The Scottish Budget, 2021-22

Described as the most important of devolution era, the Scottish Government’s Cabinet Secretary for Finance Kate Forbes today set out the Scottish Budget for 2021-22, the final budget ahead of the upcoming Scottish Parliamentary Elections which are expected in May 2021. This year, she had more time to prepare her remarks, after standing in at the very last moment in 2020 following Derek Mackay’s shock resignation.

Taking place on the anniversary of the first confirmed case of Covid-19 in Scotland, she argued that her plans aimed to “bring much-needed support and stability” during the pandemic but also helped to lay the foundations for a “fairer, stronger and greener” economy in future.

The spending plans were set out amidst a bleak economic outlook: the economy was now 7.1% smaller than it was pre-COVID, with GDP forecast to fall 5.2% in Q1 2021, and unemployment to increase to 7.6% in Q2 this year. GDP is not expected to return to pre-pandemic levels until 2024.

On a more positive personal note for Kate Forbes, opposition spokespersons congratulated her on her recent engagement, with Scottish Conservative MSP Murdo Fraser musing that she now appreciated the benefits of being in a union.

What are the main Budget takeaways?

  • Income Tax: thresholds for starter, basic and higher rate bands of income tax will increase by inflation, while the top rate threshold 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
  • Non-Domestic Rates: non-domestic rates tax rate 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 Spend: £11.6 billion allocated towards local government, including the £90 million to compensate local authorities which choose to freeze Council Tax.
  • Health Spending: invest over £16 billion in the Health and Sport portfolio.

Opposition Party Reaction

Responding to the plans, the Shadow Cabinet Secretary for Finance 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. Meanwhile, 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 finalised by the first full debate of the Budget Bill on 25 February. Let the pre-election political horse-trading commence.