Scotland to receive £1.2 billion boost from UK Budget

Scotland will receive a £1.2 billion boost as a result of the UK Budget, the Chancellor has said, in an announcement that was mostly welcomed by Scottish businesses.

Delivering the UK Government’s tax and spending plans on Wednesday, Rishi Sunak confirmed an additional £1.2 billion in funding for the Scottish Government through the Barnett formula, alongside an extension to both the furlough scheme and £20 weekly uplift to Universal Credit until September.

The Budget included an extension to the five per cent VAT reduction for the tourism and hospitality sectors, and Scottish businesses are set to benefit from UK-wide initiatives such as the Help To Grow scheme and a £375 million ‘Future Fund’ which aims to support “highly innovative companies”.

The personal allowance threshold for taxation - currently at £12,500 - will also rise this year by £70 but then be frozen until 2026. This means that more people will be paying tax as wages increase, but other changes announced today do not apply in Scotland.

Scottish businesses have welcomed the extension of the furlough scheme in particular, with the Scottish Chamber of Commerce branding it a “major boost”, but many warned that employer contributions may not be viable for some beleaguered businesses.

“Furlough still comes at a cost to business and it will take some time for many businesses to start to trade viably again and meet the most basic costs,” said Marc Crothall, chief executive of the Scottish Tourism Alliance.

“I’ve spoken to a number of sectoral associations over the past week who have told me that businesses simply don’t have the cash reserves to get them beyond Easter.”

The Scottish Hospitality Group similarly welcomed the extension, but raised concerns over Mr Sunak’s failure to mention the Job Retention Bonus that was previously announced.

“We need immediate confirmation on whether this will still be paid. The Chancellor cannot simply take this vital payment away from businesses who have been subsidising the furlough scheme and fought so hard to stay viable and protect jobs during the last year,” said Stephen Montgomery, group spokesperson.

The extension of the five per cent VAT reduction was also welcomed by Scottish businesses, although there are calls for this to be extended to beyond September until sectors have recovered further from the financial blows dealt by the pandemic.

"Reassurance has been provided today. But the Chancellor must keep the door open to providing more support if the pandemic hits our economic re-opening plans again,” said Dr Liz Cameron OBE, director of the Scottish Chambers of Commerce.

"Let's not lose sight that the doors of many businesses remain closed. The tapering of support may need to be reviewed for some sectors such as tourism to reflect the length of time it will take for businesses to reach operating capacity.”

Andrew McRae, the Scotland policy chair of the Federation of Small Businesses, urged Scottish ministers to use the rates and grants changes in England as “food for thought” to “optimise their package of measures” and ensure that “the bulk of help goes to smaller firms hit hardest”.

Fuel duty will also be frozen for the 11th consecutive year while alcohol duties will be frozen across the board, which the UK Government claims will make a typical bottle of Scotch whiskey 30p cheaper compared to the planned rises and “give a £450m boost to distillers”.

Karen Betts, CEO of the Scottish Whiskey Association, described the freeze and giving distillers “some breathing space in the face of some of the worst trading conditions anyone can remember”.

However, Ms Betts urged the Chancellor to “set out a clear timetable for the reform of the UK’s outdated system of alcohol taxation” and “modernise and reform the duty system” now that the UK has left the EU.

Experts have also suggested that aspiring home-buyers in Scotland and northern England in particular are set to benefit from a new five per cent mortgage deposit scheme.

The mortgage guarantee scheme will be available to current home-owners as well as first-time buyers looking for a property for up to £600,000, and will be available from April.

"Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland, where a 95 per cent mortgage is more attainable,” said Richard Donnell, research director at Zoopla.

A £27 million investment in the Aberdeen Energy Transition Zone to support North East Scotland to “play a leading role” in meeting net zero ambitions was also confirmed, as well as over £57 million in investment to “turbocharge green recovery” and “accelerate” the creation of around 13,000 jobs.

Additionally, the Chancellor announced a further £5m for the Global Underwater Hub to “ensure the UK’s underwater sector grows alongside the global subsea market”.

Towns and communities across the UK will also receive direct investment through the £4.8 billion Levelling Up Fund and the £150 million UK-wide Community Ownership Fund, Mr 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,” he said.

Scottish Tory leader Douglas Ross praised the Budget, describing it as delivering "vast economic support and investment to individuals, businesses and communities across Scotland".

“It is absolutely imperative that we see the SNP Government do the same. All too often during the pandemic, the SNP have treated our businesses as an afterthought and failed to get funding out the door,” he added.

However, Scotland’s Finance Secretary Kate Forbes said the Chancellor has “not matched Scotland’s ambition for economic recovery and supporting households”.

While Ms Forbes welcomed “some of the announcements made today”, she said Mr Sunak 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 Chancellor’s statement that the storm clouds of austerity are on the horizon once again,” she said.

She added: “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.”