The Chancellor has announced that his budget provides an additional £2.4bn to the devolved administrations in 2021-22 through the Barnett formula, with the Scottish Government getting a £1.2bn funding boost.
Rishi Sunak said: “The UK Government has protected millions of jobs and livelihoods across Scotland – and the strength and stability of our economic union will ensure we bounce back from this pandemic together.
“This budget will ensure the people of Scotland continue to be supported through our Plan for Jobs, committing more than a billion pounds in extra investment and funding to help fuel the UK’s recovery.”
The Treasury noted that individuals and businesses in Scotland also continue to be supported through the Coronavirus Job Retention Scheme, self-employment grants, loan schemes and VAT cuts.
Finance Secretary Kate Forbes responded that the Chancellor “has not matched Scotland’s ambition” for economic recovery and supporting households.
“It is extremely disappointing that the Chancellor has failed to reverse the cuts to Scotland’s capital budget and has refused to make the £20 uplift to Universal Credit permanent.
“While there is some additional funding for Scotland, it was clear from the statement that the storm clouds of austerity are on the horizon once again – with the OBR highlighting that departmental spending is being cut by £15bn – a move that would be disastrous for our economic recovery, undermine our public services, and impact on the most vulnerable in our communities.
“Over the coming days I will be meeting with all parties in Parliament as we look towards the final stages of the Scottish Budget next week and I repeat my call to them to come together in a time of crisis to pass a budget that delivers for Scotland.”
Click here for the 12 key points from the budget announcement
The £4.8bn Levelling Up fund has also been extended to devolved governments, allowing Whitehall to bypass Holyrood and go direct to Scottish councils with funding.
Andrew McRae, Scotland policy chair the Federation of Small Business, said the package of measures gives the bulk of Scotland’s small business community more fuel to get through the last lap of this crisis.
“Specifically, the important move to extend furlough buys local employers important time until the wider economy gets up and running – and additional emergency payments for the self-employed means that those that work for themselves aren’t going to be left high and dry over the summer.
“Rates and grants changes for firms in England should provide food for thought for Scottish policymakers,” he continued, urging MSPs to optimise their package of measures on this front to ensure the bulk of help goes to smaller firms hit hardest.
“The Chancellor missed an opportunity to extend help to some operators that have had little or no support throughout this crisis, like directors of small companies.
“Scotland’s business community is now saddled with more than £3bn of government-backed debt – we’d like to have seen new initiatives aimed at helping independent firms grapple with this burden.”
In a move that went further than many expected, the Chancellor also set the UK’s corporation tax rate back a decade, with the rise in 2023 to 25% falling between the 2011 rate of 26% and 2012 rate of 24%.
Chris Sanger, EY’s head of tax policy, commented: “This is the single biggest tax rise in the budget, raising over £17bn a year by the end of the parliament and is almost 60% of the total tax increase.
“The Chancellor has slightly tempered this for some by retaining the reduced rate of 19% for those with small profits of up to £50,000, and then tapering the relief up to £250,000.
“However, even in this area, the Chancellor seems to be focusing on small rather than small and medium sized businesses, as the previous system of reduce rate that existed until 2015 applied to business with profits of up to £1.5m per annum.”
CBI Scotland Director Tracy Black responded that moving corporation tax to 25% in one leap “will cause a sharp intake of breath” for many businesses “and sends a worrying signal” to those planning to invest in the UK.
“The UK must remain attractive for every type of business, from the innovation, high-growth UK homegrown firm to the global firms investing in the UK.
“For firms across Scotland, their attention will quickly turn to the Scottish Parliament and the need for all parties to get behind, and pass, a budget that enables business to invest and give the Scottish economy the boost it needs.”
As predicted, the furlough scheme has been extended until the end of September, alongside a fifth Self-Employment Income Support Scheme (SEISS) grant.
Mubin Haq, chief executive of Standard Life Foundation, said: “The Chancellor today said his approach to protecting jobs and livelihoods during the pandemic has been comprehensive – many of those excluded from the furlough and SEISS schemes will disagree.
“Whilst it’s welcome more of the self-employed will now be able to claim the SEISS grant, this still leaves over three million people who have experienced a drop in income unsupported by the schemes – too many excluded for the past year, far too many facing severe hardship.”
The Chancellor announced a duty freeze across all four alcohol categories.
The duty rate on spirits remains £28.74 per litre of pure alcohol, meaning that of the £15.01 average price of a bottle of whisky, £10.55 is collected in taxation through duty and VAT.
The tax burden on the averaged priced bottle of Scotch remains 70%.
Scotch Whisky Association chief executive Karen Betts said: “The freeze on duty is good news for hospitality and gives distillers some breathing space in the face of some of the worst trading conditions anyone can remember.
“What’s really important to us is that the government redoubles its efforts to resolve the 25% tariff imposed by the US on Single Malt Scotch Whisky.
“The Chancellor must also set out a clear timetable for the reform of the UK’s outdated system of alcohol taxation – now the UK has left the EU, we can modernise and reform the duty system to ensure that it is clear and fair both to businesses and consumers.”
Dayalan Nayager, managing director at Diageo, said: “The last year has been incredibly tough and today’s decision, along with other measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical last months before reopening.
“We now look ahead to the Alcohol Duty Review and welcome the opportunity to work with government to bring greater fairness to the duty system and spirits producers across the UK.”
The budget also included a reduction of VAT for hospitality and tourism businesses to 5% for a further six months.
However, commentators have pointed out that increasing it back up in October to 12.5% does not solve the problem for the sector.
Scott Craig, head of VAT at regional accountancy firm Azets, said: “The economy needs to reopen first, and hospitality businesses allowed to trade so the sector can benefit – and we seem to be a long way from that point.
“Clarity is also needed on rules relating to advance bookings.”
Scottish Licensed Trade Association spokesman Paul Waterson said: “It’s a game of two halves for the licensed trade and hospitality industry – good news in the short term but not such a sunny longer-term outlook although it does buy us a bit of time.
“The furlough extension is, of course, to be welcomed but the costs incurred after employers are asked to contribute 10% in July then 20% in August and September may be prohibitive for some at a time when many are struggling to survive and waiting to see when hospitality can start to open up north of the Border.
“It’s absolutely vital that policymakers take a long-term view and we urge the Scottish Government to look closely at today’s announcements on rates and grants and give further consideration of long-term support if Scotland is to lag behind England in the reopening of the hospitality industry.”
As trailed yesterday, Sunak has pledged £27m for the Aberdeen Energy Transition Zone and £5m for the Global Underwater Hub in Scotland – the first stage in delivering the North Sea Transition Deal.
He also confirmed that three Growth Deals in Scotland – Ayrshire, Argyll & Bute, and Falkirk – will receive funding more quickly.
Andrew Howie, Grant Thornton’s managing partner in Scotland, and head of international for the firm in the UK, said: “The £57m green stimulus package to support Aberdeen and the transition to cleaner energies is progressive and will be universally hailed by businesses in the sector.
“It will help to create sustainable, future-proof jobs across the northeast coast, while also setting down a marker for the role Scotland can play in shaping the zero-carbon agenda ahead of COP26 in Glasgow later this year.”
Don’t miss the latest headlines with our twice-daily newsletter – sign up here for free.