Scottish Budget Review 201/22 Highlights
The Scottish Budget was delivered by Kate Forbes, Finance Secretary, on Thursday 28th February 2021, setting out budget plans for the year ahead.
Overview
Since the last budget in February 2020, an extra £8.6bn has been offered up to Holyrood from the UK Treasury to help support people and businesses through the COVID-19 pandemic. We already know that a further £1.3bn been added to the block grant for the coming financial year, and potentially more once we hear more from Rishi Sunak, the UK Chancellor, on the 3 March at the UK Spring Budget.
Forbes underlined the exceptional circumstances of both the pandemic and Brexit compounding the current economic environment.
Her aim over the next financial year as finance secretary of Scotland is focussed on ‘support and stability to those hardest hit [due to the pandemic and Brexit], and to build a fairer, stronger and greener economy’.
The Scottish Budget focused on 3 priorities:
Job Creation
Responding to the health pandemic and the economic fall out
Tacking inequalities
Forecasts Review
The Scottish economy is now 7.1% smaller than pre-pandemic.
GDP is expected to fall by a further 5.2% in the first quarter of 2021, reversing much of the economic recovery experienced last summer with easing of restrictions.
The Scottish economy is not expected to recover to pre-pandemic levels until 2024.
Unemployment in Scotland is expected to be 7.6% by the second quarter in 2021 if the furlough scheme does indeed end as planned at the end of April.
Forbes called on the UK Chancellor to extend the furlough scheme beyond April to support and provide certainty to Scottish businesses and jobs.
Tax changes
There are no changes to the current income tax bands in Scotland, and due to increase in inflation, Scottish taxpayers are expected to pay less tax on their earnings than the previous financial year. We will learn in March at the UK Budget if planned increases to personal allowance from £12,500 to £12,750 will take place, giving a further boost to workers wages.
Land and Buildings Transaction Tax (LBTT): Since July 2020, due to the pandemic, the residential nil rate band was scrapped to keep the property market moving. It has been confirmed that this will indeed end on 31 March as planned and the nil rate band will return to £145,000 on 1st April.
The First Time Buyers Relief will remain in place, which translates to around £600 saving for 8 out 10 new first time buyers.
Additional Dwelling Supplement (ADS) will remain at 4%. The much touted review of ADS tax will take place over the coming financial year.
Council tax: Local authorities have the option to freeze council tax, with a 3% increase in funding to local councils offered to use as they see fit.
Other highlights
100% business rates relief will continue for the first 3 months of 2021/22, despite uncertainty from the UK government on their plans to do so in England and Wales. Forbes called for the UK government to confirm further funding to Scotland to extend the rates relief beyond the current 3 months.
Public sector pay: unlike England and Wales where a public sector freeze is currently in place, Scotland will adopt the real living wage increase to £9.50%, translating to a 3% increase for those earning up to £25,000 per annum, and 1% increase earning above this, capped at £800 per annum.
Free bus travel scheme for under 19s to be rolled out in the coming financial year
Digital connectivity: Scotland is a world class hub for tech starts ups. £7m funding is being offered including £100m to support digital connectivity, including enhancing 4G and 5G infrastructure across Scotland
