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Scottish Government Budget: Chamber Summary

Posted: 28th January 2021

This budget aims to provide support and stability to help the economy recover and target support, whilst providing a stronger, fairer and greener economy.

3 key priorities:

  • Creating jobs and investing in sustainable recovery
  • Responding to health pandemic
  • Tackling health inequalities

Budget based on a partial settlement, waiting on the UK budget in March for some funding announcements, e.g. £500m expected to flow to Scotland from the UK Covid reserve next year.

Package of tax measures:

  • Lower tax bands (starter, basic, and higher) will rise with inflation, but top rate threshold will be frozen at £150,000 – this will see all tax payers pay slightly less income tax next year than this year, and many will pay less than if they lived in other parts of UK
  • Land and buildings transaction tax: the temporary changes to the residential nil rate band introduced in July helped to support the housing market, which has since remained open and had a robust recovery. The sealing of the nil rate band will therefore return to £145,000 from 1st April as planned. Non-residential LBTT rates and bands remain unchanged
  • First Time Buyers relief will remain in place, saving them up to £600 and meaning 8/10 first time buyers will pay no tax at all
  • The Additional Dwellings Supplement rate will remain at 4%, but they intend to consult on reforms to ADS early in the next parliament

Policy on non-domestic rates:

  • Committing to extend 100% rates relief for retail, hospitality and leisure for a further 3 months, and should the UK govt. extend their rates relief then Scotland will use the funding from that to match their extension
  • Offering total reliefs package worth almost £1bn
  • Reducing NDR poundage to 49p – the lowest poundage available anywhere in UK, and saving rates payers over £120m compared to previously published plans

Economic recovery plan:

  • Enterprise agencies will play a leading role in the recovery – the budget for the 3 enterprise agencies will increase by more than 12%
  • Total investment of £1.1bn in employability and skills support
    • Additional investment of £125m for Young Persons Guarantee, National Transition Training Fund, and other employability and skills schemes
    • £230.9m for Skills Development Scotland to work with partners across this agenda
    • Launch of first phase of 5 year £100m green jobs fund and commitment to establish a green jobs academy
  • £230m to be invested in culture and heritage sectors
  • Infrastructure investment plan will be published next week and outline pipeline of projects that will provide good jobs, stimulate supply chains and build market confidence
  • As previously promised, the National Infrastructure Mission will increase annual investment in infrastructure by £1.5bn by 2025, supporting 45,000 full-time jobs across the period
  • Supported by NIB which will get over £200m for investment in 2021-2022
  • Next year providing funding of £210m for cities investment and strategy
  • Providing more than £800m for housing
  • £2bn low carbon fund over next parliament, including almost £1.6bn in heat and energy efficiency in our homes and buildings

Other spending commitments:

  • Strategic Framework Business Fund will continue beyond the end of this financial year as long as UK Govt. funding remains available
  • Doubling the discretionary funding given out by local authorities
  • Committing to pay February grants at tier 4 levels regardless of what happens with restrictions
  • Investing over £16bn in the health and sport portfolio, including increased spending on alcohol and drugs and investment in mental health of over £1.1bn
  • £50m for the Tackling Child Poverty fund
  • Public sector pay – will continue to adopt the real living wage, guaranteeing a minimum 3% increase for those on salaries up to £25,000
  • £2.7bn for education and skills
  • £1.6bn to be invested in bus and rail networks, including a national concessionary travel scheme to provide free bus travel for under-19s to be delivered in the coming year

Local authority spending:

  • Local councils being compensated for the loss of income due to the pandemic, and this compensation is being increased, to a total of £249m
  • Total funding package for local government of £11.6bn for 2021-2022 incl. £245.6m increase in core revenue funding and £259m of non-recurring covid funding
    • Includes £59m to complete the expansion of early learning and childcare
    • £72.6 for investment in health and social care
  • Allows councils to financially support struggling households – offering funding to councils who choose to freeze council tax, equivalent to £90m for councils or a 3% rise

Economic outlook:

  • Yesterday’s GDP figures show that our economy is now 7.1% smaller than pre-covid, whilst UK economy has shrunk by 8% – negligible difference in labour market stats between the two, but widening gap in impact on economies
  • Difficult outlook with GDP not set to return to pre-pandemic levels until 2024, and GDP set to fall by 5.2% in Q1, and unemployment set to rise to 7.6% in Q2

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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