Last month the Scottish government revealed its draft Scottish budget for 2024/25, which will have significant impacts on the Scottish construction industry.
The budget sets out the Scottish government’s proposed spending and tax plans for that period.
Deputy first minister and finance secretary Shona Robison described current fiscal conditions in Scotland, saying: “This budget is set in turbulent circumstances. At the global level the impacts of inflation, the war in Ukraine, and the after-effects of the pandemic continue to create instability.”
Scotland was, she said, “vulnerable to these international shocks”.
Central features of the budget include investments in social security, health and social care with an income tax shake-up introducing a new tax band for the highest earners. There are, however, several announcements of particular relevance and importance to the construction sector:
- Clean heating systems: £358m is to be invested in the installation of clean heating systems, to make homes more energy efficient, tackle emissions and support the creation of jobs. There is to be further investment in renewable district heating networks, with 90% renewables district heating relief to be extended until 31st March 2027 and expanded to include not only new networks, but all district heating networks where at least 80% of the thermal energy generated derives from renewables.
- Offshore wind: £70m is to be invested to support the offshore wind supply chain in Scotland. It is described as a “kickstart” to a commitment of up to £500m.
- Cladding: an increase in spending from £29m in 2023/24 to £41.3m in 2024/25. This comes against the backdrop of various plans to enhance building safety in Scotland, including the recently published Housing (Cladding Remediation) (Scotland) Bill.
- RAAC: the Scottish government will work with the public sector to identify the extent of reinforced autoclaved aerated concrete (RAAC) in buildings and consider how the risks should be addressed.
- Housing and building standards: a cut in spending of around £200m, from £738m in 2023/24 to £533m in 2024/25. The cabinet secretary for social justice acknowledged that the Social Justice and Social Security Committee was “keen to understand how the Scottish government will ensure local services have the resources required to deliver on housing rights”.
- Affordable housing: investment of £556m in the affordable housing supply programme, to enable providers to build affordable homes.
- Non-domestic rates: Shona Robison acknowledged in her foreword to the budget that the introduction of non-domestic rates retail, hospitality and leisure relief available to businesses in England will not be introduced in Scotland, despite calls to do so. The 2024/25 budget instead introduces 100% relief for hospitality businesses on Scottish islands, capped at £110,000 per business.
The budget will no doubt be the subject of much debate and MSPs will decide upon any further changes proposed by Scottish government ministers and whether to pass the Bill. The Scottish government aims to have the Bill passed by the end of February, ready for the new financial year.
About the authors: Rosie Gollan is an associate and Francesca Macmillan is a trainee solicitor in Womble Bond Dickinson’s construction team.