England & Wales, Scotland Democracy, devolution and governance, Economy and regeneration, Finance

May you live in interesting times – Budget Day for Scotland

Photo Credit: HowardLake via Compfight cc

Public Finance Minister Kate Forbes delivered the budget statement for the 2020/21 financial year today. This statement was produced at a time when many questions remain unanswered, including, what will the Westminster budget say about Scotland on March 11th? March 11th is also the date that councils in Scotland have to set next year’s budget. Today, the Minister called for Parliament to work together for the good of the national interest. Interestingly, this is the first time a woman has set a budget in either Westminster or Scottish Parliaments.

The caveats – the actual size of the Westminster budget is unknown and there is uncertainty about income tax receipts. We certainly are in uncharted territory. Furthermore, there remains uncertainty around the impact of Brexit on councils and new politicians in place in Westminster. The budget may have to be revisited if Westminster changes the Barnett assumptions or if no EU deal is achieved.

This has been billed as a budget that is bold and puts well-being and fairness at the heart of it. It is not surprising then to see the inclusion of immediate action to tackle the climate emergency and a multiyear approach for the future to reduce emissions. There are also investments in a national infrastructure mission with a note that local authorities will be incentivised with a green growth accelerator fund. In addition, there are monies to support low carbon capital investment including action on active travel and public transport to support sustainable economic growth

The local government settlement, capital, revenue and specific funding streams are contained in some detail here.  Mentions are made of a variety of specific policy funds including a Scottish child payment, business rates relief, city deals and energy efficiency. Scottish Government states there is a 494 million pounds increase in local government revenue funding.

For citizens, there are no increases to income tax rates. The Scottish Fiscal Commission forecasts income tax receipts of over 12 billion pounds in 2020/21. Whilst public sector workers earning less than eighty thousand pounds will get a pay rise of 3 per cent.

This is the start of this year’s rather unusual budget process and we do know that the SNP led Scottish Government will need support from other political parties to get this budget agreed. In previous years, the Green Party have supplied support and in return demanded money for local government. In 2018 and 2019, that support from the Green Party was important for local government. In January 2020, Patrick Harvie from the Scottish Greens was quoted as warning that they cannot support the 2020/21 budget. This week, Green MSP Andy Wightman pushed for the business rate system to be reformed and devolved to the 32 LAs, but the Scottish Parliament voted that down. Any budget deal will need to be completed by February. 27th with a final vote in the Scottish Parliament on March 6th.

At the LGiU, we will continue to provide analysis and comment on the budget process as it unfolds and further detail is supplied on the local government funding settlement.

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