The State of Britain

Income tax receipts fall short of forecasts and more money for the Borderlands Growth Deal

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Unemployment in Scotland was virtually unchanged at 92,000 between March and May, a rate of 3.3%. At 2.6% and 5.6% the SW of England and the North East had the lowest and highest unemployment rates in the country. The UK unemployment rate stands at 3.8%.

Scottish average property prices increased by 1.2% to £152,801 during the month which uplifted the annual growth rate to 2.8%. In comparison, UK prices increased by 0.1% to £229,431 during May which reduced the annual growth rate to 1.2%.

The amount of income tax revenue raised by the Scottish government in 2017/18 went up by 1.8% but this was £941m short of forecasts according to HMRC figures. It is the first time revenue from Scottish taxpayers has been calculated since the new devolved powers over income tax began in 2017. Under the new fiscal framework, £737m of the £941m will be offset by a recalculation of the Barnett formula which will mean a £204m reduction overall next year. The new system recalculates the block grant to reduce it by the money raised from devolved taxes.

Income tax receipts were forecasted at £11.8bn but only £10.9bn was actually raised. The Scottish Government chose not to uplift the higher rate band in the 2017/18 budget so the number of higher and additional rate taxpayers in Scotland increased. Whether this had an effect on reducing tax receipts or whether the initial forecast was unrealistic is unclear. There will be more evidence to determine if higher rate payers are modifying their behaviour to avoid tax when the data for 2018/19 is published next year.

On development, The Oil and Gas Authority (‘OGA’) has invited applications to explore 768 blocks or part-blocks of the North Sea and West of Shetland. This is the 32nd round of licensing for exploratory drilling over more than 50 years. The round includes co-operation on license timing with the Faroe Islands government for the first time. The OGA has also provided access to information from the past drilling of wells, seismic surveys and pipelines. The data will increase the chances of finding oil and gas, reducing financial risk. A report last year estimated the UK has enough oil reserves to sustain production for the next 20 years. Successful applicants should hear by the second quarter of 2020.

Barclays has announced that Kilmarnock will be the next location for its growth initiative, Thriving Local Economies. The programme involves working closely with leaders from businesses, government and education over a three-year period to identify opportunities to boost the local economy.

Borders, Dumfries & Galloway and the three other cross-border councils plus the Scottish and UK governments have signed the heads of terms for the Borderlands Growth Deal. The two governments have confirmed funding of up to £350m and agreed to uplift the deal with an extra £45m. Projects under consideration include a £10m feasibility study into extending the Borders Railway beyond Tweedbank to Carlisle, Carlisle Station Gateway, Chapelcross Energy Park near Annan, Berwick Theatre and Conference Centre and the Mountain Bike Innovation Centre in the Borders. Second phase projects might include a play village at Alnwick Garden, the Star of Caledonia landmark sculpture at Gretna and a dairy innovation centre in Dumfries and Galloway. The funds will be deployed over 10 years by the Scottish government and over 15 years by the UK government.

A 74 page report commissioned by the Scottish government outlines the role a new enterprise agency can play in aiding growth and creating jobs in Southern Scotland. Like most reports, its key recommendations include better transport improvements (such as extending the Borders Railway) a plan to attract young people, better tourism promotion and an overhaul of town centres. In June, the Scottish Parliament passed legislation allowing for the creation of the new enterprise agency. Dumfries & Galloway has the lowest productivity ranking in Scotland at 30% below the UK average and the Scottish Borders is third worst at 28%. In UK terms, Southern Scotland only outperforms Cornwall and Lincolnshire.

Until 2020, Scotland will continue with two enterprise agencies. The most northerly, Highlands and Islands Enterprise, owns the Cairngorm funicular, which will remain out of service this winter highlighting the problems which can occur when the state gets involved in leisure businesses. The UK’s highest railway has been out of action since October last year due to structural problems. Built at a cost of £26m and opened in 2001, the railway connects a base station with a restaurant 1,097m up Cairngorm. The Development agency, which also owns the Cairngorm Mountain ski centre, near Aviemore, said public procurement regulations has meant repairs will not be possible until spring or summer next year.

On jobs, oil company EnQuest is to cut about 80 jobs at the Sullom Voe terminal in Shetland. The company is currently in talks with former operator BP to continue exporting oil from the Clair Field west of Shetland via an existing pipeline. EnQuest is trying to retain the contract and stop oil being loaded offshore by-passing the terminal. Also, a car dealership in south west Scotland and Cumbria is facing closure. Dumfries-based Border Cars, which employs more than 200 staff, is in talks with up to three potential buyers.