Scottish Budget passes in parliament

Finance Secretary Kate Forbes laid out the details of the Scottish Budget on 28 January, and the bill cleared its final stage on 9 March, following deals struck with the Scottish Greens and Scottish Liberal Democrats.

None of the changes made during the final stages of the bill impact on the housing elements announced in January. However, in February the Finance Secretary announced an additional £100 million for grant, bringing the total proposed investment for new supply during the next parliament to the £3.4 billion SFHA had called for.

The changes made following the deals struck with opposition parties include:

• Pandemic Support Payments of £130 to households receiving Council Tax Reduction and two payments of £100 to families of children qualifying for free school meals
• phased introduction of free school meals to all primary school children by August 2022
• an £800 pay rise for public sector workers earning up to £25,000 and a 2% increase for those earning over £25,000 up to £40,000
• extending free bus travel to under-22s
• £40 million to support the green recovery, including a further £15 million for active travel
• £10 million for energy efficiency
• £10 million for biodiversity and £5 million for agri-environmental measures
• an extra £120 million for new community mental health services
• £15m of support for staff retraining in the north-east of Scotland, following the downturn in the oil and gas sector.

A summary of the announcements is outlined below.

Housing

SFHA has been in regular discussions with the Scottish Government regarding housing’s role in the economic and social recovery from the pandemic. As a result, we were pleased to see the following statement within the budget document: “As we rethink how we live, and the communities we live in, housing will be central to our ambitions for a strong recovery and fairer Scotland – creating jobs, tackling social and health inequalities, and ensuring strong, sustainable communities...Our housing investment will make a vital contribution to Scotland’s recovery, leveraging significant economic output, supporting over 10,000 jobs a year, and producing social and environmental benefits.”

The budget provides capital grant funding of £767.6 million for affordable housebuilding in 2021/22, including £675.4 million through the Affordable Housing Supply Programme, and £92.2 million through local government.

Alongside this grant funding, the Scottish Government will also utilise £142 million of financial transactions (FT) – capital funding that must be used in the form of loans outwith the public sector – to support housing, including shared equity schemes. It is possible there may be more FT funds made available to Scotland following the UK Budget.

SFHA has cautiously welcomed the funding announcement on the basis that if the same level of investment – amended in line with any changes to subsidy levels – was committed throughout the duration of the next parliament, it could deliver the 53,000 affordable homes Scotland needs. 

The subsidy level is, however, fundamental to this. We are calling on the Scottish Government to ensure that grant subsidy levels increase with rising development costs in order to ensure social landlords can deliver the affordable homes Scotland needs between 2021 to 2026 – and to the required building and energy standards. With costs of construction rising and social landlords expected to meet new higher standards, the money announced in this budget must be increased throughout the next parliament to ensure housing need is met.

Fuel poverty

The budget includes a small increase in funding for fuel poverty and energy efficiency programmes, £155.6 million for 2021/22, significantly short of the £244 million SFHA, and our partners in the Existing Homes Alliance (EHA), calculate is needed. This is a missed opportunity – not only to transform people’s homes and tackle fuel poverty, but also to create up to 17,000 jobs and cut the cost of heat decarbonisation. SFHA will continue to pursue this through our work as part of EHA.

Adaptations

The annual budget for RSL adaptations budget has increased to £11 million from £10 million. While an increase is welcome, our research has identified that £17 million is required per year, if savings to the health budget are to be maximised and a preventative approach embedded. The increase does not go far enough to support this vital work. We will continue to press for this in our ongoing discussions with government as well as the comprehensive review of the system and financing that the government acknowledged was required in the Programme for Government.

Social justice

The experience of the pandemic has demonstrated the need to rethink how we live, work, learn and shop, and ensure local spaces are green, vibrant and safe – for this reason SFHA welcomes the government commitment to the 20-minute neighbourhood.

The premise is people can meet their needs within a 20-minute walk from their house – bringing together a number of priority policies and investments. These include active travel, regeneration, town centres, air quality, infrastructure investment, climate change, Community Wealth Building, access to greenspace and local services.

To support this, the Scottish Government will establish a new Place Based Investment Programme which will be backed with initial investment of £55 million in 2021/22. This is included an overall commitment to invest £275 million-plus over the next five years in support of community-led regeneration, town centres and 20-minute neighbourhood ambitions.

In 2021/22, the government will provide £81.6 million for regeneration programmes, including the Empowering Communities Programme which funds communities to undertake projects which tackle poverty and inequality on their own terms, in turn supporting community regeneration and inclusive growth. As community anchor organisations, housing associations are perfectly placed to play a central role in enabling, supporting and delivering this work.

Vacant land

The budget also includes commitment to a five-year £50 million programme of investment to regenerate Scotland’s vacant and derelict land as part of a green recovery. It will help bring persistent vacant and derelict land back into appropriate uses – for example, creating community gardens, providing a local food supply, improving biodiversity or by creating space for community renewables projects, low carbon affordable housing, urban farms, woodland and green spaces. Again, housing associations are central to achieving these objectives at local level.

The economy, taxation and the public sector

Turning to the GDP, Ms Forbes highlighted predictions from the Scottish Fiscal Commission which said Scotland’s GDP was 7.1% smaller than it was prior to Covid-19 and was not expected to return to pre-pandemic levels until 2024.

On taxation, it was confirmed the five-band structure for income tax will remain in place, while the starter, basic and higher rate bands all increase by inflation. The top rate threshold will remain frozen at £150,000. As a result, all Scottish taxpayers will pay slightly less income tax next year, based on their current income.

The government has allocated £90 million to provide additional funding to councils that choose to freeze Council Tax for the year.

The public sector pay announcement will see an £800 pay rise for workers earning up to £25,000 and a 2% increase for those earning over £25,000 up to £40,000.

The government will also continue to support payment of the real Living Wage, applying the increased rate of £9.50 per hour.

Additional reading

You can find the full budget documents and statement here: https://www.gov.scot/publications/scottish-budget-2021-22/