Ben Wray

CommonSpace editor Ben Wray analyses yesterday’s draft Scottish Government budget, and looks at whether Finance Minister Derek Mackay’s attempt to position it in the centre-ground will win him parliamentary allies

MOST people aren’t paying much attention to the Scottish Budget this year, even the small minority who usually do pay attention to it. What with the severe crisis at Westminster, Holyrood’s finances aren’t getting much of a look in.

We’ve got news for you budget slackers – you aren’t missing much.

Finance Minister Derek Mackay delivered a status quo budget yesterday [12 December], sticking to existing commitments and priorities while ignoring calls for change from left and right.

A brief overview of the key headlines:

– Income tax rates will stay the same, with the higher rate frozen. Freezing the higher rate, in contrast to the UK Government, will raise £180 million in additional revenue.

– Raising public sector pay by 3 per cent for those earning £36,500 or less, 2 per cent for wages up to £80,000, and cap those over £80,000 to £1500 increase.

– Real terms increases for protected budgets: £730 million for healthcare and £500 million for early years & childcare.

– Capital investment will be increased by £1.5 billion, with a further £130 million put into the new Scottish National Investment Bank.

“In sharp contrast to the chaos and uncertainty of the UK Government, the Scottish Government will keep on delivering good governance for Scotland,” Mackay said in his no-thrills budget.

READ MORE – Mike Danson: Unexciting Scottish Budget deserves cautious welcome

As Professor Mike Danson pointed out on this site earlier today, the “unexciting” aspect of the budget isn’t entirely by choice – while the Chancellor’s recent budget saw an increase Barnett consequential to Scotland, in real terms, with public service demand rising, the Scottish Government still labours under austerity.

“If this year’s budget consequentials for investment in the NHS are excluded, which is reasonable given our commitments to pass all of these consequentials onto health, our 2019-20 resource block grant is £340 million less than it was in 2018-19,” Mackay stated.

Nonetheless, the status quo feel cannot go by without being challenged. One noticeable example of this was the Finance Minister’s decision, under pressure from the big retail lobby, not to introduce the Barclay Review’s recommendation of an out of town levy to incentivise retailers to set-up in town centres rather than establish out of town shopping centres. Instead of the levy, town centres had to make do with a £50 million fund. Meanwhile, the commercial building transaction tax was cut, making it easier for speculation on commercial property to ensue, which will push up prices and make more areas unaffordable.

There were other examples in Mackay’s response to questions which pointed to dated thinking. When asked why his Budget speech had no mention of an industrial strategy, he said “we don’t need an industrial strategy, we need industrial actions”. This is an odd thing to say when the widespread consensus, which has even reached the UK Government, that Scotland and the UK’s chronic productivity rates really does require a government strategy for industry to tackle it which goes beyond reacting to crisis. Mackay’s remark implies he thinks saving firms in trouble is all that is necessary.

When asked about social security, he responded: “I happen to believe the best social policy is employment”, apparently oblivious to the fact that employment has for some considerable time now not been a route of poverty for hundreds of thousands of Scottish workers. It’s the Tories line to repeat endlessly that jobs is the answer to poverty despite the evidence to the contrary – why steal it when it is so morally and intellectually bankrupt?

On income tax, Mackay has rightly been credited with a more progressive approach than the Tories, freezing the higher rate so that it starts on incomes over £43,430, rather than £50,000 as in the rest of UK. This does create some clear red water between the Scottish Government and the Tories on tax, but as we wrote in our analysis pre-budget, is one-notch-to-the-left of the Tories really the limit of our political ambitions in Scotland?

We argued that council tax was a real test of progressivity, given it is the only tax on wealth at a time when wealth inequality continues to skyrocket. The regressive council tax, designed by the Tories to replace the failed poll tax over 25 years ago (and still using the same property valuations), is a permanent sign that Scottish politics is less progressive in practice than in rhetoric.

The Budget included zero commitments on local tax reform. And, as Scottish Greens co-convenor Patrick Harvie pointed out at First Minister’s Questions, the supposed real terms increase of £200 million announced by Mackay disguises the fact that some of this is money set aside for national policies, and thus the actual available budgets to local authorities has gone down by 200 million according to Cosla, or £300 million according to the Scottish Parliament Information Centre.

Mackay said he would listen on local tax reform if “a consensus” could emerge, but as Scottish Greens local Government spokesperson Andy Wightman quite rightly said, “where is the leadership?”. Consensus is code for being unwilling to tax the wealthy more unless every party in the Scottish Parliament agrees to do it too.

Nicola Sturgeon responded to Harvie’s questions at FMQs by saying she was open to ways to raise new money if parties can come forward with them. The Scottish Greens do have a proposal for a property/land tax which would raise significant sums for local authorities (while giving councils more power to decide themselves how much they wish to raise).

The Greens have made a commitment to local tax reform their red line for entering into negotiations over supporting the minority Scottish Government’s budget, and therefore the draft Budget must have felt like a snub considering it essentially ignored their call. Sturgeon said discussions between the Scottish Greens and Mackay had now begun, so perhaps the Finance Minister was holding something back to sweeten the deal for Harvie and co.

But the Scottish Greens co-convenor appeared pretty peeved on Thursday, saying Mackay had a “brass neck trying to pass off hundreds of millions of pounds in council cuts as a funding increase” and “there’s no way Greens will back a double-whammy of council cuts and no new action on local tax reform.”

However, his next line – “[Sturgeon’s] own councillors have backed plans for tourism and parking levies because they know how absurdly dependent councils are on central government grants” – suggests Harvie may settle for substantially less than plans to scrap and replace the Council Tax.

The Greens may be thinking twice about the prospect of forcing another election on Scots at this time of chaotic UK politics, while Scottish Government officials have talked up the possibility that they could pass the Budget without Harvie’s MSPs, with two Lib Dems backing the Budget last year because of special sweeteners for their constituencies in the North-East. It’s likely that, one way or another, Mackay will find a way to pass his budget.

This was a Budget of the centre-ground, seeking to do enough to keep left and right at bay. But on a week when the right-wing media’s attention was diverted elsewhere, it feels like a missed opportunity to make much needed bigger structural changes.

Picture courtesy of Colin Hattersley