuring people get to keep more of the money they earn.
The threshold change means that 70% of UK workers will pay less National Insurance, even after accounting for the Health and Social Care Levy that is funding the biggest catch up programme in NHS history and putting an end to spiralling social care costs.
Speaking before his resignation last night, formerChancellor of the Exchequer Rishi Sunak said: “I know rising prices are putting pressure on hard-working families across the UK – which is why we’ve stepped in to help to ease the burden with a £37 billion package of support this year, including at least £1,200 going directly to the 8 million most vulnerable families.
“Today marks the next stage in that package, with the biggest personal tax cut in over a decade coming in to help millions of workers across the UK keep up to £330 more each year.”
The Prime Minister (at time of writing, anyway – Ed.) said: “We know it’s tough for many families across the UK, but we want you to know that this government is on your side.
“Today’s tax cut means around 70 per cent of British workers will pay less National Insurance – even after accounting for the Health and Social Care Levy that is funding the biggest catch up programme in NHS history and putting an end spiralling social care costs.
“So whether you are a receptionist, work in hospitality or are a delivery driver, this tax cut is likely to make you and your family better off.”
From today the level at which people start paying National Insurance has risen from £9,880 to £12,570.
This change means that millions of people working across hundreds of different industries across the UK will now be better off.
This includes bricklayers who’ll save £218, care workers who’ll save £324, hairdressers who will get a £118 benefit and nursery assistants who’ll get a £343 yearly boost.
Workers can check their salary in the government’s online tool to estimate the amount they could save between July 2022 to July 2023.
The last major personal tax cut of today’s magnitude was nearly ten years ago, when the income tax personal allowance increased by £1,100 in 2013. Today’s threshold change is more than double that, as working people are now able to hold on to an extra £2,690 free from tax.
Today’s change to National Insurance thresholds comes as part of the Chancellor’s wider vision for a lower tax economy. At the Spring Statement Mr Sunak announced a 1p income tax cut in 2024 – which will be the first cut to the basic rate in 16 years and will save the average taxpayer a further £175 a year.
The Chancellor also committed to cutting and reforming business taxes later this year in the autumn, to help spur business growth and productivity. The government is currently working with industry on how best to do that.
The increase to the National Insurance thresholds will leave around 76% of National Insurance payers in the North East better, 75% in the North West and Merseyside, and 62% in London.
Today’s landmark personal tax cut also comes as the government launched new Help for Households campaign designed to raise awareness and signpost people to the £37 billion in support on offer and targeted at those most in need.
The support provides millions of the most vulnerable households at least £1,200 of support in total this year to help with the cost of living, with all domestic electricity customers receiving at least £400 to help with their bills.
It also includes a 5p fuel duty cut – the biggest cut ever to fuel duty rates, a rise in the national living wage to give full time workers an extra £1,000 and a cut to the Universal Credit taper rate to provide over 1 million families an extra £1,000.
The NICs threshold change takes effect following the government making tough but responsible decisions to manage the public finances responsibly and choosing not to saddle future generations with almost £400 billion of debt used to protect jobs and the economy during the pandemic – worth around £5,500 for every person in the UK.
The government had planned for this good news story to be the big news event of today, but those plans were scuppered by the resignation of two senior cabinet ministers last night. As former Prime Minister Harold MacMillan once ruefully observed: “Events, dear boy. Events” …
BELEAGUERED BORIS JOHNSON INSISTS HE’LL ‘GET ON WITH THE JOB’
Chancellor of the Exchequer Rishi Sunak and Health Secretary Sajid Javid resigned from Boris Johnson’s Tory government last night.
The mishandling of the former deputy Chief Whip Chris Pincher affair seems to have been the final straw for the two senior cabinet ministers, who submitted letters of resignation within minutes of each other last night.
Four junior ministers and Solicitor General Alex Chalk also resigned, piling pressure on the Prime Minister to step down.
