Chancellor Rishi Sunak has promised a “new economy” by increasing UK public spending by £ 150 billion. But what does his fall budget mean for Scotland?
While many of Scotland’s tax and expense decisions are made in Edinburgh, the UK budget still has a big impact, far beyond the simple question of how much money goes into Holyrood’s coffers.
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Mr. Sunak has decided to turn on the grocery taps in all government departments, and this means that Scottish Finance Secretary Kate Forbes will have more money to allocate when she finalizes her draft budget in December.
This is because many of the eye-catching announcements in the UK budget relate to issues that are donated to Holyrood, such as the £ 24bn allocated to housing or £ 21bn for the streets.
North of the border, Scottish ministers are in charge of housing and transport. So when the Chancellor promises new funding to these areas, an extra chunk of money is added to the Scottish budget to balance things out and ensure that Scottish taxpayers don’t end up subsidizing giveaways in England.
Manna is calculated based on population levels using Barnett’s formula and Scottish ministers can spend the money for whatever they want – that’s quite the point of devolution.
Mr Sunak said his spending spree will send an average of £ 4.6 billion a year more to Holyrood, resulting in “the largest bulk grants for decentralized administrations” since they were established.
However, Ms Forbes argues that this is still not enough to address the “significant challenges” Scotland faces in the wake of the pandemic.
He also says it’s important to “go beyond the rhetoric and understand what the figures mean” before announcing their spending plans on December 9th.
Not all spending in decentralized areas triggers Barnett consequences. Starting this year, some money is going to Holyrood and directly to local projects.
The UK government has set up a £ 4.8 billion ‘leveling’ fund, which allows local authorities to make cash offers for things like road and bridge construction, museum refurbishment and installation of charging points for electric vehicles. Mr. Sunak told MPs that £ 170m was awarded to Scottish projects this year.
These include the redevelopment of Inverness Castle, the refurbishment of the Westfield roundabout in Falkirk and a new market in central Aberdeen, each receiving £ 20 million in funding.
The redevelopment of the Artizan shopping center in Dumbarton is bringing in an additional £ 20 million, while £ 38 million will be spent on improving travel links between Paisley and a hub of local manufacturing innovation.
Up to £ 3 million has also been committed to Glasgow’s Burrell Collection in an effort to bring world-class art exhibitions to the city, while another £ 1 million is being spent on local projects through the Community Ownership Fund.
This has partly to do with the government’s “leveling” agenda, an attempt to rebalance an economy previously seen as biased towards London and the south-east of England – while making good money on former Labor constituencies. elections of the “red wall” in the north of England.
But it also plays into a long-term Downing Street strategy to have a more visible presence in Scotland. UK ministers hope that by directly funding projects north of the border they can write themselves into some local success stories and perhaps dampen the enthusiasm for independence.
Meanwhile, Scottish ministers do not like the idea of being left out of the loop, saying it “undermines devolution”. They instinctively contest the idea that London officials are in a better position to assess the merit of funding offers than those in Edinburgh.
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The political difficulty, however, is that these are positive projects supported by local councils, some of which are run by the SNP, and therefore it is not possible to oppose extra money for them. Instead, whistleblowing tends to be more procedural, regarding the decision-making process and the complexity of the funding landscape.
This could also become a more common occurrence in the future, with the UK’s Shared Prosperity Fund set to replace the EU Structural Funds in 2022, again sparking complaints that Holyrood is being bypassed.
Taxes and benefits
A number of different taxes go to Holyrood, but others don’t, and the interaction between the two means that the changes announced in Westminster may still have far-reaching implications in Scotland.
For example, income tax rates and bands are devolved, with Scotland running its own five-band system that the Edinburgh government claims is fairer. However, the tax deduction is still reserved, which as a starting point for the entry into force of taxes clearly has a ripple effect on the whole system.
So what’s really changing and what’s not?
The national living wage is set across the UK, so the increase there – at £ 9.50 per hour for those over 23 – will apply north of the border.
And while a growing range of welfare powers are taken over by Social Security Scotland, Universal Credit is also reserved for Westminster – hence the “taper rate” changes, allowing working applicants to keep more money they earn as their wages rise. , will also apply in Scotland.
By moving away from personal taxes, corporate rates are fully devolved to Holyrood as non-domestic rates, and the Scottish Government has already committed to reducing rates for the hospitality and retail sectors.
The cut in air passenger tax on domestic flights will apply in Scotland: Aberdeen and Inverness have been specifically named by the Chancellor as beneficiaries, although Inverness is effectively exempt from the levy.
Although there have long been plans to replace the air passenger tax with a devolved air departure tax, the move has been linked to technical disputes for years, mainly due to such an exemption for Highland and Island airports.
Incidentally, the Scottish ministers wanted to eliminate the levy entirely, but they abandoned this plan in 2019 citing environmental concerns. This freed them to raise an eyebrow at Mr. Sunak’s incoming floor on the eve of the COP26 climate conference.
The alcohol tax review will also take effect in Scotland. Although there is a system of minimum unit prices in Scotland, this is not actually a tax, with retailers pocketing the proceeds of the price increase.
The freeze on the current alcohol tax is also good news for the Scottish whiskey industry, which has lobbied for a planned hike.
Rishi Sunak seems determined that this is seen as a red, white and blue budget, a budget for the whole of the UK.
As he chose to say: “We are, and will always be, one family, one United Kingdom”.
This is obviously under discussion in Scotland, where the SNP and others aspire to independence – so what has the Chancellor done to try to strengthen the Union?
In addition to the extra money for the Scottish government, there is so-called “leveling” money which implies that the UK government spends more directly in Scotland.
There is likely to be more after COP26 when UK ministers publish their Union connectivity review which identifies investments in cross-border transport.
The budget also included a cut in air passenger rights for UK domestic flights which, according to Sunak, was designed to “bring people together across the UK”.
There was also a program across the UK to increase math skills, although education is a responsibility of Holyrood.
What nationalists might see as overstretching the Treasury was also a signal to trade unionists that this Chancellor is committed to their cause.
A tiny pub in Scotland’s most inaccessible village; a roundabout in Falkirk: a shopping center in Dunbartonshire; the stable block in Glasgow’s Pollok Park – the UK budget is getting very local.
In 22 years of devolution, it had become more and more of a spending budget for England, with decentralized bells and whistles and taxes mainly covering the whole of the UK.
But this is changing. This budget marks a major shift towards the UK government planting its union flags on Scottish government territory.
The Leveling Up Fund is offering £ 170m to Scottish projects this year and £ 400m over three years – money that would previously have passed through the block grant to Holyrood, which ministers there would have allocated.
Community-owned and regeneration funds also choose pet projects that show the difference Whitehall money can make, by supporting some really small projects from Whithorn to Kinloch Rannoch.
An extension of this will take place with the Shared Prosperity Fund, which will increase as the EU structural funds are liquidated. This too will ignore Holyrood, because Westminster wants their own direct links to projects on the ground.
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