2024-25 Scottish Budget Unveiled

A £6.3 billion investment in social security and more than £19.5 billion for health and social care form the heart of the Scottish Budget for next year, alongside record funding for local authorities and frontline police and fire services.

With targeted funding to invest in public services and protect the most vulnerable, the Budget underpins the social contract with the people of Scotland, Deputy First Minister and Finance Secretary Shona Robison told Parliament. She also outlined policies to grow the economy and progress the commitment to deliver a just transition to net zero.

Difficult decisions have been required to prioritise funding for the services people rely on in the face of a deeply challenging financial situation, Ms Robison added.

The 2024-25 Scottish Budget includes:

• £6.3 billion for social security benefits, which will all be increased in line with inflation. This is £1.1 billion more than the funding received from the UK Government for devolved benefits in 2024-25
• £13.2 billion for frontline NHS boards, with additional investment of more than half a billion – an uplift of over 4%
• record funding of more than £14 billion for local government, including £144 million to enable local authorities to freeze Council Tax rates at their current levels
• more than £1.5 billion for policing to support frontline services and key priorities such as body-worn cameras
• almost £400 million to support the fire service
• £200 million to help tackle the poverty-related attainment gap, almost £390 million to protect teacher numbers and fund the teacher pay deal, and up to £1.5 million to cancel school meal debt
• almost £2.5 billion for public transport to provide viable alternatives to car use, and increased investment of £220 million in active travel to promote walking, wheeling and cycling

The Finance Secretary said:

“It is an enormous privilege to present my first Budget. A Budget setting out, in tough times, to protect people, sustain public services, support a growing, sustainable economy, and address the climate and nature emergencies.

“At its heart is our social contract with the people of Scotland, where those with the broadest shoulders are asked to contribute a little more. Where everyone can have access to universal services and entitlements, and those in need of an extra helping hand will receive targeted additional support.

“This Budget is set in turbulent circumstances. At the global level the impacts of inflation, the war in Ukraine, and the after-effects of the pandemic continue to create instability. In the UK the combined effects of Brexit and disastrous Westminster policies mean that we are uniquely vulnerable to these international shocks.

“We cannot mitigate every cut made by the UK Government. But through the choices we have made, we have been true to our values and rigorous in prioritising our investment where it will have the most impact.

“We choose investment in our people and public services. This is a Budget that reflects our shared values as a nation and speaks to the kind of Scotland that we want to be.”

A new income tax band will raise additional revenue to deliver high quality public services and support the social contract with Scotland’s people, Deputy First Minister and Finance Secretary Shona Robison has announced.

The Advanced rate band will apply a 45% tax rate on annual income between £75,000 and £125,140. Other changes include an additional 1p being added to the Top rate of tax and the Starter and Basic rate bands increasing in line with inflation. There are no changes to the Starter, Basic, Intermediate and Higher tax rates. The Higher rate threshold will be maintained at £43,662.

The Scottish Fiscal Commission estimates that overall Income Tax will raise £18.8 billion in 2024-25.

The Commission also estimates that next year the Scottish Government will raise around £1.5 billion more in income tax revenue than if it had followed the Income Tax policy of the UK Government, as a result of changes to rates and bands it has brought in since 2017-18.

The Finance Secretary also announced plans to:

• Freeze the non-domestic rates poundage at 49.8 pence, delivering the lowest poundage rate in the UK for the sixth year in a row. The Intermediate Property Rate and Higher Property Rate will rise in line with inflation to 54.5 pence and 55.9 pence respectively

• Offer 100% rates relief for hospitality businesses in island communities, capped at £110,000 per business

• Maintain existing Land and Buildings Transaction Tax (LBTT) rates and bands at their current levels. Relief allowing first-time buyers to claim a reduction in the amount of LBTT they need to pay will continue

• Increase the standard and lower rates of Scottish Landfill Tax to continue to support Scotland’s circular economy ambitions, while ensuring these do not encourage cross-border movement of waste

Ms Robison said:

“Managing the cumulative impacts of the UK Government’s disastrous Autumn Statement, high inflation and ongoing economic damage from Brexit means we have had to make difficult choices and prioritise support for those who need it the most.

“We are proud that Scotland has the most progressive Income Tax system in the UK, protecting those who earn less and asking those who earn more to contribute more. This in turn allows us to provide a more comprehensive set of services than in the rest of the UK.