Prime Minister Boris Johnson has vowed to carry on, however, and promoted three loyalists in an attempt to shore up his teetering government. The following ministerial appointments have been made:
Rt Hon Nadhim Zahawi MP to be Chancellor of the Exchequer
Rt Hon Steve Barclay MP to be Secretary of State for Health and Social Care
Rt Hon Michelle Donelan MP to be Secretary of State for Education
Health and Social Care Secretary Steve Barclay said: “It is an honour to take up the position of Health and Social Care Secretary. Our NHS and social care staff have showed us time and again – throughout the pandemic and beyond – what it means to work with compassion and dedication to transform lives.
“This government is investing more than ever before in our NHS and care services to beat the Covid backlogs, recruit 50,000 more nurses, reform social care and ensure patients across the country can access the care they need.”
THE Government is collapsing and it has been “corrupted” by Prime Minister Boris Johnson, Labour leader Sir Keir Starmer said last night.
Speaking to GB News after the resignation of Chancellor of the Exchequer Rishi Sunak and Health Secretary Sajid Javid, he also called for a General Election.
He told Darren McCaffrey: “It’s clear that this Tory government is now collapsing.
“Tory cabinet ministers have been cheerleaders for Johnson throughout this sorry saga. They backed him when he broke the law.
“They backed him when he lied. They backed him when he mocked the sacrifices of the British people, so they have been complicit as he has disgraced his office and let down his country.
“And frankly, if they had a shred of integrity, they would have gone months ago. The Tory Party is corrupted and tragic.
“One man at the top won’t fix it. We need a real change of government and a fresh start for Britain.”
Sir Keir added: “There’s anything but political stability, this government is collapsing. Cabinet members have been backing Boris Johnson through this.
“The Tory party is corrupted and we need not just a change at the top of the Tory party, we need a change of government and a fresh start for our country so we can actually address those big issues that are undoubtedly out there.”
He continued: “He isn’t fit to be Prime Minister. He’s not fit to govern the country.
“That is appalling for many people across the Conservative Party but they have to reflect on the fact that they have backed him for months and months and months and resigning today, it means nothing against their complicity for all those months when they should have seen him for what he was they knew who he was.”
Starmer called for a General Election: “We need a fresh start for Britain. We need a change of government and this government is collapsing. The Tory party is corrupted and changing one man at the top of the Tory party won’t make any difference. It won’t fix the problems.
“Let’s have a fresh start for Britain, let’s have a real change of government.”
First Minister Nicola Sturgeon tweeted: “Feels like end might be nigh for Johnson – not a moment too soon. Notable tho that the resigning ministers were only prepared to go when they were lied to – they defended him lying to public. The whole rotten lot need to go.
“And Scotland needs the permanent alternative of independence.”
Prime Minister’s Questions will be interesting today!
As the cost of living crisis worsens, on Sunday 26th June and Sunday 3rd July Greenpeace volunteers spoke to people on Middle Meadow Walk and on Portobello Promenade about the connection between rising energy bills, Putin’s war, and the climate crisis.
They invited the public to write down how much their energy bills have already increased, and stick these messages onto a life-size cardboard cut-out of Chancellor Rishi Sunak. Volunteers found that most people’s bills had at least doubled and many were fearful of further increases.
Jessie from Portobello wrote that her rising bills meant she hadn’t been able to put her heating on and was worried about what she would do in the Autumn, while another local wrote ‘my bills are not sustainable. Invest in greener energy!’
These messages, along with hundreds of others from across the UK, will be delivered directly to the Government so that Ministers can see how much people are really having to pay to heat their homes and cook food.
Anke, a Greenpeace volunteer from Bruntsfield, said: “‘I was shocked to hear how many more local people are worrying about being pushed into fuel poverty when bills rise again in the autumn.
“Greenpeace Edinburgh volunteers are calling on the Chancellor to deliver an Emergency Energy Package that stops fuelling rising energy bills, the climate crisis and Putin’s war, and on our local MPs to keep the pressure on the Government until they do the right thing.”
