Scottish budget: Council and income tax freezes unveiled to 'support families'

Finance secretary Kate Forbes has moved to freeze income and council tax to support “households and families” in her budget for 2021/22.

The SNP minister unveiled an additional £800 million of funding for the health portfolio, which rises to £16 billion in Scotland as she set out her £41 billion spending plans for 2021/22 at Holyrood.

There will also be another £869m to boost the response to the virus, including vaccinations and Test and Protect.

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Scottish Budget 2021: What it means for you, businesses and public services
Finance secretary Kate Forbes. Picture: Andrew Cowan/Scottish Parliament via Getty ImagesFinance secretary Kate Forbes. Picture: Andrew Cowan/Scottish Parliament via Getty Images
Finance secretary Kate Forbes. Picture: Andrew Cowan/Scottish Parliament via Getty Images
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Income tax levels in Scotland will be effectively frozen in Scotland, Ms Forbes said. The starter band, basic band and higher rate threshold of income tax will rise in line with inflation, while the top rate threshold of income tax will be frozen in cash terms at £150,000.

"During this time, it is vital that we also continue to support households and families,” Ms Forbes said.

"That is why I have ensured that no Scottish taxpayer will pay more income tax in 2021/22 than they do now on their current income and, for a fourth consecutive year, more than half of Scottish income taxpayers will pay less tax than if they lived anywhere else in the UK.”

The differences between the taxation rates and bands north and south of the border mean Scots workers with income of more than £27,393 will pay more than those in other parts of the UK from this April.

But those with an income below this figure, about 55 per cent of all taxpayers, will pay less income tax than their UK counterparts as a result of the Scottish Government’s lower, 19p starter rate of tax. This will represent a saving of £21.

Councils have also been allocated an additional £249m to deal with the impact of falling revenues.

Ms Forbes said there would also be an additional £90m of funding to compensate councils who choose to freeze their council tax. This is the equivalent of a 3 per cent increase.

"This will ensure that while council tax bills won’t go up, there will be no impact on vital local services,” the minister said.

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“Now is a time for stability, certainty and targeted support for the individuals and businesses who have been most impacted by the pandemic and our tax policy delivers this.”

Local council umbrella body Cosla said it would be down to individual councils to take up the offer.

"Whether or not a council applies to the fund for money for freezing the council tax would rightly be a matter for them,” a spokesman said.

Pubic sector pay rises will be capped at 1 per cent above £25,000, Ms Forbes announced, having previously pledged not to follow the pay freeze being implemented in England.

But the EIS teaching union said this amounted to a “real-terms” freeze in pay for its members.

“Today’s announcement of an effective pay freeze will be met with deep disappointment by Scotland’s teachers, who have been working flat-out throughout the pandemic to offer as much support as possible to young people,” EIS general secretary Larry Flanagan said.

Ms Forbes told MSPs that estimates from the country’s economic watchdog, the Scottish Fiscal Commission, pointed to a slow recovery from the virus.

The current lockdown measures will “reverse” the economic recovery seen last summer, the finance secretary said, with GDP expected to fall 5.2 per cent in the first quarter of this year.

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"The economy is expected to return to growth across 2021/22 as a whole,” Ms Forbes said.

"Yet the commission still expects long-term damage and does not expect GDP to return to pre-pandemic levels until 2024.”

Unemployment in Scotland is also expected to increase in Scotland to 7.6 per cent later this year after the furlough scheme is wound up in April.

Retail, hospitality, leisure and aviation businesses will continue to get 100 per cent non-domestic rates relief extended for at least an additional three months, but Ms Forbes warned this will not continue unless this is replicated by UK Chancellor Rishi Sunak in his Budget in March.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, warned this doesn’t go far enough.

“Plans for a three-months extension of rates relief is a too short a reprieve,” Ms Cameron said.

"We need commitment to a 12-month reliefs package to provide the certainty business needs. Clearly there is more to do, and we await further announcements from the Chancellor to see what further support can be made available and expect Scottish Government to pass on the equivalent consequential funding to businesses.”

And the poundage rate – the non-domestic rates tax rate – has been reduced mid-revaluation from 49.8 to 49 pence, saving ratepayers more than £120 million and delivering the lowest poundage in the UK.

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A commitment to launch a new Green Workforce Academy to help people secure work in the low carbon economy was unveiled in the budget, with a £100m Green Jobs Fund over the next parliament.

There will also be £7m towards making Scotland a world-class hub for digital business and an additional £115m for the Young Person’s Guarantee.

There will also be £98.2m to improve Scotland’s digital infrastructure and deliver access to high quality broadband and mobile coverage, along with £711.6m for affordable housing and £68m for the first full year of the Scottish Child Payment, tackling child poverty

Tory finance spokesman Murdo Fraser said the £41bn marked the “biggest ever Scottish budget” since devolution..

“As a result of all that extra UK funding, we can welcome that key Scottish Conservative demands on income tax and NHS spending have been met,” he said.

“However, we are extremely disappointed that the SNP have not delivered a fair funding deal to councils to protect local services.”

Labour interim leader Jackie Baillie hit out at the failure to commit to a £15 an-hour pay rate for social care workers.

“Surely they finally deserve to be properly valued and recognised by society, and surely they deserve £15 an-hour,” Ms Baillie said.

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