Emergency Budget Review: 2022 to 2023

5. Policy Measures

Section 3 set out the fiscal context within which Scottish Government has made decisions to progress our priorities and secure the social contract that people in Scotland can rely on. The financial and policy decisions we have made are in response to the unprecedented burdens the cost of living crisis has placed on Scotland's households, businesses and public finances – made worse by a number of the UK Government's choices. In the Programme for Government (PfG), the Scottish Government announced a package of support to aid families and businesses. In 2022-23, almost £3 billion has been allocated to mitigate the impact on households, including a range of support for energy bills, childcare, health and travel, as well as social security payments that are either not available anywhere else in the UK or are more generous. This also includes delivering energy efficiency and heating improvements and advice for those most in need through Warmer Homes Scotland and our Area Based Schemes.

The Scottish Government recognises that the cost of living crisis has required a fresh approach to public sector pay in 2022-23 and has worked closely with employers and trade unions to secure agreement to make fair pay awards that balance support for hard working public sector employees, especially those on lower incomes, with affordability. Where settlements have still to be reached, we will continue to engage and negotiate in good faith with our partners.

So far, over £700 million of public spending has been reprioritised to support enhanced pay offers in 2022-23, including £260 million of additional funding to Local Government to support their offer. This Emergency Budget Review is being published before all of the public sector pay deals are settled but takes account of the anticipated costs as we make adjustments to the 2022-23 budget and look towards the Scottish Budget 2023-24.

Paying higher wages is the biggest contribution the Scottish Government can make to helping many families with soaring costs, impacting around 450,000 devolved public sector workers – or approximately one fifth of Scotland's workforce. It also represents our commitment to sustaining public services. The costs of pay deals have recurring implications for budgets in future years. With over £22 billion invested in employee pay this year, equivalent to more than half the Scottish Government's resource budget, financial sustainability must be a key element of all pay awards. A primary purpose of the savings outlined in the previous section of this review is to support pay settlements within the 2022-23 budget. However, all spend has been reviewed for opportunities to redirect additional resources to those most in need, reduce the burdens on business and stimulate the Scottish economy.

In reviewing measures which would provide this support, consideration has been given to proposals put forward by a range of stakeholders, including research institutes and voluntary and business organisations. This process has also been informed by the updated analysis of the anticipated impacts associated with rising costs and real term reductions in income set out in The Cost Of Living Crisis In Scotland: An Analytical Report.

As a result, in addition to providing enhanced pay awards for public sector workers, action is being taken to support individuals and households across a number of areas, as follows:

• doubling the value of the December Scottish Child Bridging Payment, from £130 per eligible child to £260, benefitting around 145,000 school age children registered to receive free school meals on the basis of family low income
• doubling the Fuel Insecurity Fund to £20 million in 2022‑23, to help households at risk of self-disconnection or self-rationing of energy use as the energy price cap has risen from October
• funding to local authorities for additional Discretionary Housing Payment support to mitigate the UK Government's benefit cap as fully as possible within devolved powers, and providing local authorities with more flexibility to take account of energy bills in their prioritisation of households for Discretionary Housing Payments
• providing support, via emergency legislation, to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023
• implementing reforms to remove cost burdens for the most financially vulnerable allowing them to obtain debt relief through bankruptcy where this is needed
• introducing new payment break options to help protect those who have taken control of debt through the highly successful Debt Arrangement Scheme and who are impacted by unexpected increases in cost of living
• an Island Cost Crisis Emergency Fund of £1.4 million, to support island households who are already experiencing higher costs of living, with geography, high fuel costs, a challenging climate as we head into winter and a lack of consumer choice exacerbating this

The actions above, to increase public sector pay and support individuals and households, enable additional spend to support our retail sector, high streets and local economies. This is especially the case as lower income households generally spend a larger proportion of their income and therefore measures that support these households are more likely to increase consumption and support the economy.

Over the last six months we have engaged extensively with business organisations, industry groups and individual businesses and led industry summits on energy and financial services (with an upcoming summit on food retail) to better understand and address the very real challenges businesses face as a result of rising energy costs, wider inflationary pressures and supply issues. On the back of that engagement, we will:

• build on the additional £300,000 provided to Business Energy Scotland (BES) earlier this year to expand and improve energy support for small to medium sized businesses by doubling the energy efficiency cashback element of the BES Loan & Cash Back Scheme to £20,000, covering up to 75% of the installation cost, helping many SMEs with their energy efficiency ambitions
• work with BES, our enterprise agencies and the Scottish National Investment Bank to explore ways to support business to accelerate moves to low/no carbon energy
• encourage all public sector bodies, where 90% of invoices are already paid within 30 days, to pay all SME invoices without delay
• maintain the UK's most generous Small Business Bonus Scheme in 2022-23, which takes over 111,000 businesses out of rates altogether
• work with businesses to respond to skills and labour shortages through continued investment in upskilling and retraining, promoting Fair Work and developing a lifetime skills offer - benefiting business and making organisations more attractive to workers
• continue to invest in employability support, including employer recruitment incentives where appropriate, to assist people who face challenges in accessing the labour market to move towards and into employment - helping individuals to fulfil their potential and meet employer needs
• drive forward delivery of Scotland's fourth National Planning Framework and further planning reform, including asking planning authorities to prioritise planning applications for the installation of alternative energy generation in homes or businesses, or proposals which help businesses to diversify or adjust their operating arrangements
• extend permitted development rights for small scale renewable energy generation; introducing Masterplan Consent areas which will incentivise development by removing the need for planning applications in areas where construction proposals are in line with an agreed scheme
• engage with the development and business sectors to identify and address barriers to development and ensure the planning service is properly equipped to facilitate major proposals, such as those anticipated from the ScotWind programme

As well as these measures, we will seek to balance the essential role that regulation plays in driving innovation and achieving economic, social and environmental goals with concerns businesses have expressed about the impact of new regulation at a time of other pressures and costs. We will therefore:

• continue to engage with businesses and other stakeholders on legislative proposals to restrict the promotion of less healthy food and drink and for a Local Visitor Levy. In line with the existing Parliamentary timetable and plans, these proposals will not be fully implemented until at least 2025 and 2026 respectively
• work with local authorities and business stakeholders to encourage, where possible, consistency in the application of short terms lets, regulations and associated fees
• consider all options to ensure that online takeback obligations under the Deposit Return Scheme, which we understand are a bigger burden for some businesses than others, are applied in an appropriate and proportionate way; and take steps through additional guidance to ensure that the process for retailers to apply for an exemption from operating a return point, if they meet certain criteria as defined in the Regulations, is as straightforward as possible. The Scheme, which is industry led, will launch in August 2023
• establish a Joint Taskforce with COSLA, local authorities, our regulatory agencies and business to consider the differing impacts of regulation on business and drive early progress on the commitment made in the National Strategy for Economic Transformation to review and improve the process of developing, implementing and reviewing regulation to meet our economic and societal aims for the longer term