CBI Scotland seeks member views ahead of Scottish Budget submission

This year’s Scottish Budget and how to influence it

With sluggish economic growth of 0.8% in 2017 compared to 1.8% at UK level, improved private sector growth is crucial to the future success of the Scottish economy. To deliver this necessary step-change it’s more important than ever to ensure that the voice of business is heard.

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This year’s major fiscal events are expected to be subdued for a number of reasons, however, there are still levers the Scottish Government can pull to alleviate pressure on business and encourage investment. With last year’s Scottish Budget featuring a range of recommendations made in our productivity report and submission to the Barclay review on business rates, we know CBI members can have a significant influence on policy in this area.

Significant revenue-raising powers have been added to Mr Mackay’s portfolio since the establishment of the Scottish Parliament in 1999, with powers over income tax, land taxes, air passenger duty and Scottish assigned VAT now sitting under his direct control.

Economic outlook

In light of the Spending Review coming up in Q1 next year, the UK Autumn Budget is more likely to be focus on tax measures than significant spending commitments. While the Chancellor will be keen to demonstrate fiscal prudence ahead of Brexit, there has political pressure to loosen the purse strings and increase spending on important public services.

While Scottish Budget constraints will largely mirror the overall UK context, Scottish growth forecasts have been cautiously optimistic for 2018 following years of lagging behind the UK [FAI]. There is however likely to be an added challenge for the Scottish Finance Secretary as income tax forecasts for Scotland have been revised down, while at UK level tax receipts were revised up – resulting in a gap in government finances due to the block grant adjustments under the fiscal framework.

Scotland has seen a continued decline in business investment, falling by 10% in 2017 – a trend mirrored across the UK as a whole. This suggests that structural issues rather than Brexit related uncertainty alone, are having an impact. According to the Fraser of Allander Institute, a drop-off in investment appears to be driven by a lack of demand for finance rather than inadequate supply – we are keen to find out whether this reflects the views and experiences of CBI members.

Business feedback so far

Business feedback from all sectors of the Scottish economy continues to focus on the need for skills. In the immediate term it’s about protecting access to people and talent post-Brexit and about how to support the current workforce to upskill and retrain.

Skills needs are underpinned by broader priorities around competitiveness and productivity.

In difficult economic times it is more important than ever for the Scottish Government to send crystal-clear signals that they value business of all shapes and sizes and want them to stay, grow and invest in Scotland – that means big, small, foreign-owned and home-grown firms.

The Scottish economy continues to struggle with flagging productivity levels, but by challenging and supporting businesses themselves to take the lead in areas where they can deliver change or have specific expertise, boosting productivity could be more effectively addressed through skills and technology investments, R&D support and better management practices.

Have your say

Shape our Scottish Budget submission with our simple three-question survey: https://www.surveymonkey.co.uk/r/RMMCXFT