On 1st April energy bills went up by an average of £700, pushing 2.5 million UK households into fuel poverty. According to data published by Energy Action Scotland, as of last December, 24% of all households in Scotland live in fuel poverty.
In October bills will rise again, potentially reaching up to an estimated £2600 per year, which could put 1 in 3 households in fuel poverty, according to National Energy Action. Life is only going to get harder for people in Edinburgh.
Although the Government has recently declared a windfall tax on oil and gas producers, this will only provide temporary relief and does nothing to address the causes of the climate or cost of living crises.
Greenpeace Edinburgh is calling for a tax rate of 70%, which could bring in an extra £13.4bn per year. £7.9bn of this tax should go towards the six million households experiencing fuel poverty. This would leave just over £5 billion to invest in the nationwide roll out of heat pumps, insulation and other energy efficiency measures as well as increasing investment in renewable energy infrastructure.
Anke continued: “This Government has failed to get a grip on the climate and cost of living crises. We’ll keep facing these problems for years to come while oil and gas giants pump out planet-trashing emissions and enjoy sky high profits.
“Join us in calling on the Chancellor to make them pay up”.
Chancellor confirms that the UK stands ready to guarantee up to $50 million for further financing to Ukraine to continue electricity provision during latest G7 meeting in Germany.
Rishi Sunak also discussed how global partners can continue to work together to soften the war’s impact on the global economy
He will also urge G7 counterparts to maintain momentum behind and deliver the historic agreement on global tax reform – ensuring companies pay their fair share of tax in the countries in which they operate.
The Chancellor of the Exchequer Rishi Sunak has confirmed that the UK stands ready to guarantee up to $50 million for further financing to Ukraine, to help ensure the continued provision of electricity to its citizens.
The Chancellor attended meetings with G7 partners yesterday and will continue to do so today, alongside the Bank of England Governor Andrew Bailey.
They discussed efforts to support Ukraine and the ways in which the war is adding to pressures on the global economy, including impacts on the cost of living in the UK.
Yesterday Rishi Sunak announced the UK’s commitment to guarantee $50million, of further financing to Ukraine from the European Bank of Reconstruction and Development, which is headquartered in London.
This comes on top of the $950m in loan guarantees that the UK has already committed to significantly scale up World Bank lending to the Government of Ukraine to help meet urgent fiscal needs.
This guarantee will be used by the EBRD to provide further financing to the Ukrainian electricity grid operator, Ukrenergo to support continued provision of electricity to the brave Ukrainian people, subject to approval by Parliament.
This funding forms part of the significant economic, humanitarian and military support the UK has committed to Ukraine, totalling well over $3 billion.
The Chancellor also discussed the shared challenges facing the global economy, including the rising cost of living globally, and the acute challenges faced by developing economies including heightened food insecurity.
He pushed his partners in the G7 to ensure that the sanctions announced so far are being urgently implemented and strongly enforced to exert maximum cost on Putin and his regime.
Ahead of the meetings, Chancellor of the Exchequer, Rishi Sunak said: “I remain steadfast with my G7 partners in standing with Ukraine. I am pleased to confirm up to $50million in UK guarantees for EBRD critical support in Ukraine. This will help Ukraine continue to provide electricity to its citizens as they fight for their freedom.
“It’s clear that Putin’s barbaric and illegal invasion of Ukraine has not only had a devastating humanitarian impact on Ukraine; it is also causing significant disruption to the global economy, the impacts of which are being felt across the G7, including here at home in the UK.”
“I am determined to work with my G7 partners to confront these shared challenges.”
Today, the Chancellor will also call for progress on the implementation of the international tax agreement that was struck last year during the UK’s presidency of the G7.
This historic global tax reform will ensure companies pay their fair share of tax in the countries in which they operate. In Bonn, the Chancellor will encourage his partners to maintain momentum and collaborate to deliver on the agreement as swiftly as possible.
The Chancellor has announced that a new fraud squad, recruited from data analytics experts and leading economic crime investigators, will crack down on criminal gangs who rip off the taxpayer.
