What does the UK budget mean for Scotland?

What does the UK Budget mean for Scotland?

10/27/2021 9:21:00 PM

What does the UK Budget mean for Scotland?

Some key decisions about tax and spending in Scotland are devolved - but the UK budget still has a big impact.

Direct spendingNot all spending in devolved areas triggers Barnett consequentials. As of this year, some cash is actually going around Holyrood and directly to local projects.The UK government has established a £4.8bn "levelling up" fund, which allows local authorities to bid for cash for things like building roads and bridges, refurbishing museums and installing electric vehicle charging points. Mr Sunak told MPs that this year, £170m had been awarded to Scottish projects.

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These include the redevelopment of Inverness Castle, the renovation of the Westfield Roundabout in Falkirk, and a new marketplace in Aberdeen city centre - each of which is getting £20m of funding.A redevelopment of the Artizan shopping centre in Dumbarton is getting another £20m, while £38m will be spent improving travel links between Paisley and

a local manufacturing innovation hub.Up to £3m is also being committed to the Burrell Collection in Glasgow in a bid to bring world-class art exhibitions to the city, while another £1m is being spent on local projects via the Community Ownership Fund. headtopics.com

Image source,Image caption,Inverness Castle is in line for a refit as part of the levelling up fundThis is partly to do with the government's "levelling up" agenda, an attempt to rebalance an economy previously seen as being skewed towards London and the south-east of England - while helpfully winning over former Labour voters in "red wall" constituencies in the north of England.

But it also plays into a longer-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 enthusiasm for independence.

Scottish ministers meanwhile do not like the idea of being cut out of the loop, saying this "undermines devolution". They instinctively contest the idea that officials in London are better placed to assess the merit of funding bids than those in Edinburgh.

The political difficulty though is that these are positive projects backed by local councils - some of them SNP-run - and so extra cash for them cannot be opposed outright. Instead, the complaint tends to be more procedural, about the decision-making process and the complexity of the funding landscape. headtopics.com

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This may also become a more common occurrence going forward, with the UK Shared Prosperity Fund set to replace EU structural funds in 2022 - again sparking.Taxes and benefitsA range of different taxes are devolved to Holyrood - but others are not, and the interplay between the two means changes announced at Westminster can still have far-reaching implications in Scotland.

For example, income tax rates and bands are devolved, with Scotland operatingwhich the government in Edinburgh argues is fairer. However, the tax-free allowance is still reserved, which as the starting point where taxes kick in clearly has a knock-on effect on the entire system.

So what is actually changing, and what is not?The national living wage is set UK-wide, so the increase there - to £9.50 an hour for over-23s - will apply north of the border.And while an increasing range of welfare powers are being taken over by Social Security Scotland, Universal Credit is also reserved to Westminster - so the

changes to the "taper rate", allowing working claimants to keep more of the money they earn as their wages increase, will also apply in Scotland.Moving away from personal taxes, business rates are fully devolved to Holyrood as non-domestic rates - and the Scottish government headtopics.com

for the hospitality and retail sectors.Image source,Image caption,The Scottish government dropped its own plans for an air passenger duty cut in 2019The cut to air passenger duty on domestic flights will apply in Scotland - Aberdeen and Inverness were specifically cited by the Chancellor as beneficiaries, although Inverness is actually exempt from the levy.

While there have long been plans to replace air passenger duty with a devolved Air Departure Tax, the move has been tied up in technical wrangles for years - chiefly because of that exemption for Highlands and Islands airports.Incidentally, Scottish ministers wanted to do away with the levy entirely - but

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ditched this plan in 2019citing environmental concerns. This has freed them up to raise an eyebrow at Mr Sunak's plan coming on the eve of the COP26 climate conference.The overhaul of alcohol duties will have effect in Scotland too. While there is a system of minimum unit pricing in Scotland, this is not actually a tax, with retailers pocketing the proceeds of increased prices.

The freeze on current alcohol duty is also good news for the Scottish whisky industry, which had been lobbying against a planned increase.A tiny pub in the most inaccessible village in Scotland; a roundabout in Falkirk: a shopping centre in Dunbartonshire; the stable block in Glasgow's Pollok Park - the UK budget is going very local.

Over 22 years of devolution, it had become increasingly a spending budget for England, with devolved bells and whistles, and taxes that mainly covered the whole of the UK.But that's changing. This budget marks a big shift towards the UK government planting its union flags on Scottish government turf.

The Levelling Up Fund offers £170m to Scottish projects, this year, and £400m over three years - money that would previously have gone through the block grant at Holyrood, for ministers there to allocate.Community Ownership and Regeneration Funds also pick pet projects that show the difference some Whitehall money can make, backing some really small projects from Whithorn to Kinloch Rannoch.

An extension of that will come with the Shared Prosperity Fund, which will ramp up as European Union structural funds are wound down. That, too, will bypass Holyrood, because Westminster wants its own direct links to projects on the ground. Read more: BBC News (UK) »

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