Scottish Budget 2021: What it means for you, businesses and public services

Kate Forbes announced the details of her Covid-19 affected budget in the Scottish Parliament today, and these are the key points for people, businesses and councils.

Health

A total of £16 billion will be invested in health, up £800 million from 2020/21, with a further additional £869m to pay for the vaccination roll-out and the Test and Protect system.

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This is the most the Scottish Government has ever spent on the health budget, eclipsing last year’s record of more than £15bn.

Finance Secretary Kate Forbes preparing her speech in her office in Holyrood, Edinburgh, ahead of delivering the Scottish Budget to the Scottish Parliament on Thursday. Picture date: Wednesday January 27, 2021.
Finance Secretary Kate Forbes preparing her speech in her office in Holyrood, Edinburgh, ahead of delivering the Scottish Budget to the Scottish Parliament on Thursday. Picture date: Wednesday January 27, 2021.

Previously announced funding of £145m around drugs and alcohol issues was also confirmed, with £1.1 billion to be spent on mental health support.

Tax

Tax rates in Scotland have been frozen for another year, with the amount at which taxpayers will start to pay tax or see their rate increase to rise by 0.5 per cent in line with inflation.

The exception to this is for those in the highest rate – earners of more than £150,000 – whose tax band is frozen at 2017/18 levels.

This will see a slight reduction in the tax all Scots bar the highest earners will pay next year, and alongside the UK-wide rise in the the personal allowance, most Scottish tax payers see a “small benefit”, the Chartered Institute of Taxation has said.

Alexander Garden, chair of the CIOT added: “Taxpayers with income of more than £27,393 will pay more income tax than those in the rest of the UK because of the higher rates of Scottish Income Tax that will apply to income above this level.

“Conversely, those with income below this will pay less income tax, with a maximum yearly saving of £21, because of the lower starter rate of income tax that applies in Scotland.”

In addition, the temporary rise in the ceiling for when property buyers start paying Land and Buildings Transaction Tax will return to £145,000 from April 1.

Police

The Scottish Police Authority (SPA) will receive £1.3bn, an uplift of £60m in the resource budget, which has been welcomed by the SPA.

This is intended to “eliminate the deficit” faced by Police Scotland, the finance secretary said, and will be viewed as a major boost following years of underfunding and unsustainable funding models.

Last year, public spending watchdogs warned that 750 frontline officers could lose their job if the budget was not raised by £50m over two years, a target now met by the Scottish Government.

This was welcomed by the SPA with interim chair David Crichton labelling it a “strong vote of confidence” in the embattled authority.

Business

In a move that will be a relief for many businesses, the poundage rate – the non-domestic rates tax rate – for Scottish businesses will be reduced to 49 pence from an earlier estimation of 49.8 pence.

This will lead to a saving of around £120m for ratepayers and is the lowest rate anywhere in the United Kingdom.

Ms Forbes also announced that she would guarantee 100 per cent rates relief for businesses in the retail, leisure and hospitality sectors for at least three months.

This will only be continued beyond that initial timeframe should Rishi Sunak announce a similar measure at his budget in March.

The rates relief extension was welcomed by several business groups including the Federation of Small Businesses and the Scottish Licensed Trade Association, but many called for more to be done by both the Scottish and UK Governments.

Calling for rates relief into the 2022 financial year to be funded from taxes on supermarkets and higher payments for businesses impacted by lockdown, the Scottish Hospitality Group said the Scottish Government must act to ensure businesses “survive”.

Stephen Montgomery, spokesperson for the group, said: “Over the past six months, the Scottish Government has regularly over-promised and under delivered for our sector. Thousands of hospitality businesses and employees across Scotland cannot afford for them to do so again.”

Councils

Following a report this week from the Accounts Commission highlighting concerns the Scottish Government covered just two thirds of Covid-19 related costs for councils, local authorities were given another difficult pill to swallow by Ms Forbes.

The finance secretary announced £249m for councils, which includes £59m for the extension of 1,140 hours of free childcare and £72.6m for health and social care.

But she also announced a further £90m of funding for councils who choose to freeze council tax for the coming financial year.

Such a freeze could have significant financial implications for local authorities already struggling to cope with Covid-19, but will limit the burden on council tax payers to pay for that recovery.

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