Kate Forbes has warned she cannot commit to the continuation of “lifeline” rates relief for hard-hit businesses in Scotland due to uncertainty over Westminster’s spending plans.
The finance secretary said she was having to draw up a budget based on “provisional and partial figures” that could end up being wrong by billions of pounds.
Writing exclusively for us, Ms Forbes said the situation was “far worse” than last year and her options to help businesses were currently “severely limited”.
The remarks will cause fresh concern for the nation’s beleaguered retail, hospitality and leisure sectors.
The Scottish Retail Consortium had warned earlier this week of the need to avoid an abrupt “reverse cliff edge”, which it said would be faced by such firms if 100% rates relief was to end in April, without any kind of extension or phased reintroduction.
The Scottish Government is expected to announce a date for its 2021/22 budget imminently, which is again expected to be earlier than Westminster’s budget.
Criticism of spending review
In September, Chancellor Rishi Sunak scrapped plans for an autumn budget, promising to replace it with a three-year spending review, which will now only cover one year and is to be unveiled at the end of this month.
Ms Forbes said that while the review might provide “some clarity”, it was not a substitute for a budget, and she feared there would be significant variations caused by the pandemic, Brexit and potential tax changes.
As a result, the Skye, Lochaber and Badenoch MSP signalled that she currently did not have the funding to be able to guarantee the continuation of rates relief for businesses.
Ms Forbes wrote: “Last year setting our spending ahead of the UK budget ran the risk of variations totalling millions of pounds.
“Next year, because of the financial volatility surrounding Covid-19, the possibility that the UK Government will make significant tax changes to stimulate the economy and the uncertain outlook following the end of the Brexit transition period on December 31, the risks are considerably greater, potentially into billions of pounds.
“For example, our decision to provide 100% rates relief for the retail, hospitality and leisure sectors in 2020/21 has been a lifeline to thousands of businesses during the pandemic and we are being urged to extend it.
“This initiative alone has cost around £900 million and, given the limited fiscal powers available to the Scottish Government, our ability to continue offering relief next year is contingent on the UK budget extending the equivalent policy in England and generating consequential funding.
“Should the UK Government bring forward such an extension, I am committed to creating a tailored package of business support measures, including rates relief, that best meets Scotland’s needs.
“But until it does, my options to support businesses are severely limited by the financial restrictions of devolution.
“These limits are imposed on the Scottish budget, despite cross-party calls for the UK Government to grant us minor flexibilities to help us manage risk.”
Ms Forbes comments follow a dispute between the Holyrood and Westminster governments over the availability of furlough funding north of the border.
All a matter of timing?
A UK Government spokesman said: “At all stages of the pandemic we have sought to work constructively with the devolved administration in Scotland and we will continue to do so.
“Nothing stops the Scottish Parliament from passing their budget before the UK budget.
“The Scottish Government’s last budget was set on February 6 2020, ahead of our budget on March 11 2020.”