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Scottish Budget: 5 key tests for the SNP Government’s £35 billion spending plans

Finance Secretary Kate Forbes

Finance secretary Kate Forbes faces a major headache as she prepares to set out Scottish Government spending pledges nearly two years into a devastating pandemic.

The Covid crisis is holding back the economy and piling pressure on public services.

Businesses are crying out for support while new policies must be delivered off the back of the Holyrood election and new SNP-Green deal for government.

While Holyrood’s day-to-day funding is 8% higher in real terms than it was in 2019/20, experts predict the 2022/23 Budget will be the most difficult yet for Ms Forbes.

We have highlighted five of the biggest dilemmas facing the finance secretary as she prepares to deliver her third Budget on Thursday afternoon.

1. Climate commitments

First Minister Nicola Sturgeon welcomes Scottish Green co-leaders Patrick Harvie and Lorna Slater at Bute House, in Edinburgh, following their ministerial appointments.

Nicola Sturgeon said before the COP26 climate change conference in Glasgow that the SNP’s cooperation agreement with the Greens “explicitly, and rightly, places climate policy at the heart of everything we do”.

This Budget will be the first delivered at Holyrood with the Greens in government.

It is likely to focus on policies to help Scotland meet its target of “net-zero” emissions of all greenhouse gases by 2045.

‘A first step’

Patrick Harvie, the co-leader of the Scottish Greens, said it is a “first step” on delivering the commitments to tackle the climate emergency made in the cooperation agreement with the SNP.

He highlighted investing to cut pollution from transport, to make homes warmer and more energy efficient, and to restore the natural environment.

Expect to hear more about pledges to invest more than £5bn in “maintaining, improving and decarbonising” Scotland’s rail network.

Also, look out for £400m for heat and energy efficiency projects, and potentially a proposal to divert grants to businesses which will use the support for green initiatives.

2. Healing the north-east economy

The government’s focus on the climate has been blamed by some for a series of badly-timed blows to the north-east of Scotland.

The region was already lagging far behind the rest of Scotland in its recovery to pre-pandemic employment levels.

And its attempts to bounce back were hampered by the UK Government’s decision to snub a pioneering carbon capture and storage scheme at St Fergus.

At the same time, the Scottish Government has been shifting its policy on the North Sea, ending its long-standing support for unlimited recovery of oil and gas, and expressing outright opposition to new developments, such as Cambo off Shetland.

Meanwhile, the SNP-Green cooperation agreement also plunged the £3billion dualling of the A96 road from Aberdeen to Inverness into doubt.

Tensions have been rising as a result of the pressures caused by these decisions, with senior SNP figures in the north-east reacting angrily to recent remarks from Green leaders on oil and gas.

Holyrood ministers must be in no doubt about the scale of the potential political and economic problems they could face in the region if they do not act soon.

Further details about the £500m Just Transition Fund for the region would be expected from Ms Forbes as a minimum.

3. Protect the NHS

Staff at work in Ninewells Hospital, Dundee

Ms Forbes faces huge decisions on health and social care in this Budget.

The NHS continues to be swamped as a result of the pandemic and a backlog in other treatments, while the government is also progressing radical plans for a National Care Service.

Ministers said they will pass on health spending uplifts outlined in the UK Budget, representing a real terms rise of 15% to £17bn.

‘Extremely challenging’

However, even with the increased spending, the Fraser of Allander Institute has said meeting a target of a 10% increase in NHS capacity will be “extremely challenging”.

The think tank added that a commitment to increase social care spending by 25% will “not be sufficient” to fully implement the proposals in the Feeley review, such as establishing a National Care Service.

4. A business boost?

Many firms are continuing to face a fight for survival as a result of the pandemic.

They will be waiting to hear what extra support can be offered in the Budget, particularly with new restrictions potentially on the horizon in response to the Omicron variant outbreak.

One of the key decisions to look out for will be on non-domestic rates.

Ms Forbes announced extended relief in February, ensuring that retail, hospitality, leisure and aviation businesses would pay no rates during 2021/22.

Business chiefs want her to now continue that relief for another year, but it costs about £736m in reduced revenue.

Meanwhile, Chancellor Rishi Sunak revealed in October he would freeze the poundage rate used to calculate the business rates bill for a property in England.

And he confirmed a 50% reduction in the business rates bill for the majority of retail, hospitality and leisure properties in 2022/23, up to a cash limit of £110,000.

Ms Forbes will reveal whether she will follow suit when she announces her plans for non-domestic rates on Thursday.

Businesses, including the Scottish Chambers of Commerce, have also called for infrastructure improvements, such as a renewed commitment to dualling the A9 from Inverness to Perth, and part of the A96 from Inverness to Aberdeen, within this parliament.

5. Councils cuts

Councillor Gail Macgregor, Cosla resources spokeswoman

Funding for councils has been another bone of contention at recent Scottish Budgets.

Gail Macgregor, from Scottish councils group Cosla, warned local authorities face a “tipping point”.

She said councils need an extra £700m in funding for services just to stand still, and they would need double that figure in order to “thrive”.

Local authorities also asked for more flexibility and less ringfencing, which places restrictions on how and when funding can be used.

The Greens have previously demanded an uplift in council funding in exchange for their support for Scottish Budgets, and may have been pressing the case behind the scenes again.

When is the Budget and how can I watch it?

The finance secretary is due to start her statement at the Scottish Parliament shortly before 3.30pm on Thursday.

It can be watched on the parliament’s live stream here.

We will bring you all the latest on our websites about the promises and reaction.

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