PwC Scotland comments on the Scottish Government’s budget

Sharon Blain, Tax Director at PwC Scotland, said:

“There was nothing extraordinary or unexpected about the Scottish Government’s budget statement. Shona Robison stuck to a social values-led announcement, centred around the government’s key political priorities. This is perhaps a result of perceived volatility in the economic climate, narrowing the focus to a single rather than multi-year budget.

“There was pressure to outline measures that may make up the well-publicised projected budget shortfall of £1.5 billion, but the changes made to income tax will do little to fill the gap. The heavily trailed tax increases for higher earners [with rate increases to 45% and 48%, is set to raise around £82 million; but interestingly, the government will see a much greater impact as a result of freezing the £125,140 and £43,000 thresholds. As wages rise with inflation, so-called ‘fiscal drag’ could result in an additional £307 million being paid in tax, as more workers fall into these income tax brackets.

“While there was talk of freezing business rates and a nod to the New Deal for Business group, there may be a feeling across the business community that any engagement with Scottish business hasn’t fed into the tone of the budget, with significant measures to drive economic growth notably absent from the Cabinet Secretary’s announcement. References to increased spend on digital connectivity and funding for the Scottish Investment Bank, which featured in the budget document, will be welcomed - but there may be a feeling that economic growth, and its potential drivers, didn’t feature heavily enough.”