Scottish Budget 2021: 'Pretty clear' Omicron will hit Scottish economy amid demands for policing and high street funding

Kate Forbes is facing calls to throw a lifeline to struggling local high streets and beef up policing across Scotland ahead of the SNP’s Budget on Thursday.

The finance minister is set to announce the details of her first post-election Budget later this week amid rising concerns around the Omicron variant and extreme winter pressures on the NHS.

Opposition parties have also demanded additional funding, with the Scottish Conservatives calling for £62 million to tackle crime and Scottish Labour demanding substantial tax relief for high street businesses which continue to suffer the effects of the pandemic.

Kate Forbes is facing calls for additional funding from across the political spectrum ahead of the budget on Thursday

It comes as leading economists warn it is “pretty clear” the Omicron variant will impact the economy going forward, throwing the economic predictions on which parts of the Budget is based into question.

Despite this, the Scottish Government said it would produce a budget focused on the challenges posed by the climate emergency and which aims to create green jobs.

Patrick Harvie, leader of the Scottish Greens and government minister, said key aspects of the party’s co-operation agreement with the SNP would be delivered in the Budget and “end Scotland’s contribution to climate change”.

He said: “The Budget that will be presented to Parliament on Thursday will put Scotland on a path towards securing a fairer and greener future.

"It’s the first step on delivering commitments to tackle the climate emergency made in the agreement between the Scottish Government and the Scottish Greens.

"That means investing now to cut pollution from transport, make homes warmer and more energy efficient, and restore our natural environment.

“The Budget process is a core part of our shared agreement made in August and will help us accelerate efforts to become a net-zero economy and support people, businesses and communities to recover from the impacts of the pandemic.”

Liz Smith, the Scottish Conservative’s finance spokesperson, called on the budget to focus on investing in tackling crime, including ensuring there is no shortfall in the budget for Police Scotland.

The party’s demands include £35.6m of capital funding for the police service to improve facilities and to fund “crime-fighting equipment”, and £13.2m for the courts system to clear the court backlog.

It also wants an additional £8m for the Scottish Fire and Rescue service to improve fire engines and stations, £4.3m to the Crown Office for additional prosecutorial staff, and £500k to reverse cuts to the Victim Support budget.

Ms Smith said: “This funding is desperately needed to keep the public safe. Scotland’s justice system has suffered from years of under-investment by the SNP Government, with police stations left crumbling, cuts to victim support and a growing backlog in courts that forces victims to wait years for justice.

“There is no time to lose.”

The finance minister is also facing calls from Scottish Labour to provide significant tax relief to high street businesses as they continue to battle the impact of the pandemic.

The party has called for 50 per cent rates relief for retail, hospitality and leisure businesses, alongside a £50 budget for every adult to spend inside high street shops.

Together, the two policies would cost the government more than £600m, with the voucher scheme worth £227m.

Daniel Johnson, the party’s finance spokesperson, said the measures would be a “lifeline” to high streets “fighting for survival”.

He said: “ These problems have been mounting for years now, with the pandemic pushing things to crisis point. We need to act before we are faced with a sea of ‘To Let’ signs up and down every high street.”

Mr Johnson also called on the government to “level the playing field” between high street shops and online retailers.

The calls came after Professor Sir Charlie Bean of the Office for Budget Responsibility told MSPs during a pre-budget meeting of Holyrood’s finance committee that it was “pretty clear” the Omicron variant would have an impact on the economy.

He said: “Even just through December you are going to have less spending in hospitality and travel presumably, so there’s bound to be some negative impact on consumer spending.

"And then there may be an issue that it carries through into next year if you need more substantial health measures for longer.

"The impact on GDP can sometimes turn out to be not what you expect because it is easy to pick out what is happening to consumption, but of course a consequence of Omicron is that the government is stepping up vaccinations and that boosts GDP because the way GDP is measured, it treats that output of the health sector as indeed it should be.

"The GDP numbers may or may not reveal something, but I think as far as consumption is concerned you will see some slowing over the Christmas period.”

The same committee also heard from Carl Emmerson, deputy director of the Institute for Fiscal Studies, who criticised the UK Government’s decision to omit pension income from the coming rise in National Insurance contributions through the health and social care levy.

The tax rise, which will see a 1.25 percentage point increase in National Insurance contributions, is set to come into force in April 2022.

Mr Emmerson said the levy will not hit those gaining additional income through property rents, large pensions, or with strong performing investments, and labelled this omission a “missed opportunity”.

He said: “I understand that it’s hard politically to introduce a tax on pension income, but I think the moment to do it is the moment when you’re saying well we’re increasing this tax on everybody, so workers will be paying in to.

"And the actually the money is pretty clearly going to go on the NHS and social care which will benefit again everybody, but I guess in particular those of pension age.”

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