Scottish budget 2018: As Brexit and economic uncertainty continues, Scottish Finance Secretary Derek Mackay set out the tax and spending agenda for the year ahead at Holyrood on Wednesday 12th December.
Beginning his delivery, Mackay outlined a vision of building a ‘strong and stable’ government that would ‘safeguard’ Scotland during the Brexit process. While Chancellor Phillip Hammond declared that austerity was coming to an end just months ago in the Autumn Budget, Mackay stated this wasn’t the case and the price Scotland was paying is ‘economic and social vandalism’.
On the divisive topic of Brexit, he concluded: “Any kind of Brexit will make us poorer.” Before noting that any measure announced during the Budget would have to be reassessed should a no deal Brexit happen and change priorities.
Below are the key points outlined in the Scottish Budget 2018, which focused heavily on public services.
Economy and fiscal
As usual, the Scottish Budget 2018 started with an assessment of Scotland’s fiscal forecasts of economic growth for the coming years. Again, Brexit was noted to have a significant impact on the projections.
The Scottish Fiscal Commission predicts economic growth of 1.4% this year, followed by 1.2% in 2019. Looking further ahead, GDP growth of 1% in 2020 and 2021, 1.1% in 2022 and 1.2% in 2023 is expected.
Health was a key focus during the budget. The proposed spending on health and care services will increase by £730 million; £500 million in real terms. It will bring the total spending on the NHS in Scotland to £13.9 billion following a 5.5% increase. Much of the money is being passed on as a result of the Chancellor’s increased NHS budget earlier this year.
Education was also another winner. Among the educational commitments made were an extra £500 million to support early learning and childcare, and £180 million to raise attainment in schools.
For further education, £600 million has been pledged to colleges, support for universities and free higher education will be maintained. Apprenticeships will also receive £240 million boost.
Following a shake-up in Income Tax earlier this year, it’s unsurprising that there aren’t any big changes to the new bands. However, the starter and basic rate tax bands will rise with inflation, helping those on the lowest incomes. Moving away from the rest of the UK, the higher rate tax bracket will not increase in April next year, a huge blow to higher earners.
While we’re on the subject of pay, many of those working in the public sector will benefit from the 1% pay rise cap being lifted. Public sector workers earning £33,600. Will benefit from a 3% pay increase in 2019/20.
Business rates are set to increase in 2019/20 by 2.1%, a rise below inflation. However, small and medium sized businesses (SMEs) will continue to pay a lower rate than they would in other parts of the UK.
High street businesses are also set to receive a boost. Mackay announced a £50 million fund designed to regenerate high streets that have been struggling in the digital age. This forms part of a wider commitment to invest £5 billion to improve Scotland’s infrastructure.
What happens now?
The plans outlined in the Budget will now have to pass through the final vote. This is expected to take place in February. As the Scottish National Party (SNP) is a minority administration, it will be relying on the support of opposition to get the plans through the vote. If you would like more information or to discuss the contents of this blog please contact us.