WITH the deadline to set council budgets quickly closing-in and a UK Budget yet to come, this year’s Scottish Budget was delivered in unusual and somewhat challenging circumstances.
While caveats may have jockeyed for position with commitments on the day, there were some important wins for business to reflect on – albeit with a potential income tax hurdle further down the line.
Once again, climate change and reducing inequality provided the Budget backdrop – two key issues for the Scottish economy and goals the business community wholeheartedly supports.
With huge expertise in energy production, including through a world-class renewables sector, Scottish firms are perfectly placed to help meet decarbonisation targets.
Additionally, helping the private sector thrive can be a driver to improve people’s living standards by delivering more jobs, higher wages and increased prosperity for everyone.
Looking to specific policy announcements, we saw some important movement on building a more competitive business rates system – a major priority for firms across Scotland. Building on the welcome decision to retain the Uniform Business Rate, we saw a lowering of the poundage rate for medium-sized firms unfairly caught by the Large Business Supplement. Along with capping the poundage rate below CPI, that’s an important step in the right direction.
With improving skills essential for productivity growth, and already at a premium in a highly competitive labour market, a real terms funding increase for colleges and universities is very welcome. Being able to offer young people a range of career pathways - from higher and further education courses to first-rate apprenticeships and in-work training - is key to developing our talent pipeline. Greater support for digital skills and boosting digital connectivity should also be applauded as technology continues to shape the way we live and work.
However, one issue will continue to give Scottish firms cause for concern: income tax divergence. While we welcome the commitment to no further divergence with the rest of the UK, the freezing of upper rate thresholds has the potential to widen the gap down the line if the UK Budget sees the higher rate down south rise. There are real world implications for the Scottish economy if we don’t get this right.
Ask any business about their number one priority and most will say keeping and attracting talent. Demand for high skilled roles already far exceeds supply. These are precisely the type of jobs we need to attract to Scotland to bolster the economy and deliver the increased tax revenues that will pay for vital public services.
While the current gap – with someone earning £50,000 in Scotland paying around £1,500 a year more in tax than they would in England – isn’t the end of the world for business, the worry is direction of travel. Further widening of the tax gap would send a dangerous message and risk making it more difficult for employers to attract the skills and talent they need to grow our economy. We really can’t afford to give talent a reason to choose Newcastle or Leeds over Glasgow or Dundee, particularly when our working age population is already in sharp decline.
While the Budget reaction seemed to focus on everything but policy, it’s good to know the concerns of the business community are still being heard. Set against another pretty gloomy growth forecast from the Scottish Fiscal Commission, we need all parties at Holyrood to put strengthening the economy at the centre of the political debate once again. That, along with keeping a close eye on competitiveness, is how we remind the world that Scotland is a great place to live, work and do business.
Tracy Black is director of CBI Scotland.
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