Thursday’s draft Scottish Budget was both good news and bad news for the vital small business sector in the Western Isles, according to the FSB’s Highlands & Islands Development Manager, David Richardson.
Speaking yesterday, he said: “At the start of 2022 most believed that this would be a year of recovery from the ravages of the pandemic – a chance for businesses and economies to get back on their feet. Clearly, Putin put paid to that, and the country is ending the year in a worse position that it began.
“However, all is not lost. Given the right breaks and encouragement from governments, our smaller businesses can help carry us out of this mess, just as they did after the financial crash of 2007/8 and all that followed.
“So, did yesterday’s Scottish Budget deliver for these smaller businesses, and did it give them the breathing space they need? The answer is yes…and no.
“The freezing of the Scottish business rates poundage is very welcome, and we are delighted that the Small Business Bonus Scheme will be reformed and extended, and that a transitional rates relief package will be introduced for those hit hardest by the recent property revaluation. All good stuff.
“However – and there is a however – we are concerned that the 100% relief threshold for the Small Business Bonus Scheme will be reduced from £15k to £12k, and that there is no specific support for those sectors struggling most thanks to energy and other price hikes, such as hospitality, retail and leisure, all of which are vital to the Highlands & Islands.
“Elsewhere, many rural businesses in the Western Isles will want to see how the extra funding announced for the R100 broadband rollout scheme will benefit them.
“On income tax, we’ll need to see what impact these moves have on consumer confidence – especially for those in businesses that rely on discretionary consumer spending like this region’s tourism and hospitality businesses, many of whom are already seeing their margins evaporate.”
Deputy First Minister John Swinney delivered the 2023-24 Scottish Budget on Thursday 15 December, in what he described as, "the most turbulent economic and financial context most people can remember".
He said: “the Office of Budget Responsibility (OBR) estimates the UK has entered a recession that will last for over a year and see GDP fall by 2%". While inflation now stands at 10.7%, the Bank of England base rate reached 3.5% today, following the largest increase since 1989.
With real household disposable incomes falling back to 2013 levels and shortages in the labour market, unemployment is projected to gradually rise to a peak of 4.7% at the end of 2024.
He explained that the three Budget priorities were to eliminate child poverty, strengthen public services and move towards a net zero economy.
Income tax rates will rise for anyone earning more than £43,662 a year. This is more than people earning the same salary elsewhere in the UK. There are no changes to the Starter, Basic and Intermediate rates.
Higher rate taxpayers will pay 42p in the £ instead of the current 41p from April 2023. The threshold will remain frozen at £43,662 in Scotland – lower than the £50,270 elsewhere in the UK.
The top rate of tax will start at £125,140 (currently £150,000) and will rise from 46p to 47p in the £ from next April.
This applies to salaries, pensions income and self-employed profits.
Savings income, dividend income and capital gains are all based on whole of UK rates, allowances and bands.
Mr Swinney said the increase was an extra penny to enable spending on patient care in our National Health Service.
The second homes tax will increase from 4% to 6%. This is part of the Land and Buildings Transaction Tax or LBTT, which is the Scottish equivalent of stamp duty.
Social security benefits under the control of the Scottish government are being increased by the rate of inflation in September of 10.1%.