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Scottish Budget

Rates bills cut as public sector workers get pay rise

Kate Forbes: much needed support

Finance Secretary Kate Forbes today announced that she will use cash repaid to the government by supermarkets to extend business rates relief to the hardest hit sectors.

All the big supermarkets and other retailers reimbursed the funding they received from the Treasury. Ms Forbes said she would use it to help out retailers, hospitality and leisure businesses who will continue to receive 100% relief for a further three months.

Together with other schemes it amounted to £1 billion of support for businesses.

She also took the unprecedented step in a non-revaluation year to cut the rate poundage from 49.8p to 49p – the lowest in the UK. She said it would save ratepayers £120m.

Ms Forbes said Scottish income tax rates will be unchanged and thresholds go up with inflation, except for the top rate at £150,000.

“During this time, it is vital that we also continue to support households and families,” she 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.”

Ms Forbes said: “In recognition of the increasing pressures on many family budgets, I am also providing local councils with £90 million on top of their settlement of £11.6 billion to freeze the council tax. This will ensure that while council tax bills won’t go up, there will be no impact on vital local services.”

However, the Chartered Institute of Taxation said taxpayers with income of more than £27,393 will pay more than those in other parts of the UK from April.

Its initial analysis also showed that Scots with income under this figure 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.

Home buyers and property agents will be disappointed that Land and Buildings Transaction Tax relief is ending after the end of March, except for first-time buyers.

She raised the nil rate band for LBTT to £175,000, resulting in a reduction of tax of up to £600.

While there is a public sector pay freeze elsewhere in the UK, Ms Forbes said public sector workers in Scotland earning up to £25,000 will receive at least a 3% pay increase via a £750 cash underpin, while there is a 1% rise for those earning above that amount, capped at £800 above £80,000.

“Today’s budget will help to bring much needed support and stability to ensure our economy recovers and we protect those who have been hit the hardest,” she said.

However, GMB Scotland senior organiser Drew Duffy, was critical of the 3% rise: “This will be met with fury among the lowest paid in Scotland’s public sector,” he said. 

“Kate Forbes was among the many politicians applauding our frontline heroes, now she is saying ‘thank you’ with a rise that won’t amount to more than a tenner a week for most. 

“There is no value here, and it’s an insulting response from the Scottish Government to the ongoing struggles of our key workers in this pandemic.”

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The government is providing an additional £7m in 2021-22 to support the Logan Report proposals for digital hubs, and to bring more people into the digital world it will invest almost £100m in digital connectivity.

Funding for the Scottish National Investment Bank, which launched in November, will decrease from £241.1m to £205m.

More than £800m is being provided for housing.

“Building on our achievement of having delivered almost 97,000 affordable homes since 2007, I am allocating funding of more than £711m to the Affordable Housing Supply Programme,” said Ms Forbes.

She said £21bn is sitting in the Covid UK reserve and Scotland’s share would help meet the ongoing needs of businesses, the NHS and public services.

The finance secretary said she has allocated £500m against what is expected to flow to Scotland from the Covid reserve.

She claimed that she had been hamstrung on some decisions, particularly on business rates, because of lack of clarity from Westminster on funding allocations.

Scottish Business UK chief executive Struan Stevenson said: “To hear the Finance Secretary yet again blaming Westminster for spreading uncertainty because of the timing of the Budget is farcical. 

“The big picture is that she has an £8.6 billion budget guarantee from the UK Treasury for government spending to cover a wide range of priorities. That’s why she is able to guarantee measures like non-domestic business rates relief.

“She needs now to focus on making this and other Covid related business support measures work on the ground, ensuring hard pressed companies get the support they need without further missteps.”    

Retail and rates

Business groups said the rates support would be particularly helpful, but there was broad agreement that the government will need to offer longer-term funding.

David Lonsdale, Director of the Scottish Retail Consortium, said: “The Finance Secretary has clearly listened to SRC’s concerns and responded positively to extend full business rates relief for retailers until the middle of this year. This provides vital breathing space.”

Director of the Scottish Property Federation, David Melhuish, said: “The next step must be for a full-scale revaluation of non-domestic properties to reflect the current market and economic conditions.”

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “Longer-term, we believe the system is rotten and needs significant reform.

“Plans for a three months extension of rates relief is a too short a reprieve. We need commitment to a 12-month reliefs package to provide the certainty business needs.”

Liz Cameron

Liz Cameron: ‘the system is rotten’ (pic: Terry Murden)

Andrew McRae, Scotland policy chairman for the Federation of Small Businesses, said: “It was important to see the three-month extension of the 100% covid rates reliefs and the continuation of small business rates relief. 

“But this only goes so far.  We need to avoid any scenario where businesses face property tax demands on premises the government has barred them from using.

“Full rates relief for all smaller firms must be confirmed for the year, allowing local shops, pubs, hotels and restaurants to get back on their feet.”

UKHospitality Scotland executive director Willie Macleod said: “The extension of the rates relief will give operators some stability but it is vital that the relief is extended for the entire 2021/22 financial year. Funding must be delivered to the devolved administrations to allow this to happen as the Finance Secretary indicated.

Marc Crothall, CEO of the Scottish Tourism Alliance, said: “This won’t go far enough in terms of supporting tourism businesses to a point of reopening and financial viability.”

LBTT: ‘Missed trick’

David Alexander, joint CEO of lettings firm. Apropos, said he was disappointed Ms Forbes had not the raised thresholds for Land and Buildings Transaction Tax.

“This would have also raised much needed funds as the latest Scottish Government’s’ figures reveal that revenue from residential LBTT increased from £119.1m in the last quarter of 2019 to £157.3m in the last three months of 2020.

“Kate Forbes had an opportunity to continue a policy which was actually revenue generating at a time when the economy is shrinking. That she failed to do so is deeply disappointing.”

Director of the Scottish Property Federation, David Melhuish, said: “We regret that the residential LBTT holiday has not been extended beyond April 2021. This policy has helped to boost confidence in the housing market during the economic crisis, which has in turn helped the Scottish Government secure above average revenues in recent months.”

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