Rosie Gollan and Francesca Macmillan: How the draft Scottish Budget impacts construction

Rosie Gollan and Francesca Macmillan: How the draft Scottish Budget impacts construction

Rosie Gollan and Francesca Macmillan from law firm Womble Bond Dickinson discuss the Scottish Government’s plans for construction in 2024 and 2025.

The Scottish Government revealed its draft Scottish Budget for 2024/25 in late December, which will have significant impacts on the Scottish construction industry.

The Budget sets out the Scottish Government’s proposed spending and tax plans for that period.

It is no secret that the Budget has been presented to Parliament in difficult times. Deputy First Minister and Finance Secretary Shona Robison described current fiscal conditions in Scotland, saying: “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” with Scotland “vulnerable to these international shocks”.

Central features of the Budget include investments in social security, health and social care with an income tax shake-up introducing a new tax band for the highest earners. There are however several announcements of particular relevance and importance to the construction sector:

  • Clean heating systems: £358 million is to be invested in the installation of clean heating systems, to make homes more energy efficient, tackle emissions and support the creation of jobs. There is to be further investment in renewable district heating networks, with 90% renewables District Heating relief to be extended until 31 March 2027 and expanded to include not only new networks, but all district heating networks where at least 80% of the thermal energy generated derives from renewables.
  • Offshore wind: £66.9 million (a “kickstart” to the Scottish Government’s commitment of up to £500 million) is to be invested to support the green economy and future jobs to anchor a new offshore wind supply chain in Scotland
  • Remediation:
  1. Cladding: an increase in spending from £29 million in 2023/24 to £41.3 million in 2024/25. This comes against the backdrop of various plans to enhance Building Safety in Scotland, including the recently published Housing (Cladding Remediation) (Scotland) Bill.
  2. RAAC: the Scottish Government will work with the public sector to identify the extent of RAAC (reinforced autoclaved aerated concrete) in buildings and consider how the risks should be addressed.
  • Housing and Building Standards: a cut in spending of around £200 million, from £738.3 million in 2023/24 to £533.2 million in 2024/25. The Cabinet Secretary for Social Justice acknowledges that the Social Justice and Social Security Committee are “keen to understand how the Scottish Government will ensure local services have the resources required to deliver on housing rights.”
  • Affordable Housing: investment of £556 million in the Affordable Housing Supply Programme, to enable providers to deliver affordable homes across Scotland.
  • Non-Domestic Rates: Robison acknowledges in her foreword to the Budget that the introduction of Non-Domestic Rates Retail, Hospitality and Leisure relief available to businesses in England will not be introduced in Scotland, despite facing calls to do so. The 2024-25 Budget instead introduces 100% relief for hospitality businesses located on Scottish islands, capped at £110,000 per business.

The Budget will no doubt be the subject of much debate and MSPs will decide upon any further changes proposed by Scottish Government ministers and whether to pass the Bill. The Scottish Government aims to have the Bill passed by the end of February, ready for the new financial year.

  • Rosie Gollan is an associate and Francesca Macmillan is a trainee solicitor in Womble Bond Dickinson’s construction team.

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