Operational in July and based in the Cabinet Office, the new £25 million “Public Sector Fraud Authority” will double funding for the Government’s central counter fraud capacity.
More details of the new fraud squad confirmed at the first meeting of the Chancellor chaired Efficiencies and Value for Money Committee.
A NEW £25 million central government taskforce that will enlist an elite team of experts to crack-down on fraudsters who attempt to steal taxpayers’ cash will be operational by the summer, the Chancellor has announced.
Rishi Sunak unveiled the new Public Sector Fraud Authority, which will be up and running by July, doubling the Government’s central counter fraud capacity.
The new body will recruit leading data analytics experts and economic crime investigators to recover money stolen from Covid support schemes and spot suspicious companies and people seeking Government contracts. Counter fraud experts will also mount mandatory inspections on Whitehall programmes to uncover vulnerabilities.
Chancellor of the Exchequer, Rishi Sunak said: “We will chase down fraudsters who rip off the taxpayer. This elite fraud squad, backed by £25 million, will ensure the latest counter fraud techniques are being used to track down these criminals.
“People are rightly furious that fraudsters took advantage of our vital Covid support schemes, and we are acting to make sure they pay the price.”
Minister for Brexit Opportunities and Government Efficiency, Jacob Rees-Mogg said: “Hardworking taxpayers must and will be protected. Anyone who tries to defraud the public purse will know that we as a government are coming for them and we are going to put them behind bars.”
Recruitment for the Chief Executive of the Public Sector Fraud Authority will start in the coming weeks, with candidates picked from leading counter fraud experts. The new CEO will answer directly to the Chancellor and the Minister for Brexit Opportunities and Government Efficiency.
Mr Sunak unveil details of the new counter fraud squad when he chaired the first meeting of the government’s new Efficiencies and Value for Money Committee on Thursday, set up at the request of the Prime Minister.
At the committee the Chancellor also launched the Government’s Plan for Protecting the Taxpayer to cut waste by slashing the Government’s property bill, doubling the NHS efficiencies target, reducing non-front line civil service head count, as well as “quango” budgets and cracking down on fraud and error.
The committee is chaired by the Chancellor and deputy co-chaired by Simon Clarke, Chief Secretary to the Treasury and Jacob Rees-Mogg, Minister for Brexit Opportunities and Government Efficiency.
The full membership of the committee, confirmed today, is Steve Barclay, Chancellor of the Duchy of Lancaster, Oliver Dowden, Minister without Portfolio and Michael Ellis, Paymaster General and Minister for the Cabinet Office.
Chancellor expected to unveil Spring Statement that builds a stronger, more secure economy for the United Kingdom.
Rishi Sunak will set out further plans to support people with the rising cost of living and pledge to continue to “stand by” hard-working families during the challenging times ahead.
He will say that freedom and democracy remain the best route to peace, prosperity, and happiness and that a strong economy is fundamental in enabling us to counter the threat Russia poses to our values.
The Chancellor will today deliver a Spring Statement that ‘builds a stronger, more secure economy for the United Kingdom’.
With people across the UK facing growing pressures exacerbated by the war in Ukraine, Rishi Sunak will pledge to continue to “stand by” hard-working families and outline further plans to help with the rising cost of living.
Alongside Britain continuing its “unwavering” support to Ukraine, he will add that a stronger economy is vital in responding to the threat of President Putin and that freedom and democracy remain the best route to peace, prosperity, and happiness.
Delivering the Spring Statement, Chancellor Rishi Sunak is expected to say:“We will confront this challenge to our values not just in the arms and resources we send to Ukraine but in strengthening our economy here at home.
“So when I talk about security, yes – I mean responding to the war in Ukraine. But I also mean the security of a faster growing economy.
“The security of more resilient public finances. And security for working families as we help with the cost of living.”
The Chancellor’s statement is also expected to set out how the government plans to create a new culture of enterprise, with the private sector training more, investing more, and innovating more.
The Spring Statement will build on UK government support worth around £21 billion this year and next to help families with the cost of living.
