TIME TO
THINK BIG
The small adjustments we saw in January’s Scottish Budget will do little to address the country’s economic problems, says Sarah Chisnall, Director of Public Affairs
TIME TO
THINK BIG
The small adjustments we saw in January’s Scottish Budget will do little to address the country’s economic problems, says Sarah Chisnall, Director of Public Affairs
If January felt unusually budget heavy, you weren’t imagining it. A Scottish Budget this late in the day is rare, but with Holyrood dependent on Westminster’s timings, the delay was inevitable. The UK Budget landed later than ever in recent memory, and that pushed Scotland’s plans into the new year. Understandably, the Scottish government wasn’t thrilled – and neither were councils left waiting until mere weeks before the new financial year to find out what they’d be working with.
This Budget also carried a sense of finality. It’s the last before Scotland heads to the polls on 7 May, and the last to be delivered by Finance Secretary, Shona Robison, who joins several senior ministers in stepping down at the election. There was however very little speculation ahead of 13 January, as most felt the government had little wiggle room, so there wouldn’t be many rabbits being pulled out of hats. And the consensus – across business, politics and our own members – is that this Budget didn’t deliver much in the way of long-term direction.
What it did deliver was a significant £1.8bn increase in public spending. Beyond that, the changes were modest.
“Scotland’s tax system is over-complicated. Complexity breeds uncertainty, reduces transparency and makes it harder for the public to understand how decisions affect them”
The Scottish government’s main lever for raising revenue is income tax, and this year’s adjustments were small. The basic and intermediate thresholds will rise by 7.4%, meaning 55% of Scottish taxpayers will now pay slightly less than their counterparts elsewhere in the UK. But for someone earning around £25,000, the gain is just £11 a year – hardly enough for two fish suppers. And because 69% of Scotland’s income tax revenue comes from the top three bands, these lower-end tweaks won’t shift the fiscal dial in any meaningful way.
Meanwhile, freezing the higher bands means fiscal drag will continue to pull more earners into upper tax brackets as wages rise with inflation. Scotland’s more numerous income tax bands make this effect even sharper than in the rest of the UK.
With no movement on land and buildings transaction tax either (the Scottish equivalent of stamp duty), many people will continue to face higher bills. We’ve argued for better alignment with the UK system, and this Budget doesn’t move us any closer. One thing we were relieved not to see was the creation of yet more income tax bands.
Time to simplify
But the broader frustration remains: Scotland’s tax system is over-complicated. Complexity breeds uncertainty, reduces transparency and makes it harder for the public to understand how decisions affect them. Our calls for simplification continue to go unanswered.
Perhaps the biggest curveball was the announcement of two new council tax bands for properties valued at £1m and £2m. The UK government has floated its own version of a ‘mansion tax’, but Scotland’s approach would send revenue directly to councils, not the exchequer.
What’s puzzling is the timing. This announcement arrived before the ongoing full review of Scottish council tax has concluded. That risks pre-empting expert input and limiting proper scrutiny. And with only around 11,000 homes valued above £1m in Scotland, the revenue impact will be modest.
Non-domestic rates in Scotland have long been higher than elsewhere in the UK, so the proposed reduction in rate (basic, intermediate and higher property rates in 2026-27 will fall to 48.1p, 53.5p and 54.8p respectively) is a welcome measure to close the gap. For retail, hospitality and leisure there will now be specific reliefs to close at 15% for basic and intermediate levels over three years. But again, this feels like a short-term fix rather than a strategic shift.
What Scotland really needs
Our message remains consistent: Scotland needs a long-term economic and tax strategy. Not for the next year, but for the next two or three decades. Without that, we can’t tackle the deeper structural challenges facing the economy.
We also want to see a stronger focus on vocational skills, workplace learning and support for the professional services sector – areas that underpin productivity and growth.
Our members work and lead across every corner of the economy, and their view is clear. Confidence is low. At time of writing, our post-Budget survey finds:
• 77% of respondents say they do not have confidence in the health of Scotland’s economy
• Only 6% feel confident
• 83% disagree that Scotland’s current tax system benefits the economy
• Just 7% believe it does
These numbers speak for themselves. Businesses want clarity, stability and ambition – and this Budget didn’t quite get us there.
Scotland has the talent, the expertise and the potential. What we need now is a long-term plan bold enough to match it.
If January felt unusually budget heavy, you weren’t imagining it. A Scottish Budget this late in the day is rare, but with Holyrood dependent on Westminster’s timings, the delay was inevitable. The UK Budget landed later than ever in recent memory, and that pushed Scotland’s plans into the new year. Understandably, the Scottish government wasn’t thrilled – and neither were councils left waiting until mere weeks before the new financial year to find out what they’d be working with.
