News story

A fair and responsible budget for Scotland

The Emergency Budget today sets Scotland and the UK on a new economic path to stop spending beyond our means and to reduce the record deficit in a way that is fair to people on different incomes.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Emergency Budget today sets Scotland and the UK on a new economic path to stop spending beyond our means and to reduce the record deficit in a way that is fair to people on different incomes.

Public spending will fall in Scotland, with the actual figures for UK Government Departments who spend in Scotland and the Scottish Parliament budget to be announced in the Spending Review on 20 October. The devolved government in Scotland will be fully consulted ahead of that Spending Review as part of a national engagement process.

The Budget sets the overall envelope for government spending  which will be allocated between departments. The full detail of the Budget’s effect on Scotland will therefore become clearer once detailed spending plans are set out in the Comprehensive Spending Review later this year. There are therefore no Barnett consequential figures available for Scotland from today’s Budget

Measures which will affect Scotland include:

  • A rise in VAT to 20% effective from January
  • Changes to Capital Gains Tax, effective from tonight
  • A levy on banks
  • A rise of £1000 in the personal tax allowance to £7475, which will leave around 90,000 Scots on low incomes better off
  • An announcement that the Fossil Fuel Levy will be considered ahead of the Comprehensive Spending Review and that consideration is being given to a Fuel Duty Discount Scheme
  • No further changes to alcohol duty, protecting the Scotch whisky industry
  • Restoring the link between pensions and earnings, which will benefit around 1 million Scots
  • Maintaining the child element of tax credits to continue the fight against child poverty in Scotland
  • No change to the oil and gas tax regime
  • The reduction of corporation tax over the life of the Parliament
  • The avoidance of a benefit freeze, choosing instead a benefit uprating system based on the Consumer Price Index

The measures set out by the Chancellor will reduce the record £155bn budget deficit this government has inherited. Figures from the Office for Budget Responsibility recently showed the structural deficit facing the UK Government was £12 billion higher than previously thought. The material published today by Her Majesty’s Treasury also shows that the burden is being fairly distributed across the range of income levels of UK taxpayers.

The Secretary of State for Scotland Michael Moore said:

“Doing nothing in the face of a £155 billion deficit is simply not an option. The first duty  of the Coalition Government is to be responsible and take urgent action needed to tackle the record budget deficit  this government has inherited. That is the way we will get back to balanced growth - we have taken the first steps on that long journey today.

“Fairness is  at the heart of these tough decisions. We all need to play our part and the burden will fall in a fair manner.

“This is a credible plan which makes the tough choices we need to see if we are to restore confidence, recovery and growth. The simple fact is that we have to live within our means, as millions of British people and families do each and every day.

“We have to stop spending money that we don’t have. It is not easy or popular to take the decisions we have today but it is unavoidable.  Irresponsibility  is what got us into this position in the first place.”

For the first time the forecasts underpinning the Budget  from the Office for Budget Responsibility are an independent, transparent assessment of the state of the economy  and public finances. The forecasts will improve the credibility of the fiscal framework and put the UK at the forefront of international best practice.

Tables in the Budget document will also show the impact of the decisions on different income groups clearly.

Read the Budget for Scotland Press Release

Read the Emergency Budget: Scotland Headlines

Published 22 June 2010