Counting on the future: the Scottish budget that passed almost unnoticed

It’s a measure of where we are right now that the Scottish budget passed this week with barely a whimper.

Normally the subject of weeks of ‘will they/won’t they get a deal’ speculation, this year it was almost an afterthought, although not so much because of COVID as the din of the ongoing Salmond/Sturgeon drama, which has drowned out everything else.

In November, the Finance Secretary, Kate Forbes, described this year’s budget as “the most important budget since devolution”, but it certainly didn’t feel like that.

Who would have thought there was an election just around the corner and the budget would form the basis for all parties’ policy proposals for the next year?

What a contrast to 2020. A year ago we were reeling from the news that Derek Mackay had resigned on the eve of the budget over allegations he had sent inappropriate messages to a teenage boy, with Forbes parachuted in at the last minute to save the day.

And the fact the UK Government had delayed its budget until March was considered a serious threat to devolution and the ability of Scotland to set its budget; this year it’s just another of those disrespectful annoyances.

Everyone knows the budget will have to be revised anyway, probably several times.

This time last year, although coronavirus was on the horizon, it hadn’t yet had a significant impact and little did we know we were about to go into lockdown.

Now here we are 12 months on, 207,156 confirmed cases and 9,725 deaths later, and it’s a different world.

An additional £8.6bn was allocated to Scotland last year to deal with the pandemic and the continuing impact and the move towards a recovery means there is more money in this year’s budget too – and even more riding on the decisions about what to spend it on.

The Scottish Government had more to spend by the end of the budget process than when it was published on 28 January.

On 15 February the UK Government announced an additional £1.1bn of COVID funding for Scotland, which is being carried over into the year 2021-22, and the UK budget on 3 March confirmed another £1.2bn for the Scottish Government through the Barnett formula.

Deducting the £500m the Scottish Government had estimated it would receive and already factored into the budget, the £541m cost of extending business rates relief for the whole year and a £40m adjustment due to an error in the autumn spending review, it was left with a net increase of around £1.3bn, or 2.8 per cent more than on 28 January.

Following the UK Government’s February announcement and discussion with other parties, Forbes announced plans for the extra £1.1bn, including the extension of business rates relief, leaving around £700m to secure a deal with another party.

This extra funding has given the Scottish Government much more leeway than usual to add extra spending to what had already been proposed, which may have paved the way to the unusual situation of a deal being reached with two parties rather than just one.

On 8 March, the Scottish Government agreed a budget deal at stage three with the Scottish Greens and the Liberal Democrats.

This deal with the Greens and the Lib Dems saw a number of increased spending commitments. The Greens got backing for direct payments to around half a million low-income households who have been hit hardest by the pandemic, at a total cost of around £100m.

Payments of £130 will be made to households who are eligible for council tax relief, as well as two payments of £100 to up to 170,000 families receiving free school meals.

Under the agreement the pay rise for public sector workers will also increase, with those earning under £25,000 to get an £800 pay rise (up from £750 in the initial budget proposals) and a two per cent rise for those earning between £25,000 and £40,000 (the original budget had a one per cent rise up to £80,000).

by Louise Wilson

Greens and Lib Dems agree to support budget

Those earning between £40,000 and £80,000 will still get a one per cent rise, with those earning above £80,000 receive a flat-rate £800 increase.

This is also expected to cost around £100m, but it will depend on exact pay deals reached with each workforce.

The Greens’ deal also saw free bus travel extended to 19 to 21-year olds from this summer, the introduction of free school meals for all primary children by August 2022, and an extra £40m to support the ‘green recovery’, including active travel, energy efficiency, biodiversity and environmental farming measures.

Scottish Greens co-leader Patrick Harvie said the party had been “clear that the Scottish budget needed to do more to tackle rising poverty and ensure a green recovery from the pandemic” and he was “delighted that once again our constructive approach has delivered real results for the people who need it most”.

The deal with the Liberal Democrats includes an extra £120m for mental health services and £60m to lower class sizes, both of which were already announced in February.

An extra £20m will also be paid to headteachers as part of the Pupil Equity Fund to provide additional support to pupils from deprived backgrounds – representing around a 16 per cent increase on the current year.

In addition, the Lib Dems got agreement that the £90m compensation for councils to freeze council tax this year would be included in the baseline of local government funding, meaning it won’t just disappear next year.

Also in the deal is £15m for training, upskilling and business support in the north east due to the downturn in the oil and gas sector, as well as improved funding for internal ferry services in Orkney and Shetland, £5m of agriculture transition funding and a commitment that specialised eye services in Lothian will be protected.

Commenting on the agreement, Willie Rennie said: “We think that people expect parties to work together in the middle of a pandemic. Our focus has been to put recovery first.

“We have highlighted the need for business support, an education bounce back plan, and better mental health services, given the pressure we know that the virus crisis has put on people.

“As a result of those constructive discussions, the Budget Bill was substantially amended.”

Yet apart from the inclusion of the £90m in baseline funding, which will help councils in 2022-23, what it didn’t do was give any more funding to local government.

Normally, extra money is found for councils as part of the final deal, indeed it has almost come to be expected, but not this year. This was despite the extra commitment to public sector pay rises.

COSLA said the everyday services provided by councils had “once again been undervalued and underappreciated” and its “key ask around fair funding and local flexibility has not been met”.

“Without flexible additional funding to our core budget, our ability to help recover from COVID is severely eroded,” said COSLA’s resources spokesperson, Councillor Gail Macgregor.

She said the Scottish Government has not recognised the pressures being faced by councils on issues such as pay, adding: “Scottish Government has raised expectations yet further through their public sector pay policy, [but] without any increase to local government’s core funding, a pay increase for our workforce will have to be funded from elsewhere.

“This will only lead to a reduction in everyday essential services that communities rely on.”

And while the Scottish Government may have got backing for the budget, it still faces a struggle to deliver on promises of jobs and a green recovery, with this agreement set against a backdrop of questions being raised around a range of investments the Scottish Government has made in struggling firms.

The latest to be called into question is around Liberty Steel, led by Sanjeev Gupta, which took over the mothballed Dalzell and Clydebridge steelworks from Tata Steel in 2016, backed by a loan of £7m from the Scottish Government.

Later that year, Gupta’s company, GFG Alliance, also bought an aluminium smelter and two hydro plants in Lochaber from Rio Tinto in a £330m deal.

As part of the latter deal the Scottish Government underwrote the smelter’s power purchases for the next 25 years, a guarantee that is thought to be worth around £575m.

Now the whole lot is under threat after GFG Alliance’s main financial backer, Greensill Capital, has gone into administration.

The Lochaber deal was supposed to create up to 2,000 jobs and bring £1bn to the local economy, but these have never materialised and now the future of the workforce is at risk.

And this is just the latest in a long line of questionable investments or promised jobs that have not materialised, with investments in BiFab steel fabricators, the purchase of two ferries for CalMac and the public buyout of Prestwick Airport all called into question over recent months and many of the predicted green jobs coming to nothing.

As with the budget, the COVID pandemic and the harassment inquiry have meant these failings have had less attention than they would otherwise have had, but now we come into an election campaign followed by something more like a return to normal, the everyday decisions can be expected to come under more scrutiny again and the government will have to defend its spending decisions and deliver on the economic recovery it has promised.