Eddie Barnes: Introducing new taxes is one of the few options left for the SNP in its quest to find more money

By EDDIE BARNES
Published on 29/08/2012 00:00

CBI Scotland has made another foray into the spending priorities of the SNP government. In the first skirmishes ahead of the annual statement on how ministers plan to divide up their block grant, the business organisation yesterday urged finance secretary John Swinney to, coining a phrase, consider a Plan B.

It said Mr Swinney should seek more savings – by, for example, capping the public sector wage bill and seeing if the business of government could not be done more efficiently by others. He could cash in on some of his assets, such as the state-owned Scottish Water. He could cut back Holyrood’s habit of paying for things that people used to pay for themselves. The savings made would help avoid business tax rises and give Mr Swinney more cash to spend on recession-busting infrastructure projects.

Mr Swinney replied yesterday with short shrift. A Scottish Water sell-off is currently a no-no. Meanwhile, keen to keep on side unions and public sector workers, he is repeating his assertion that he should be able to find “modest” pay rises to be agreed next April, after what has been a long two-year freeze.

The increasingly tense stand-off between the government and the business lobby over this budget round points to a wider issue. The time when Mr Swinney could offer unions, public sector workers and business leaders 
his largesse has long gone. Now the choices are becoming starker. For example, hiking pay next year by just 2 per cent could cost Mr Swinney around £280 million, according to the government’s own figures. Where does this come from?

As can be seen from the new tax rises being planned for businesses – on empty properties and on big retailers – it would appear that civil servants at St Andrew’s House are running out of options, except to tap up others.

With further cuts due to the remaining block grant, and demographic-led demand going through the roof, the choices will only get tougher for the government over the next few years. And, as the Scottish Government’s tax powers are increased over the coming years, with or without independence, so the ability and the temptation of Holyrood’s politicians to find funds from taxpayers and businesses will only rise as well. Hence the reason why CBI Scotland says ministers must start to “think differently” about the way they run their shop, as their concerns increase that, in the current climate, it will be them that gets clobbered.

By contrast, the big unions purred approvingly yesterday at Mr Swinney’s tepid response to CBI Scotland, giving a clue as to where the government’s choices are currently headed.

Scotland has long had a self-image of being a more socially democratic country than the rest of the UK. As they weigh up new tax powers and the spending squeeze, it may be that ministers will have to put that theory to the test.