Iain Gray: Budget must be right for Scotland

Published on Saturday 21 November 2009 19:08

The referendum bill is going the same way as local income tax – nowhere

IT HAS not been a good year for John Swinney. His cancellation of the Glasgow airport rail link immediately before a by-election in the city has severely damaged SNP credibility. Two of the SNP's three major flagship policies – local income tax and the Futures Trust – had already crashed and burned in his care. That followed defeat on the budget, and unless there is a rethink soon, then this year's budget could be in trouble too.

Alex Salmond and his government were humiliated in February when the finance secretary had to drop the SNP's proposals for a local income tax. It had been a central plank of their election campaign in 2007, but there were two small problems. It was both unworkable and unfair, criticised by business and unions alike.

Surprisingly for a supposedly serious political party, the SNP had not properly researched the legality of the tax or even consulted with HM Customs & Revenue over whether it would work or how it could have been collected.

More damaging has been the SNP's dogmatic stance on the party's failed Scottish Futures Trust. It has raised not one single penny nor built one single school or hospital. Its chief executive has admitted that it will advise using the PPP (Public Private Partnership) model it was supposedly created to replace and, while the SNP have tried to save face, Scotland has suffered. More than 25,000 jobs have been lost in the construction industry while 2 billion worth of capital projects have been stymied, and John Swinney refuses to look at alternative methods of funding.

This incompetence and intransigence is bad enough, but such inflexibility is the last thing we need during a recession. Open minds and decisive action are required, but both Alex Salmond and John Swinney have been exposed as out of their depth since the banking crisis broke last autumn.

They have whinged about Westminster rather than facing up to their own responsibilities as the Scottish Government. They have failed to use the levers available to them to stimulate economic recovery, leaving Scotland trailing the UK in recovery, as the Fraser of Allander Institute demonstrated last week. This is the Salmond slump, which Scotland alone suffers on top of global recession.

Currently, the SNP's pet whinge is that they should be given a second year of "capital acceleration" by the Treasury. But last year, the SNP squandered the capital acceleration they were given – they admit themselves that only 20 per cent of the accelerated funds found their way to directly supporting jobs. I supported capital acceleration last year and believe that it should be considered this year, but – and it is a big but – there is no point in the Treasury accelerating funds again until the SNP have sorted out this year's budget to prioritise jobs and economic growth.

Instead, as we approached this year's budget, John Swinney made the astonishing decision to scrap the Glasgow airport rail link (Garl). This was not a financial decision but a political one. He did it without consulting anyone. It will cost Glasgow 1,300 jobs. Bad enough at the best of times, but in the midst of a recession? As well as a body blow to our biggest city, it is a serious setback for Scottish business, putting it at a disadvantage with our European competitors.

Labour will fight to reinstate Garl in next year's budget. I signed off Garl when I was enterprise minister in the Scottish Executive back in 2002. Along with the Edinburgh's airport rail link (Earl), it was seen as a vital part of Scotland's transport infrastructure for the 21st century. These projects were welcomed by the business community as a sign that government was serious about economic growth. But Earl was dumped immediately by the SNP, despite the opposition of business and unions, and now Garl suffers the same fate.

It is not too late for John Swinney to reverse this foolish decision.

Was the message the SNP received in the Glasgow North East by-election not clear enough? Why can't John Swinney ask his Scottish Futures Trust to find an alternative funding solution? After all, we are now told that the Aberdeen Western Peripheral Route is going to be funded fully by private finance.

Garl, though, is only one step. The draft budget has to be radically recast to support economic growth, or it will be unsupportable. Labour has continually urged the SNP to get Scotland building again, and there is no more obvious area at a time like this than housing.

Despite SNP propaganda to the contrary, their own civil servants have admitted there will be actually be 600 million more than expected in this year's budget. Any misrepresentation by John Swinney and Alex Salmond about the budget settlement is merely a shield to hide their own inaction. The Scottish government is receiving 34.5bn for 2010-11, twice the sum Donald Dewar received in 1999.

There is also a one-off "inflation bonus" worth a further 880m over two years in the 2010-11 and 2011-12 budgets. As inflation has dropped, every pound of public money buys more. This is a one-off opportunity and the SNP must not waste it. Labour believes they should invest immediately in a far more substantial house-building programme to ease Scotland's housing crisis and get our builders back to work.

The damage done to Scotland by the SNP deepens every day, with Scotland in danger of losing vital skills, not just in the construction industry but related sectors such as lawyers and architects. After the Southern General Hospital contract in Glasgow was recently awarded to an Australian company, some architect firms have said that they are now looking at having to lay people off. The Salmond slump is spreading across the sector.

John Swinney's problem is that he is not really finance minister for a Scottish Government but rather treasurer of a campaign for separation. Why else would he stand ready to find 12m for a referendum but not the funds for vital infrastructure? That referendum bill is going the same way as local income tax – nowhere. Unless John Swinney starts reshaping his budget to support jobs and the economy, then it is going nowhere, too.

No doubt any day now we will hear the First Minister's ritualistic resignation threats if he does not get his budget. We have heard it all before. If the budget is not right for Scotland, then we will vote it down.

Iain Gray MSP is Scottish Labour's leader