That includes the £9.1 billion Energy Bills Rebate, putting an average of £1,000 more per year into the pockets of working families via changes to Universal Credit and freezing fuel and alcohol duties to keep costs down.
The Government is also raising the National Living Wage to £9.50 per hour from April, meaning people working full time on the National Living Wage will see a £1,000 increase in their annual earnings.
And the Government’s Plan for Jobs is also helping people into work and giving them the skills they need to progress – the best approach to managing the cost of living in the long term.
Bold action needed to tackle cost of living
The UK Government must take bold and decisive action to help protect people from soaring living costs, according to Holyrood Finance Secretary Kate Forbes.
Speaking ahead of the Spring Statement, Ms Forbes said the Chancellor of the Exchequer must use every tool available to provide support through what is expected to be a turbulent period of economic uncertainty.
Finance Secretary Kate Forbes said: “This is not a time to be ducking the considerable challenges we face, and I expect the Chancellor to use the Spring Statement to outline significant actions to support households and businesses, considering that most of the relevant powers are reserved to the UK Government.
“The Scottish Government is doing all it can to help those most in need. We are uprating eight Scottish benefits by 6% from 1 April as well as doubling our Scottish Child Payment to £20 per week per eligible child. I call again on the UK Government to follow our lead and uprate social security benefits by 6%.”
The Scottish Government has called on the Chancellor to:
increase benefits at a higher rate, closer to inflation
implement business relief on National Insurance contributions
provide immediate funding to sectors directly impacted by the Russia/Ukraine conflict
remove/reduce VAT on household energy bills
take VAT off energy efficient and zero emissions heat equipment and products
provide powers to implement flexible working, to get more people into jobs
deliver two extra Cold Weather Payments – one immediately and another in winter 2022-23 when energy bills will have risen again.
Commenting on today’s (Wednesday) inflation figures, which show CPI inflation rising to a 30-year high of 6.2% in February, TUC General Secretary Frances O’Grady said: “The Chancellor must respond to high inflation today with much greater help for families with soaring bills and a plan to get wages rising.
“Families need grants, not loans to help with soaring energy bills. These should be funded by a windfall tax on excess profits from gas and oil. Universal credit should get a boost to help families keep up with the rising cost of living.
“And we need a comprehensive plan to get wages rising, including new pay bargaining rights for workers and their unions.”
Additional funding from the UK reserve will be made available to the governments in Scotland, Wales and Northern Ireland to progress their vaccine rollout and wider health response, the UK Government has confirmed today.
While the devolved administrations are well-funded to continue their response to Covid-19, and have their own reserves and contingency funds, any additional in-year Barnett funding will not be confirmed until early 2022 through the Supplementary Estimates process.
HM Treasury has therefore announced that additional funding will be made available to the devolved administrations to provide greater certainty and allow them to plan as they tackle Covid-19 during the crucial weeks ahead.
HM Treasury will set this amount of additional funding in the coming days and will keep it under review in the following weeks.
The UK Government has already provided the devolved administrations with an extra £12.6 billion through the Barnett formula this year – this includes £1.3 billion confirmed at the recent Autumn Budget and takes their total funding this year to £77.6 billion.
This is on top of UK Government spending on vaccines and tests for the whole of the UK and UK-wide support for businesses and jobs.
Chancellor Rishi Sunak said:“Throughout this pandemic, the United Kingdom has stood together as one family, and we will continue to do so.
“We are working with the governments in Scotland, Wales and Northern Ireland to drive the vaccine rollout to all corners of the United Kingdom and ensure people and businesses all across the country are supported.”
If the amount of funding provided up front to each devolved administration is more than the Barnett consequentials confirmed at Supplementary Estimates then any extra amount will be repaid in 2022-23, or over the Spending Review period if necessary.
If the Barnett consequentials are higher than the amount provided up front the devolved administrations will keep the extra funding.
The news was released as First Minister Nicola Sturgeon was updating MSPs on the latest coronavirus restrictions.
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.
