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The National (Scotland)
The National (Scotland)
National
Xander Elliards

Economists, charities, and everyone else: How Scotland reacted to the Budget

THE Scottish Government has laid out its Budget for 2023-2024 in a heated Holyrood session which saw accusations of leaking to the media fly across the chamber.

Deputy First Minister John Swinney announced the SNP-Green government’s spending plans, headline details of which included the raising of Scottish-controlled benefits by 10.1% – in line with inflation, raising the top rate of tax on the nation’s highest earners, diverting the £20 million indyref2 fund to help tackle fuel poverty, and scrapping peak-time rail fares in a six-month trial.

The full Budget document runs to some 150 pages, without including supplementary data published elsewhere, and has sparked a wave of reaction from across Scotland.

Here is what some of the key players had to say…

Local Government

The Convention of Scottish Local Authorities (Cosla) said it will not be commenting on the Budget until the leaders of Scotland’s 32 local authorities have had the chance to meet and discuss its implications. That should happen on Friday.

Local Government Information Unit (LGiU) Scotland chief executive Jonathan Carr-West said Swinney had attempted to “reach out to local government” in the Budget by “acceding to Cosla’s request to allow councils more freedom over council tax rates”.

He added: “Scottish councils will now be poring over the detail to see how much real additional money sits behind the headline of £550 million.

“Moreover, local government in Scotland will still be left wondering how, indeed if, it fits into the Government’s overall vision.”

Trade Unions

Roz Foyer, the general secretary of the Scottish Trades Union Congress, which represents some 540,000 members, said it was “clear that Scotland’s trade union movement has made progress in winning demands from the Scottish Government”.

She welcomed the tax rises on highest earners and the LBTT rate change on second homes (from 4 to 6%), and was optimistic about reform of the Small Business Bonus Scheme.

However, Foyer (below) added: “We needed strides, not steps. We cannot pretend this is the radical, redistributive budget working people in Scotland needed – it isn’t. We can – and will - demand the government to go much further.”

UNISON’s Scottish secretary, Tracey Dalling, said there were “some welcome measures” in the Budget, such as the tax rises and LBTT rate change, but said the Government had “opted to largely duck the redistribution of wealth we had been calling for”.

She said that paying “£10.90 to social care workers is nowhere near the £15 per hour they deserve”.

Charities

The Poverty Alliance welcomed the “progressive” use of tax powers, raising rates on the highest earners, but called for longer-term reform of the “basis of our tax system”.

The group further welcomed increased support for the NHS and social care, but cautioned of more cuts in future. “All of our vital public services are calling out for more investment,” they said.

The Poverty Alliance also praised the decision to trial the scrapping of peak rail fares, saying it “will help people to make ends meet as costs continue to rise”.

Gavin Thomson, a transport campaigner at Friends of the Earth Scotland, echoed this. He added: "The move demonstrates how public ownership can keep fares from getting even higher, benefitting passengers and helping support the necessary shift away from cars.”

John Dickie, the director of the Child Poverty Action Group (CPAG) in Scotland, said it was “absolutely right” that taxes on the richest were being put up, and welcomed the benefit increase of 10.1%. However, he said it was “disappointing” that the £25 Scottish Child Payment would not also rise.

Jamie Livingstone, the head of Oxfam Scotland, said the “relatively small tax tweaks are certainly welcome and will raise some much-needed additional revenue to support public services in Scotland next year, which we know people on low incomes rely on most”.

He said it was a “common-sense choice to ask those on higher incomes in Scotland to contribute a bit more to support public services and a fairer Scotland”, but warned that the tax rises were not large enough to make a significant difference to inequality.

Economists

David Phillips, an associate director at the Institute for Fiscal Studies, said Scotland was “continuing a trend of higher, more progressive taxes” compared to the rest of the UK.

However, he said that the revenues raised – estimated at around £95 million – “are not to be sniffed at but are small in the context of its budget and cost pressures”.

He added: “The way the devolved governments are funded – and particular the Barnett formula – is also delivering smaller percentage increases in funding for Scotland than in England, an issue that we’ll be looking at in more detail in the New Year.”

Emma Congreve, the deputy director of the Fraser of Allander Institute at the University of Strathclyde, said: “John Swinney faced a number of difficult choices today, even with the additional funding from [the] UK Government as a result of the Autumn Statement.

"It is alarming that the Scottish Government are still in a position of trying to balance this years’ budget, and the Scottish Fiscal Commission notes that the balance for 2023-24 is also likely to be difficult.

“The Scottish Government has delayed any announcement on public sector pay. We will have to wait and see what agreements take place here, and whether there is enough fiscal headroom left in the budget to cover demands.”

She said the tax rises for the highest earners were “understandable, if a little unexpected”, adding: “There has been a large improvement in the income tax net position, driven by forecast higher earnings growth in Scotland than the rest of the UK.”

Business

The Federation of Small Businesses (FSB) called it a “Breathing Space Budget”, welcoming the announcement that the Scottish business rates poundage will be frozen.

The FSB further welcomed promises to “reform and extend” the Small Business Bonus Scheme, but expressed concern that the 100% relief threshold for the scheme could be lowered from £15,000 to £12,000, as well as the absence of specific support for certain particularly hard-hit sectors.

The Scottish Retail Consortium raised concerns about the impact of tax rises on sales.

The body’s director, David Lonsdale, said: “Consumer spending is the mainstay of Scotland’s economy. The freezing of income tax thresholds and increased income tax rates for higher earners is likely to impact consumer spending at a time when retail sales are set to remain sluggish.”

Liz Cameron (above), the chief executive of the Scottish Chambers of Commerce, also raised concerns about the tax rate rises.

She said: “The Scottish Government’s move to increase the top and higher rates of income tax will hit taxpayers in Scotland more than other parts of the UK.

“This is a clear disadvantage for Scotland’s businesses and workers and could position Scotland as a less attractive place to live and work.”

The Scottish Tourism Alliance said that the tax rises would impact negatively on leisure spending. “The situation is grim; we have now entered our most difficult winter yet,” the body said.

Opposition Parties

Scottish Labour suggested that the Budget was not “focused on the priorities of Scots”. The party said it had “no plan for growth, no pay policy for workers, and no plan to support public services”.

Speaking at Holyrood, the party’s finance spokesperson, Daniel Johnson, said: “Scottish Labour will always support progressive taxation … [but] people will not accept a rise in tax bills if all they see is further decline of their services.”

Both the higher and top rates of tax will be increased by 1p each, to 42p and 47p respectively. The higher rate threshold will be maintained and the top rate will be lowered to £125,140 from £150,000.

The Scottish Tories attacked the tax rises, with party finance spokesperson Liz Smith claiming they would damage Scotland’s competitiveness.

“The 42p rate increases the existing tax gap between Scotland and the rest of the UK,” she went on.

“Although John Swinney justified this tax rise because the money raised will go to Scotland’s crisis-ridden NHS, this is less than one per cent of health spending and he could have found this money elsewhere without damaging our competitiveness with the rest of the UK.”

The Scottish LibDem leader, Alex Cole-Hamilton, said there was a “lot of pain” in the Budget.

He said in Holyrood: “Pain for mental health services, for a voluntary sector on it knees that will now face another £4m cut, and a local government uplift that is barely half what Cosla have asked for in order to keep the lights on.”

Swinney announced a further £550m in funding for local government, which he said was more than would have been expected.

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