12/12/2021

Scottish Government Draft Budget

Policy Context

The Cabinet Secretary for Finance and Economy Kate Forbes set out the first Scottish Government Budget of the current parliamentary term, following on from the UK Government’s Budget back in October, and amidst challenging economic circumstances.[1][2]
This was Forbes’ third budget and she framed it as one of “choices”. However, while there are difficulties facing public services due to the pandemic, the Scottish Government does have more resources at its disposal through record block grant funding from HM Treasury. Indeed, to meet its policy plans, choices will have to be made due to hefty health and social care spending commitments, as well as the interventions necessary to make net zero targets a reality.
The first budget of the SNP-Scottish Green government, and there was a strong environmental thread running through it, with Forbes set out three main themes underpinning her spending plans: reducing inequalities, supporting economic recovery, and tackling climate change.
The Cabinet Secretary pointed to Brexit, the UK Government’s financial settlement, and lack of full economic powers as factors hindering her plans, noting that she would have liked to have gone further in certain areas. However, the Budget did contain a range of bold spending pledges.

Key Announcements

Some of the key announcements from the Budget are as follows:

Income Tax/Council Tax

The Starter and Basic Rate bands will increase by CPI, and the Higher and Top Rate thresholds will remain frozen in cash terms, raising an additional £106m in 2022-23.
The Council Tax freeze will end next year as local authorities will be granted flexibility over council tax rates, the first time this has happened since 2007.

Support for Business and the Economy

The Scottish Government will continue to offer lowest Non-Domestic Rates poundage in the UK, as well as ongoing rates relief for the retail, hospitality and leisure sectors, at 50% relief for the first three months of 2022-23, capped at £27,500 per ratepayer.
They will continue the Small Business Bonus Scheme, expand the Business Growth Accelerator relief, and extend Enterprise Areas Relief until March 2023.
Provide £205.9m towards capitalisation for the Scottish National Investment Bank – helping it deliver against its missions of supporting Scotland’s transition to Net Zero.

Housing

The Budget provides £831m for affordable housing, progressing the government’s commitment to deliver 110,000 affordable, energy efficient homes across the next decade.

Tourism

Self-Catering

The Budget notes the following: “recognising the impact of COVID-19, the Scottish Government chose last year to delay the implementation of the requirement that self-catering properties be let for 70 days in order to be classed as non-domestic. We will lay legislation for 2022-23 to deliver this anti-avoidance measure, which has been recommended by the independent Barclay Review of Non-Domestic Rates in order to tackle a known potential loophole for second homes.”

Opposition Response

The Shadow Cabinet Secretary for Finance and Economy Liz Smith led the response for the Scottish Conservatives and criticised Forbes for ignoring the level of grant funding from the UK Government. She added that the Scottish Government should have extended business rates relief and challenged them on the lack of commitment to structural reforms and investment in skills and digital infrastructure.
Prior to the Budget, Scottish Labour’s attack lines had accidentally made their way into the public domain. Nonetheless, Daniel Johnson soldiered on and argued that the Scottish Government’s plans did not go far enough in terms of child payments and pay for care workers, noting that block grant funding enabled them to go further.
Alex Cole-Hamilton of the Scottish Lib Dems criticised the Scottish Government’s pay policy for public sector workers such as teachers and social care workers, and also appealed for extra funding for long Covid care.

Next Steps

The Budget will now pass to committee level – where amendments and changes can be made – before going to a vote in plenary of all MSPs in February 2022.
However, unlike in the previous parliamentary session where the SNP Scottish Government was a minority administration and relied on deals with opposition parties, due to the Cooperation Agreement with the Scottish Greens, the final vote is a formality.

[2] The statement from the Cabinet Secretary for Finance and Economy is available here: https://www.gov.scot/publications/budget-statement-2022-23/