Chapter 5 Finance and the Constitution
The Finance and Constitution portfolio is central to delivering Scotland's Economic Strategy and achieving a more productive, cohesive and fairer Scotland. Crucially, we recognise that increasing growth and tackling inequality are mutually supportive in making Scotland a more successful country with opportunities for all to flourish.
Key Strategic Priorities
The portfolio's strategic priorities support the ambitions set out in Scotland's Economic Strategy to boost competitiveness while ensuring that economic growth is inclusive.
The Finance and Constitution portfolio is a wide-ranging portfolio that is at the heart of implementing the new powers over taxation that are provided for in the Scotland Act 2016 and providing public services that are efficient, fair, flexible and valued.
With the new powers being devolved through the Scotland Act 2016, equality is a central consideration. The additional powers over income tax provided for will be used for the first time in 2017-18 in a way that protects low-income taxpayers.
The Scottish model of procurement balances business needs and social responsibility to secure the maximum benefits from the £11 billion spent by the public sector each year. Delivering community benefits through procurement advances equality of opportunity and delivers wider social benefits.
Equality Implications of the Draft Budget 2017-18
Scottish Rate of Income Tax
The Scottish rate of income tax introduced under the Scotland Act 2012 commenced on 6 April 2016. All rates of income tax - the basic, higher and additional rates - for Scottish taxpayers were reduced by 10p and the Scottish Parliament set a Scottish Rate of Income Tax ( SRIT) of 10p to replace this amount. This meant there was no increase in the overall income tax rates that apply to Scottish taxpayers for this financial year.
From 2017-18, the Scotland Act 2016 will give the Scottish Parliament powers over all revenue raised from non-savings non-dividend income tax paid by Scottish taxpayers. The Scottish Parliament will set the rates and band thresholds - excluding the personal allowance - for the first time. We will use these additional powers over income tax in a way that will protect low-income taxpayers and provide additional revenue to invest in high quality public services.
The impact of income tax policy is limited to those who are in receipt of a taxable income. In Scotland, there are almost two million adults with no income tax liabilities due to low or no income, which is over 40 per cent of the 16+ population. How the income tax burden falls across different equality groups is taken into consideration as part of wider policy development where corrective actions may be able to be taken.
However, even with the further proposed income tax powers, the Scottish Government will have limited powers to define the tax base, and the power to adjust tax reliefs remains reserved to the UK Government. Due to these policy restrictions, the Scottish Government's power to affect the relative burden of tax is limited.
Air Passenger Duty
Equality considerations will be central to the implementation of the increased powers being devolved to the Scottish Government. As part of the proposals for the implementation of the devolved Air Passenger Duty, an Equality Impact Assessment ( EQIA) will be conducted by Revenue Scotland.
Scottish Futures Trust
The Scottish Futures Trust ( SFT) was established to improve the efficiency and effectiveness of infrastructure investment in Scotland by working collaboratively with public bodies and industry, leading to better value for money and, ultimately, improved public services.
In particular, SFT is involved in the following which contribute to sustainable growth and support jobs:
- Implementing its Growth Accelerator Model ( GAM) across Scotland's cities which can accelerate public and private sector investment, creating economic growth and long-term employment opportunities.
- Developing the delivery strategy for Scotland's future digital requirements to provide ultrafast broadband and wireless infrastructure that will enable greater connectivity to support businesses and communities across Scotland.
- Developing creative financing initiatives to increase the supply of affordable rent housing.
- Managing the additional £1 billion of Non-Profit Distributing ( NPD) and hub funding. In a period of smaller capital budgets, NPD/hub brings forward construction by many years, creating and protecting jobs.
Investment in our infrastructure - both physical and digital - improves access to services and creates greater opportunities for individuals, including disabled people and others with accessibility issues. This benefits the economy by widening the pool of potential talent for Scotland's firms and, for individuals, the improved connectivity can be life-changing.
Sustainability is a key driver for SFT when developing infrastructure and delivery solutions. Economic, environmental and social sustainability are addressed in the early stages of product development and are an integral part of procurement and delivery. As part of this, there is a focus on improved outcomes for communities. Completed projects will allow public services to be delivered to communities in a more joined-up way, supply affordable housing in high-cost housing areas and bring economic activity to disadvantaged areas, thereby promoting socio-economic equality.
Procurement Shared Services
The Procurement Reform (Scotland) Act 2014, which came into force in 2016, aims to establish a national legislative framework for sustainable public procurement that supports Scotland's economic growth by delivering social and environmental benefits.
Two key strands of the Procurement Strategy are improving access to public contracts for small and medium-sized enterprises ( SMEs), and delivering social benefits ( i.e. community benefits). Improving access to public contracts for SMEs supports eliminating discrimination and advancing equality of opportunity, while delivering community benefits may impact on various equality groups depending on the nature of the community benefits obtained. For example, improving access for SMEs may particularly support younger (16-24) and older (65+) workers, who are employed in SMEs in greater proportions than in large firms  .
Scottish Government-led procurement has delivered over 3,500 apprenticeships and training opportunities through community benefits, and procurement policy has been used to promote the payment of the Living Wage and to address blacklisting. Apprenticeships particularly benefit younger people in helping them enter the labour market.
This portfolio is focused on delivering sustainable economic growth, with opportunities for all the people of Scotland to flourish. The focus on growth that is inclusive is based on the increasing body of evidence that demonstrates promoting equality through improving diversity and eliminating barriers also supports economic growth.
In a tough fiscal climate, some efficiency savings are being achieved while spend is being maintained in other areas which are beneficial to equality groups. Equality considerations lie at the heart of all the work of this portfolio and will be central to the implementation of the further powers being devolved through the Scotland Act 2016.
Email: Paul Tyrer