Scottish Government Budget, 2021-22

Introduction

• Described as the most important of devolution era, the Scottish Government’s Cabinet Secretary for Finance Kate Forbes set out the Scottish Budget for 2021-22, the final budget ahead of the upcoming Scottish Parliamentary Elections which are expected in May 2021.[1]
• Against the backdrop of the pandemic, the Cabinet Secretary stated that the Budget focused on three key priorities: creating jobs and supporting and investing in a sustainable recovery; responding to Covid-19; and tackling inequalities.
• Prior to setting out the Scottish Government’s spending commitments, she outlined Scotland’s economic performance and outlook: the economy was now 7.1% smaller than it was pre-COVID, with GDP forecast to fall 5.2% in the first quarter of 2021, and unemployment to increase to 7.6% in Q2 this year. GDP is not expected to return to pre-pandemic levels until 2024.
• The Cabinet Secretary argued that her plans would aim to “bring much-needed support and stability” during the pandemic but also lay the groundwork for a “fairer, stronger and greener” economy in future.[2]

Main Points

• Income Tax: thresholds for starter, basic and higher rate bands of income tax will increase by inflation, while threshold the top rate will be frozen at £150,000.
• LBTT: return the ceiling of the nil rate band for residential land and buildings transaction tax to £145,000 from 1 April.
• Landfill Tax: increase the standard rate of Scottish landfill tax to £96.70 per tonne and the lower rate to £3.10 per tonne.
• Business Support: the Strategic Framework Business Fund continues beyond this financial year. The Cabinet Secretary stated that 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.
• Non-Domestic Rates: the non-domestic rates tax rate will be reduced mid-revaluation from 49.8 to 49 pence. Furthermore, retail, hospitality, leisure and aviation businesses will get 100% non-domestic rates relief extended for at least an additional three months.
• Local Government: £11.6 billion for local government, including £90 million to compensate local authorities which choose to freeze Council Tax, plus £259 million in one-off funding.
• Housing and Town Centres: £712 million will be provided for affordable housing and a new £55 million programme to support town centres and community-led regeneration projects.
• Tourism: £55.1m will be provided to the tourism budget in 2021-22. They will also double the spend on the Rural Tourism Infrastructure Fund (to £6.2m), “helping tourist attractions and local communities make improvements to cope with increased visitors.”
• Enterprise Agencies: provide £103.3 million funding for Highlands and Islands Enterprise and South of Scotland Enterprise – an increase of £17 million.
• Sustainable Travel: provide £100 million to active travel, including large-scale infrastructure projects and access to bikes, as well as £1.6 billion for public transport such as rail and bus services.
• Digital Connectivity: invest £98 million to improve digital infrastructure – including access to high quality broadband and mobile coverage.

Opposition Party Reaction

• The Shadow Cabinet Secretary Murdo Fraser highlighted the unprecedented financial support from HM Treasury and emphasised the importance that this money was distributed to individuals and businesses. He welcomed the commitments on income tax but criticised the Scottish Government’s plans for a second independence referendum.
• Interim Scottish Labour Leader Jackie Baillie welcomed elements of the Budget statement and sought further discussions, but called on the Scottish Government to increase the pay of social care workers.
• The Co-Leader of the Scottish Greens Patrick Harvie sought detail on what spending could be diverted from high carbon infrastructure towards green spending projects.
• The Leader of the Scottish Lib Dems Willie Rennie called on the Scottish Government to look again at the spending commitments on mental health, education and business support, and said that he intended to engage on those issues during his discussions with the government.

What Happens Next?

• In order to get the Budget passed, as the SNP Scottish Government is a minority administration, they require the support of another party in parliament on their spending plans.
• Traditionally, the SNP have relied on the Scottish Greens, a fellow pro-independence party, to pass their Budget Bill.
• The Scottish Government will now enter into negotiations with opposition parties and will aim to have a deal done by the first full debate of the Budget Bill on 25 February.

[1] Scottish Government, Scottish Budget: 2021-22 (2021). Url: https://www.gov.scot/binaries/content/documents/govscot/publications/corporate-report/2021/01/scottish-budget-2021-22/documents/scottish-budget-2021-22/scottish-budget-2021-22/govscot%3Adocument/scottish-budget-2021-22.pdf

[2] The full statement by the Cabinet Secretary for Finance Kate Forbes MSP can be accessed here: https://www.gov.scot/publications/budget-statement-2021-22/

Marc Crothall, CEO of the STA said:

“The Finance Secretary made some very welcome announcements in today’s draft Budget; the continuation of the current Non-Domestic Rates relief for at least three months will come as a relief for businesses in the short-term, however this won’t go far enough in terms of supporting tourism businesses to a point of reopening and financial viability therefore it is crucial that additional funding comes from the Treasury to support a further extension.

The STA has been instrumental in campaigning for an extension and a lower poundage rate and we are pleased that our asks have been recognised, with Ms Forbes announcing the lowering of the poundage rate to 49p.

The commitment today to support the delivery of some of the recommendations of the Tourism Task Force is very much welcomed as is the budget allocation to improve Scotland’s digital infrastructure through high quality broadband and improved mobile coverage and also our physical infrastructure and transport.

The announcement that the Rural Tourism Infrastructure Fund will be doubled to support tourist attractions which have been so badly exposed financially as a result of the pandemic, with many receiving little or no funding to date will come as good news to many businesses and community organisations which can now plan to create the right foundations to welcome visitors to our rural areas when travel restrictions ease.*

The focus on developing our people is one of the key priorities of Scotland’s tourism strategy, Scotland 2030 and I am delighted to see the substantial investment in education to support recovery of the sector and bring young, emerging talent into Scotland’s tourism industry.  This is absolutely critical if we are to build a sustainable, innovative and attractive tourism product to showcase to the world.

I look forward to our continued conversations with Ms Forbes over the coming weeks to learn more detail around the breakdown of the figures announced today; the STA will be meeting with Minister Stewart from the Scotland Office on Monday and will press further for increased support from the Treasury to support many of the priority areas which we have detailed throughout the pandemic and to ensure that the Non-Domestic Rates relief can be further extended beyond the three months announced today.

In addition to these announcements of support, what the industry needs now is a route map for reopening domestic tourism and additional support packages to protect the sector, especially for those businesses that are heavily dependent on international tourism, given the Scottish and UK government’s current position on international travel to the UK.

It is heartening to see that many of the STA’s policy agenda priorities have been adopted in this budget and is testament to the strength of relationship our industry and the STA has with the Scottish Government and their understanding of the short and longer term needs of the sector.”

*Following the release of our statement, we were informed by the Scottish Government that there was an error in the Budget terminology and that ‘attractions’ should have been referred to as ‘destinations’.