Scottish Budget: Funding outlined for homes and regeneration but LBTT holiday will end

In an effort to prioritise job creation, measures in the Budget included a commitment to launch a new Green Workforce Academy to help people secure work in the low carbon economy, a £100 million Green Jobs Fund over the next parliament, £7m towards making Scotland a world class hub for digital business and an additional £115m for the Young Person’s Guarantee.

Placing more affordable, greener housing “at the heart” of the announcement, Ms Forbes included £711.6m to deliver affordable homes, £81.6m for regeneration programmes, including £5m to regenerate Scotland’s vacant and derelict land, and £150m for fuel poverty and energy efficiency measures.

Health receives record funding of over £16bn, an increase of 5.3% on 2020-21, along with a further £869m to continue tackling coronavirus, including funding for the vaccination and test and trace programmes. 

The Budget also proposes:

• £11.6bn for local government, which represents a £335.6m increase in core revenue funding, including the £90m to compensate local authorities which choose to freeze Council Tax, plus £259m in one-off funding
• £1.9bn for primary health care to help deliver more services in the community. A further £550m is earmarked to build new Elective Care Centres and the Baird Family Hospital and Anchor Centre in Aberdeen
• £98.2m to improve Scotland’s digital infrastructure and deliver access to high quality broadband and mobile coverage.
• £711.6m for affordable housing and £68m for the first full year of the Scottish Child Payment, tackling child poverty
• a new £55m programme to support town centres and community-led regeneration projects
• more than £3.1bn in resource and capital investment for education and skills, and £567m to provide 1,140 hours of early learning and childcare, supporting implementation of the UK’s most ambitious childcare programme
• £1.6bn for rail and bus services and £100.5m for active travel to consolidate changes to healthy, green travel options seen during the pandemic
• doubling the Rural Tourism Infrastructure Fund, helping tourist attractions and local communities make improvements to cope with increased visitors
• an additional £27m to expand woodland creation and the associated infrastructure, supporting green jobs.

Relief for first-time buyers, which raises the nil rate band for LBTT to £175,000, has been extended, while the ceiling of the nil rate band for residential land and buildings transaction tax (LBTT) will return to £145,000 from April 1.

The continued relief is calculated to result in a reduction of tax of up to £600 first-time buyers.

Elsewhere, the non-domestic rates tax rate has been reduced mid-revaluation from 49.8 to 49 pence saving ratepayers more than £120 million and delivering the lowest poundage in the UK. And to deliver “stability and certainty” from the tax system, there will be no changes to income tax rates this year.

During her Budget statement, Ms Forbes also set out plans to:

• increase the starter band, basic band and higher rate threshold of income tax by inflation
• freeze the top rate threshold of income tax in cash terms at £150,000
• increase the standard rate of Scottish landfill tax to £96.70 per tonne and the lower rate to £3.10 per tonne to ensure consistency with planned landfill tax charges in the rest of the UK.

Ms Forbes added: “This Budget is focused on delivering tax policies that will support economic recovery and maintain our commitment to creating a fairer and more progressive tax system. It is about striking the right balance between raising the revenue required to fund our public services and supporting the economic recovery through targeted interventions. 

“This includes using the rates relief handed back by businesses to help fund a three month 100% rates relief extension for the sectors that have been hardest hit by the pandemic.

“Should the UK Government bring forward an extension to its equivalent rates relief that generates consequential funding, we will match the extension period as part of a tailored package of business support measures.

“During this time, it is vital that we also continue to support households and families. That is why I have ensured that no Scottish taxpayer will pay more income tax in 2021-22 than they do now on their current income and, for a fourth consecutive year, more than half of Scottish income taxpayers will pay less tax than if they lived anywhere else in the UK.

“In recognition of the increasing pressures on many family budgets, I am also providing local councils with £90m on top of their settlement of £11.6 billion to freeze the council tax. This will ensure that while council tax bills won’t go up, there will be no impact on vital local services.

“Now is a time for stability, certainty and targeted support for the individuals and businesses who have been most impacted by the pandemic and our tax policy delivers this.”

Housing, planning and local government minister Kevin Stewart said the affordable housing funding will contribute to its net-zero ambitions while helping to ensure everyone has a home that meets their needs.

He added: “The 2021-22 Scottish Budget affirms yet again our commitment to funding good-quality, affordable homes for the people of Scotland. Ensuring everyone has access to a safe, warm and affordable place to call home is at the heart of our ambition for a fairer Scotland, and this Budget builds on the excellent progress made since 2007 with almost 97,000 affordable homes delivered, almost 67,000 of these being for social rent.

“We are delivering this Budget against a shortfall of over £500m in consequentials for housing as a result of decisions taken in the UK Government’s Spending Review last autumn. While we have protected the housing budget from this as much as we can, it has of course had an impact on our overall budget for affordable housing, and we are calling on the UK Government to urgently clarify their forthcoming plans to restore this funding to the levels required to deliver housing commitments in all parts of the UK.

“The coronavirus pandemic has reinforced the need to think differently about housing and its place within our communities. Later this year we will publish our Housing to 2040 strategy, setting out a 20-year plan to deliver good quality, energy efficient, net zero carbon housing with access to outdoor space, transport links, digital connectivity and community services.

