Biggest Scottish budget ever still fails to deliver for business – Murdo Fraser MSP

In many ways, Kate Forbes is in a fortunate position as Scottish Finance Secretary. In drawing up her Budget for 2021-22, she has at her disposal more resources than any previous incumbent of her post.

Thanks to the UK government, Finance Secretary Kate Forbes has more money to spend than any of her predecessors but businesses and individuals across Scotland are still not getting the support they need during the Covid crisis, says Murdo Fraser (Picture: Jane Barlow/PA Wire)

Thanks to the UK Treasury, the Scottish Budget for the coming year will be the highest in the history of devolution, putting unprecedented resources at the disposal of the Scottish government.

Moreover, unlike finance ministers across the world, Scotland’s does not need to be concerned about a fall in tax revenues. Although non-savings, non-dividend income tax is devolved to the Scottish government, along with land and buildings transaction tax (LBTT) and landfill tax, the fiscal framework between the UK and Scottish governments protects the Scottish Budget from any drop in these tax revenues, as long as it is in line with what happens elsewhere in the UK. We are protected from a UK-wide economic shock.

It was appropriate, therefore, and significant, that in the Budget statement we had in Holyrood last week, the word “austerity” did not appear once. Those days are in the past, and the challenge for Kate Forbes was how to spend the additional sums at her disposal, a £1.1 billion increase in the general budget for the coming year, with already an additional £1.3 billion to help manage the pandemic.

This comes on top of the unprecedented additional guaranteed sum of £8.6 billion in the current financial year to support the NHS, individuals, and businesses across Scotland, coming from the UK Treasury into the Scottish government’s budget. And even that sum takes no account of the many billions in direct support that have been provided through the furlough scheme, and other Treasury initiatives.

Despite all these payments, there continue to be concerns about delays in payments to needy businesses and individuals across Scotland who have been crying out for support. Many of the new funds announced back in December are still not actually dispersing funds, and that needs to change rapidly.

Some of what the Finance Secretary proposed in her Budget for the coming year was very welcome. There will be more funding for the NHS, thanks to Barnett consequentials arising from the additional planned £6.3 billion announced for the health service south of the Border.

The Scottish government proposal not to increase income tax in the coming year is a sensible move, given that consumer spending, following the easing of restrictions, should be a major driver in future economic growth, and any increases would have held that recovery back.

But, in other respects, the Budget fell short of what is required. Crucially, the headline demand from the business community that the existing 100 per cent rates relief for leisure, hospitality and retail businesses should continue for a further 12 months was not delivered, with only three months of relief being promised.

The Scottish Conservative view was that this was the absolute priority for the Budget for the coming year. At a cost in the region of £700 million, this was easily affordable in the context of the additional £2.4 billion already announced for the overall Budget.

But the SNP government chose to make different choices. It is not surprising that its decision was met with anger in the business community.

Enterprises in the retail, hospitality and leisure sectors have had a year of unprecedented difficulty, due to the Covid restrictions put in place, and absolutely no certainty as to when they may be able to reopen.

A glance at any high street in Scotland tells its own tale of the devastation there has been on traditional retail over the past 12 months, with household names disappearing almost by the week. This is a sector that desperately needs more support, and what was promised last week falls far short.

There were other areas in the Budget where cuts hit in a way that will have a negative impact on the economy. There is a reduction of £36 million in the funding of the Scottish National Investment Bank, a cut of £43 million in the budget allowing for “innovation and industries” and a cumulative cut of £67 million in funding for rail infrastructure and major projects.

On top of that, the most drastic cut came in the budget for social housing, down from £896 million this year to just £628 million in the next, representing a reduction of 30 per cent in this vital area; a cut described by the housing charity Shelter as “a huge step backwards”.

It also appears that Scotland’s councils are being short-changed, with a revenue rise of less than one per cent, at a time when they are facing unprecedented pressures due to Covid, and a substantial drop in income.

The Scottish Conservatives have argued for movement to a model of “fair funding for councils”, in which their funding would increase by at least the same amount as the rise in the Scottish government’s overall budget, but the SNP have come nowhere close to delivering this.

Once again, it is local authorities that are having to shoulder the burden of financial restraint, while spending on pet projects continues to rise.

The SNP are, of course, a minority government, and will require the support of at least one other party at Holyrood in order to get their Budget plans passed. We therefore enter a period of negotiation, and all parties will have an eye on the Chancellor’s UK budget planned for March 3, when announcements will impact on the available cash for spending in Scotland.

In the meantime, it is clear that what has been announced by the SNP, against the backdrop of unprecedented Westminster support, falls far short of what Scottish business and communities actually require.

The Scottish Conservatives will certainly be looking to see how this Budget might be improved, to help with the overriding objective of promoting economic recovery and protecting jobs.

Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife

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