Scottish Budget 2019-2020

Foreword

by the Cabinet Secretary for Finance, Economy and Fair Work

This is a budget that prepares our economy for the opportunities of the future, enables the transformation of essential public services, and builds a more inclusive and just society. 

It does so in the context of continuing UK austerity, which has reduced our resource block grant by £2 billion in real terms over the last decade and against a backdrop of a UK Government careering toward any Brexit, regardless of the cost.

Despite its promises, the UK Government has not ended austerity. If this year’s budget consequentials for investment in the NHS are excluded – which given our commitment to pass these on in full to Scottish health and social care services, is reasonable – our 2019-20 resource block grant is £340 million or 1.3 per cent less in real terms than it was in 2018-19. 

Against that backdrop, the decisions I have taken in this budget aim to ensure that we not only deliver the public services, social contract and economic investment people expect of us, but that we mitigate the risks of Brexit as best we can, to enable our economy and our country to thrive in any circumstance, now and in the future.

Inevitably, money and effort will need to be spent on preparing our economy and public services for whatever Brexit outcome the UK Government arrives at. While this is frustrating, this budget also helps to prepare our economy for the future whatever our relationship with the EU is. It supports an economy that is more innovative, international and skilled, with the flexibility to adjust to challenges and seize opportunities.

If Brexit can be avoided, those resources currently invested in contingency planning and mitigation can be reinvested into our public services and economy. However, if we face a no deal or cliff-edge Brexit I will have to return to Parliament to reassess our spending priorities. 

The budget I am putting forward delivers on the plans set out in ‘Delivering for today, investing for tomorrow: the Government’s programme for Scotland 2018-19’. It makes a number of strategic long-term investments for Scotland’s future, and it uses the full powers of devolution to mitigate cuts, deliver increased spending on key public services and support an innovative, dynamic and increasingly international economy.

We know that greater investment in infrastructure improves quality of life, boosts productivity and makes our country a more attractive place to do business. That is why this Government will increase capital investment by £1.56 billion per year by the end of the next parliament compared to 2019-20. This budget shows the potential that additional investment can secure. It sets out capital spending of more than £5 billion over the year including: £1.7 billion of investment in our transport infrastructure; more than £825 million towards housing; more than £180 million towards city and region deals; investment in early learning and childcare and school buildings; support for our R100 programme to deliver superfast broadband; and a new £50 million Town Centre Fund to support diversification of our high streets.

Our comprehensive ‘Economic Action Plan 2018-20’ set out our priorities for growing our economy. We will invest £2 billion over 10 years to capitalise a new Scottish National Investment Bank that will become a transformational pillar of our economy. 

To build on our reputation as a country that innovates, pioneers and creates, we will invest over £8 million this year to continue the delivery of the National Manufacturing Institute for Scotland. We have also established an £18 million Advanced Manufacturing Challenge Fund to ensure all parts of Scotland benefit from developments in advanced manufacturing. 

To ensure we maintain and build on our international presence and support Scottish business in key export markets we are doubling Scottish Development International’s presence in Europe and we are investing £5 million this year as part of a three year, £20 million plan to support more companies to export.

And as we look ahead to the passage of the Climate Change Bill, this budget continues to drive Scotland towards a low carbon economy. We are providing £50 million for low carbon transport measures, including the expansion of electric vehicle charging infrastructure to support the phasing out of new petrol and diesel vehicles by 2032, £80 million for Active Travel and over £145 million investment in energy efficiency and heat decarbonisation. 

Business success drives our economy, and provides opportunity for the people of Scotland. Businesses consistently tell me that a stable and competitive tax environment is key to their success. Our proposals deliver a below-inflation cap on business rates increases, ensuring that more than 90 per cent of properties in Scotland will pay a lower poundage than they would in other parts of the UK. This is in addition to the most generous package of reliefs in the UK, worth more than £750 million in 2019-20, including our commitment to lift 100,000 properties out of business rates altogether. 

These actions will support businesses, contribute to economic growth, help boost employment and generate the revenues that enable continued investment in public services and the social contract.

This budget also secures our key public services. It prioritises closing the education attainment gap, transforming our NHS and supporting communities with real terms increases in spending. We are also supporting local authorities to continue to deliver high quality public services with £11.1 billion in total support through the local government finance settlement - providing a real terms increase in both resource and capital funding.

Our youngest children will benefit from the roll out of the Best Start Grant under our new social security powers, which provides support for children and families at key points in their early lives.

This budget also supports the landmark increase in early learning and childcare provision with investment in nursery buildings and support for the recruitment of new staff. It backs schools, teachers and pupils with continued investment in the £750 million Attainment Challenge, including £120 million of Pupil Equity Fund money, and it looks to support our young people to fulfil their potential with £12 million of support for mental health provision in our schools. It invests £600 million in colleges and maintains our investment of over £1 billion in universities to develop our future talent and innovation.

Our investment in police and fire services will help to keep our communities safe and our support for measures to tackle poverty and build a fairer and more equal society aims to ensure everyone is able to play their part in Scotland’s success. 

To do that we will continue to invest in the £50 million Ending Homelessness Together Fund to tackle rough sleeping, and in our £50 million Tackling Child Poverty Fund. We will provide support to those who require it with £435 million of direct assistance delivered through our social security interventions, including investment of nearly £100 million to continue our mitigation of the Bedroom Tax and UK Government welfare cuts. Recognising the challenges faced by the roll-out of Universal Credit this budget includes additional investment to increase the Fair Food Fund, which supports the work of foodbanks, from £1.5 million in 2018-19 to £3.5 million in 2019-20. 

Our employment programmes will continue to provide training and advice for those who need it. This will include a new £1 million fund to help those on low incomes benefit from digital skills training.

Ensuring that those on the lowest incomes are able to prosper in our society is a key test for the Scottish Government in all our actions. Last year I introduced a new progressive system of income tax in Scotland, which at the same time raised additional revenue. The decision to do so played a fundamental role in enabling us to deliver on our commitments to invest in public services, particularly the NHS, at the same time as protecting those on low incomes.

As a result of my decisions to provide an inflationary increase in the Starter and Basic Rate Band, along with increases to the Personal Allowance, on current incomes 99 per cent of taxpayers will pay no more than they did last year, and 55 per cent of taxpayers will continue to pay less than in other parts of the UK.

These decisions also deliver for our NHS. In June 2018 the Prime Minister promised an additional £600 million for the Scottish NHS yet the UK Autumn Budget fell £55 million short. As a result, I have used my tax decisions to ensure Scottish public services are not short-changed. Freezing the Higher Rate Threshold will deliver £68 million of additional revenue, which we will invest in our public services. This will ensure that funding for Scotland’s NHS Boards increases by the £600 million promised and that will deliver a total of £730 million of additional investment in health and social care this year. This includes support for the roll out of ‘Frank’s Law’ which will extend free personal care to all those who need it.

The measures in this budget maintain our social contract, support and diversify our economy, and protect our public services. As a government we are committed to delivering on our objectives, despite the impact of Brexit and austerity. We are building the Scotland that we want to see.

This is a budget that delivers for today, invests in tomorrow and does so with fairness, equality and inclusiveness at its heart.

Derek Mackay MSP
Cabinet Secretary for Finance and the Constitution