“This Budget lays the groundwork for this with £81.6m for regeneration programmes, including to support community regeneration, town centres and 20-minute neighbourhoods – where people can meet their needs within a 20-minute walk from their house - alongside £5m for a new scheme aiming to regenerate vacant and derelict land. This scheme, which will repurpose the land for anything from community gardens or urban woodland to low-carbon affordable housing, is part of our Low Carbon Fund and will be worth £50m over five years.

“Of course, the environment must be at the centre of our thinking, and we’ve also allocated £150m to improve energy efficiency in people’s homes and tackle fuel poverty.”

Responses

Gordon Nelson, Scotland director at the Federation of Master Builders

“Since the imposition of coronavirus restrictions earlier this month that curb non-essential construction work or services within homes, Scottish builders have experienced drastically reduced workloads yet remain ineligible for the Strategic Framework Business Fund. This is an anomaly that threatens the survival of many small and medium sized Scottish builders, in particular those operating in the repair, maintenance and improvement sector. As we look toward COP26 in Glasgow later this year and the ambition of achieving Net-Zero by 2045, these firms will be of paramount importance in our efforts to reduce carbon emissions through retrofitting our existing housing stock.

“The Scottish Government should also bring forward their draft Heat in Buildings Strategy. This will increase confidence within local building firms through encouraging greater demand for and investment in retrofit, and establishing a clear pipeline of work that will enable these businesses to thrive and allow Scotland to deliver on its climate change ambitions.”

Kevin Reid, chief executive of the Cruden Group

“While it’s disappointing that LBTT relief has not been extended past 31st March, it is of some comfort to hear that first time buyers will continue to receive relief of up to £600 off their tax bill.

“More welcome news, however, is the increased funding for the affordable housing supply programme to £711m.  This will help tackle Scotland’s desperate shortage of housing and provide a significant boost in the supply of more affordable and energy-efficient new homes.”

David Melhuish, director of the Scottish Property Federation

“We share the finance secretary’s desire to see a strong, fair and green economic recovery from the pandemic and a number of measures proposed today will help the business community support this aim.

“We regret that the residential LBTT holiday has not been extended beyond April 2021. This policy has helped to boost confidence in the housing market during the economic crisis, which has in turn helped the Scottish Government secure above average revenues in recent months.”

David Alexander, joint chief executive officer of property firm apropos by DJ Alexander

“While it is welcome news that the Scottish Government is to continue the increased threshold in LBTT for first time buyers it has failed to recognise the value of extending this successful policy for all homebuyers. Kate Forbes had an opportunity to continue a policy which was actually revenue generating at a time when the economy is shrinking. That she failed to do so is deeply disappointing.

“However, this policy may yet be reversed in the near future with Westminster debating whether to extend the stamp duty relief in England on Monday and hints that Chancellor Rishi Sunak may announce the extension in his March budget. If this were to occur, then there is every likelihood that the Scottish Government would follow, as they did in July, and be in the difficult position of changing policy to follow Westminster’s lead.

“There is undoubtedly a case for reviewing the way LBTT operates and easing the rates at all levels. As part of this the announcement that there is to be a review of additional dwelling supplement (ADS) is welcome. But the Scottish government continues to believe that maintaining higher tax rates compared to the rest of the UK for investors, landlords, and higher value property buyers is a legitimate and attractive policy. Taxation should always be about maximising revenue generation to support society. The last few months have shown that by raising the threshold before you pay taxes you increase the revenue.

“(Yesterday’s) budget offered the Scottish Government a real opportunity to confirm that Scotland is open for business, wanting to encourage investment, and keen to support individuals, families and investors who want to live and work in Scotland. That they failed to continue to support the property market in these difficult times may be something that they come to regret in the future.”

Hannah Smith, director of the Institution of Civil Engineers Scotland

“Our infrastructure is critical to every aspect of our lives, prosperity and wellbeing. Today’s budget goes some way to recognising this, with funding commitments for public transport, housing, and connectivity.

“However, as the Cabinet Secretary herself noted, our infrastructure must be resilient. That is why it is vital a ‘resiliency audit’ is carried out across Scotland’s existing assets.

“This, alongside the forthcoming Infrastructure Investment Plan and Capital Spending Review, will be key to delivering the right infrastructure for our future – one which is sustainable, productive and inclusive.”

Doug Smith, chairman of CBRE Scotland

“A search of the Budget report reveals that the word ‘capital’ appears no less than 236 times. That gives some idea of the importance which new capital investment is likely to play in supporting, or some may say driving, the post COVID economic recovery. And that is potentially welcome news for those in sectors involving ‘real assets’.

“Capital investment is to be spread across multiple programmes including the Infrastructure Investment Programme, a new Place Based Investment Programme, an Affordable Housing Supply programme, and a programme of investment to regenerate Scotland’s vacant and derelict land. The sums allocated against these ambitious programmes may appear large but against the scale of both the challenges and opportunities that exist today within the Scottish economy they will not come close to meeting the ask.

