SCOTLAND’S BUDGET: WHO ARE THE WINNERS AND LOSERS?

Derek Mackay, the Scottish Government’s Finance Secretary, has set out his draft budget today, outlining how he proposes to spend the country’s near-£40 billion income over the 12 months to March 2019.

Major income tax changes are on the way, as well as number of high profile spending plans, but the Government now faces the challenge of gaining support from other parties in Holyrood to pass the budget.

A number of announcements were made today, including:

  • £600million for superfast broadband to 100% of Scottish premises by 2020
  • £179million to tackle attainment in schools, with more money going direct to head teachers
  • £400million extra for the NHS
  • Additional funds for Councils totalling £94million
  • Increase in Police & Fire Service budgets of £20million (on top of changes to VAT announced by the UK Chancellor in November)
  • Over £22m extra for Cultural events in Scotland, increasing budget at Creative Scotland

In equalities, the Scottish Government have increased the total budget by over £2million to £22.7million next year, going up by over 10%. LGBT organisations received £983,000 of the total equalities spend in the current financial year, approximately 5% of the money available to support equalities in Scotland.

Without doubt the major announcement today was on income tax – some tax rates go up, others go down, in the first major overhaul to the income tax system in Scotland for several years.

A new ‘Scottish Starter Rate’ of income tax at 19p means those on the lowest incomes will pay less than taxpayers in the rest of the UK who are still on the normal 20p basic rate. However tax has gone up for those middle and high earners, with the introduction of a new mid-band of 21p and an increase at the top band from 40p to 41p. Most UK taxpayers already pay no tax on earnings up to £11,850. The changes are forecast to raise an additional £164million a year.

According to Scottish Government data, almost 1.8million Scottish taxpayers earning less than £33,000 will pay less tax in 2018-19 than this year. They also estimate 55% of Scots will be paying less tax than those in the rest of the UK.

Public sector workers are also likely to benefit from the lifting of the pay cap – Mr Mackay announced a 3% pay increase for those earning £30,000 or under, and 2% for those earning over that level. He told the Scottish Parliament today:

“The 2018-19 budget will demonstrate beyond doubt where the Scottish Government’s priorities are: stopping UK cuts, protecting public services and unlocking Scotland’s economic potential. The budget will bring forward key measures to protect public services like our NHS against the worst effects of UK budget cuts and continued Brexit uncertainty, and deliver a growth package to support the economy, unlock innovation and drive increased productivity. This will be a budget that is good for taxpayers, good for public services and good for business. It is a budget that will deliver for Scotland.”

But the Scottish Conservative shadow finance secretary, Murdo Fraser, wasn’t convinced, highlighting the tax changes for those on lower bands only see a £20 per year saving, the equivalent of just 38p per week, saying:

“This Nat Tax will hit nearly half of Scottish workers in the pocket. That is a tax on aspiration, a punishment for daring to work hard, and a direct breach of the promise made by the SNP in its election manifesto. Today, every single SNP member of the Scottish Government has broken that promise to the Scottish people. That will not escape the notice of voters, who will never believe a word the nationalists say again.”

Meanwhile, Scottish Labour are highlighting a reduction in real terms funding for Scotland’s local councils of £135million and they say local authorities need £700million just to maintain services. Richard Leonard said:

“There is a mood of frustration and discontent towards a government that has allowed Tory austerity to be added to from the Finance Minister’s own office with severe cuts to local government. This year has seen a shameful rise in child poverty at the same time as seeing budgets for vital local services slashed, and this budget will only serve to deepen that scandal. Tens of thousands of local government jobs lost, 3500 fewer teachers and £1.5billion already stripped from our councils since 2011. Once and for all we need a plan that delivers the resources Scotland’s public services need to tackle poverty and deliver prosperity for the many, not the few.”

Scotland’s local councils are also expected to receive over £10billion next year in the block grant, but also have the ability to increase budgets by raising the level of Council Tax by up to 3%. A full breakdown of the proposed Council budgets is below (source: Scottish Government):

More information on the budget is available here: https://beta.gov.scot/budget/

Main pic credit – BBC Parliament

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