“These targeted tax decisions are expected to increase our Income Tax revenue by £389m and have been carefully balanced with the needs of individuals, businesses and the wider economy, while ensuring we continue to build upon our progressive approach to taxation.

“Our decisions on tax in this budget – including both Income Tax policy changes and the freeze in Council Tax – provide a net benefit to around 60% of Scottish households, with around 80% of households paying no more tax as a result of these measures.

“On non-domestic rates, the support I have outlined for businesses is estimated to be worth £685 million this year and ensures that over 95% of non-domestic properties continue to be liable for a lower property tax rate than anywhere else in the UK.”

Background

The Scottish Income Tax bands and rates proposed in the 2024-25 Budget are:

*Under the UK Government’s Personal Allowance policy, those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

The UK Government confirmed in the 2023 Autumn Statement that the UK-wide Personal Allowance will remain frozen at £12,750.

The Small Business Bonus Scheme, which offers up to 100% relief from non-domestic rates, will be maintained at the rates and thresholds introduced in 2023-24. 100% rates relief will also be available for hospitality businesses on islands, as defined under the Islands (Scotland) Act 2018.

The standard and lower rates of the Scottish Landfill Tax will increase to maintain consistency with planned UK Landfill tax increases to:

• From £102.10 to £103.70 per tonne (standard rate) from 1 April 2024

• From £3.25 to £3.30 per tonne (lower rate) from 1 April 2024

The Scottish Government has allocated £144 million to enable local authorities to freeze council tax rates at their current levels. Final decisions by councils on the rates in their respective areas are expected to be made by mid-March 2024.

South Scotland MSP Colin Smyth has slammed the Scottish Government for proposing a real terms cut of a third in the South of Scotland Enterprise Agency.

In the draft Scottish Government budget published today (19 December) the recently established Agency will see its funding slashed by nearly £10 million from £37.3 million in 2022/23 to £27.4 million by 2024/25.

When the Agency was established the Government pledged that the funding would be same per head of population as the Highlands and Islands Enterprise (HIE). When the SNP came into Government the budget for HIE was £103 million for 2007/8 but by 2024/25 it will fall to just £54.8 million. Had it kept pace with inflation the budget would have been more than double that level at £130m. That would have meant the new South of Scotland Enterprise Agency having a budget of £51.5 million for 2024/25- almost DOUBLE the planned budget.

South of Scotland MSP Colin Smyth said, “This is a real kick in the teeth for the new South of Scotland Enterprise Agency and pulls the plug on much of its work before it has even got started.

“This massive cut will mean less money to support local businesses and create jobs at a time the local economy continues to fall behind much of the rest of  Scotland.

“The budget for the new Agency is linked to that of Highlands and Islands Enterprise Agency who have seen their budget halved under the SNP. That means our new South of Scotland Enterprise Agency will have a budget of just £27.4 million in 2024/25 instead of the £51.5 million promised when it was set up and that is a symptom of the utter economic mismanagement of this Government.”

Projected budget: As contained in draft Scottish Budget

Source: Scottish Government Budget 2023-24 (Page 88)  Scottish Budget: 2023 to 2024 – gov.scot (www.gov.scot)

In response to the Scottish Budget, Stephen Montgomery, Director of the Scottish Hospitality Group said:

“We are sorely disappointed that the Scottish Government has not delivered new emergency support for Scottish hospitality. Unless a hospitality business is located on the islands, this Budget offers no new support to Scottish hospitality to survive the unprecedented challenge of rising costs, inflation, and the legacy of the pandemic. The very real implication is that many Scottish hospitality businesses will struggle to survive, and customers will see prices increase. This will be a bitter pill to swallow for thousands of Scottish hospitality businesses, given English hospitality businesses will be benefitting from a 75% business rates discount for the next year. Our attention will now be focused on helping those hospitality businesses survive what will be a very challenging year to come.

“However, we welcome the Scottish Government’s commitment to exploring a long-term, fairer deal for hospitality on business rates. It is a ray of hope in an otherwise disappointing day for Scottish hospitality. This is a golden opportunity to deliver a fairer deal for Scottish hospitality once and for all. We have been engaged with the New Deal for Business Group for a number of months and it is time that the Scottish Government’s actions matched their words. The Finance Secretary has committed to introducing a long-term, fairer deal for Scottish hospitality at next year’s Budget. We will hold her feet to the fire to make sure she delivers on this promise.”

Background

Scottish Budget 2024-25

Summary of UK Economic and Fiscal Outlook from Office of the Chief Economic Adviser