This Budget also carried a sense of finality. It’s the last before Scotland heads to the polls on 7 May, and the last to be delivered by Finance Secretary, Shona Robison, who joins several senior ministers in stepping down at the election. There was however very little speculation ahead of 13 January, as most felt the government had little wiggle room, so there wouldn’t be many rabbits being pulled out of hats. And the consensus – across business, politics and our own members – is that this Budget didn’t deliver much in the way of long-term direction.
What it did deliver was a significant £1.8bn increase in public spending. Beyond that, the changes were modest.
“Scotland’s tax system is over-complicated. Complexity breeds uncertainty, reduces transparency and makes it harder for the public to understand how decisions affect them”
The Scottish government’s main lever for raising revenue is income tax, and this year’s adjustments were small. The basic and intermediate thresholds will rise by 7.4%, meaning 55% of Scottish taxpayers will now pay slightly less than their counterparts elsewhere in the UK. But for someone earning around £25,000, the gain is just £11 a year – hardly enough for two fish suppers. And because 69% of Scotland’s income tax revenue comes from the top three bands, these lower-end tweaks won’t shift the fiscal dial in any meaningful way.
Meanwhile, freezing the higher bands means fiscal drag will continue to pull more earners into upper tax brackets as wages rise with inflation. Scotland’s more numerous income tax bands make this effect even sharper than in the rest of the UK.
With no movement on land and buildings transaction tax either (the Scottish equivalent of stamp duty), many people will continue to face higher bills. We’ve argued for better alignment with the UK system, and this Budget doesn’t move us any closer. One thing we were relieved not to see was the creation of yet more income tax bands.
Time to simplify
But the broader frustration remains: Scotland’s tax system is over-complicated. Complexity breeds uncertainty, reduces transparency and makes it harder for the public to understand how decisions affect them. Our calls for simplification continue to go unanswered.
Perhaps the biggest curveball was the announcement of two new council tax bands for properties valued at £1m and £2m. The UK government has floated its own version of a ‘mansion tax’, but Scotland’s approach would send revenue directly to councils, not the exchequer.
What’s puzzling is the timing. This announcement arrived before the ongoing full review of Scottish council tax has concluded. That risks pre-empting expert input and limiting proper scrutiny. And with only around 11,000 homes valued above £1m in Scotland, the revenue impact will be modest.
Non-domestic rates in Scotland have long been higher than elsewhere in the UK, so the proposed reduction in rate (basic, intermediate and higher property rates in 2026-27 will fall to 48.1p, 53.5p and 54.8p respectively) is a welcome measure to close the gap. For retail, hospitality and leisure there will now be specific reliefs to close at 15% for basic and intermediate levels over three years. But again, this feels like a short-term fix rather than a strategic shift.
What Scotland really needs
Our message remains consistent: Scotland needs a long-term economic and tax strategy. Not for the next year, but for the next two or three decades. Without that, we can’t tackle the deeper structural challenges facing the economy.
We also want to see a stronger focus on vocational skills, workplace learning and support for the professional services sector – areas that underpin productivity and growth.
Our members work and lead across every corner of the economy, and their view is clear. Confidence is low. At time of writing, our post-Budget survey finds:
• 77% of respondents say they do not have confidence in the health of Scotland’s economy
• Only 6% feel confident
• 83% disagree that Scotland’s current tax system benefits the economy
• Just 7% believe it does
These numbers speak for themselves. Businesses want clarity, stability and ambition – and this Budget didn’t quite get us there.
Scotland has the talent, the expertise and the potential. What we need now is a long-term plan bold enough to match it.
Audit Reform and Corporate Governance Bill
A bolt out of the blue arrived at the end of January, with the UK government announcing that it was scrapping the long-awaited Audit Reform and Corporate Governance Bill. This legislation has been in the making since the Carillion collapse in 2018 and, after years of delay, this latest announcement is hugely frustrating and disappointing.
Despite several inquiries, reports, a government white paper and the promise of a bill in this government’s first King’s speech, no legislation has ever been brought forward which resolves the issue of director accountability, or which gives the regulator, the Financial Reporting Council (FRC), clarity over its role and powers. Although we know that the quality of audit and governance has improved, thanks to the work of firms, professional bodies such as ICAS, and the FRC, we believe that more still needs to be done.
We’ll continue to work with government, the regulator and our members to make sure that putting the FRC on a statutory footing remains a priority. And to see that our members’ voices are heard in developing proposals for a modernised corporate reporting framework.
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