“So whilst programmes such as these should be welcomed, their limitations must also be acknowledged alongside an ask that the application process is made as straightforward as possible with deployment of funding as quickly as possible.

“It becomes clear therefore that the soon to be published Capital Investment Plan, which is to ‘provide a set of actions to improve performance in attracting internationally mobile private capital’, becomes even more critical given the clear need for private capital to supplement limited public sector capacity.

“Competition to attract mobile private capital will be intense as other countries and regions of the UK face up to the same challenges of economic re-building.

“So it is essential that Scotland is both ‘investor-ready’ and takes a pro-active approach to engagement with these investors.

“The Budget report included a statement with which few could take issue: ‘Making the right investments in the right places is crucial, to sustainable and inclusive growth, and our capital funding decisions matter just as much as our day‑to‑day spending – supporting employment and economic recovery through large‑scale infrastructure plans.’ But I would add two parallel requests; first, that the public sector acts as an enabler and facilitator of new capital projects – we need shovel-ready to mean just that, and second that more so than ever partnership working between private and public sectors in both selecting and delivering the right investments is truly embraced.

“Within the private sector there is a genuine willingness to share the burden of driving economic recovery in Scotland, as well as the success that will come from achieving that objective.”

Scottish Renewables chief executive Claire Mack 

“The Climate Change Committee has said the UK must quadruple its renewable energy capacity if it is to meet net-zero by 2050. Doing that will mean upskilling, reskilling and educating an army of people for high-quality, sustainable, green jobs of the future.

“The Cabinet Secretary’s announcement is a significant step forward not just for our industry - which will require a large number of skilled employees as we work towards our net-zero target - but also for all those people whose careers are not compatible with net-zero.

“Along with other initiatives already underway the Green Jobs Workforce Academy has the potential to help provide the skills Scotland will desperately need if it is to contribute to the global fight against climate change and capture the social and economic benefits of doing so.”

Aidan O’Carroll, chair of IoD Scotland

“(Yesterday’s) budget was largely positive, however some measures may not go far enough. The three month extension of non-domestic business rates and lowering of the poundage to 49 pence is welcomed, however after all businesses have experienced, stability is a must and so it would be much more beneficial if this was guaranteed for 12 months.  Similarly, the continued support under the Young Persons Guarantee and skills development is positive, but should also be extended to allow for more flexibility and planning.

“The continuation of the Strategic Business Framework Fund beyond April, and the increased local authority package for discretionary grants is good for a variety of sectors, however it is imperative that owner directors of small businesses, many of whom have missed out on support, are now included in these various packages.

“While we had some certainty during this budget in terms of income tax remaining the same into the next financial year, Ms. Forbes called for the UK government to extend the Job Retention Scheme ahead of the March UK budget, to allow businesses to engage in medium- long term planning. Without this support, many businesses who have survived until this point may not be able to continue – which could be hugely damaging for Scotland.

“I also have some concern around the digital connectivity fund – earlier this month we saw the £10m Digital Boost Fund close its applications within hours due to over subscription. It has to be asked whether £100m in digital connectivity, or the £7m being invested in technology is enough as this is vital to improve the connectivity and efficiency of Scottish businesses.”

Andrew McRae, the Federation of Small Businesses Scotland policy chair

“Today was an opportunity for the Scottish Government to set out their plans to see Scotland’s independent and local firms through the remainder of the pandemic. While the Cabinet Secretary offered stability for business on several important fronts, we heard too little about closing some of the big holes in grant support.

“It was important to see the three-month extension of the 100% covid rates reliefs and the continuation of small business rates relief.  But this only goes so far. We need to avoid any scenario where businesses face property tax demands on premises the government has barred them from using.

“Full rates relief for all smaller firms must be confirmed for the year, allowing local shops, pubs, hotels and restaurants to get back on their feet. Similarly, the Scottish Government and the wider public sector should pledge to freeze and reduce other fees and charges.

“Investment in skills and digital infrastructure lays the foundations for long-term recovery. But if we lose businesses in the jaws of the crisis, then bouncing back becomes that much harder. As the budget moves through parliament, we need to see MSPs from across the political spectrum ensure that it provides enough lifeline help for the independent businesses on their doorsteps.”

Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce

“The position of Scottish businesses has never been so precarious. The Scottish Government’s announcements (yesterday) are welcome but do not go nearly as far enough to avoid risk of widespread business collapse and job losses.

“Yes, there is light at the end of the tunnel with the vaccination programme but restrictions to prevent the spread of the virus have been devastating. We understand that the Cabinet Secretary for Finance faces difficult choices in setting the budget particularly ahead of that of the UK, in a time when the country faces extraordinary challenges.

“Business will be disappointed that further details on an economic route map on how we will exit this crisis aligned with the roll out of the vaccine were not provided today. This is a critical component if businesses are to unleash the investment our country so desperately needs.

“The Scottish Government’s commitment to infrastructure investment is absolutely necessary for Scotland and the UK to be in a position to build back better and meet net zero ambitions. Now is the time for a vision driven by ambition and a willingness to collaborate like never before. This must be put first and foremost ahead of any political point scoring this year.”