Scottish budget: John Swinney’s budget ‘unravels’ as key claims rejected

By SCOTT MACNAB
Published on 21/09/2012 23:17

JOHN Swinney last night faced claims his budget is “unravelling” after independent research cast doubt on three key pillars of his spending plans and business leaders raised fears of “secret taxes” on firms.

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The finance secretary’s central claim that his overall budget is being cut by Westminster was rejected in a document published yesterday by Holyrood’s financial scrutiny unit, which concluded it is actually being increased by 1 per cent.

An £80 million cash injection on schoolbuilding to boost the ailing construction sector also met with scepticism from the Scottish Parliament Information centre (SPICe) which says this measure will have “no impact” next year.

The report further concluded that councils are facing a 4 per cent cut in their budget in real terms.

The findings came as a £400m hike in the expected revenue generated by business tax prompted fears of new “secret taxes”. A leading CBI Scotland official said that there is a fear any shortfall in “optimistic” business rate expectations would be made up by introducing tax rises.

The SNP administration’s 2013-14 budget was unveiled on Thursday. The document states the spending power the Scottish Government has at its disposal (DEL) is falling in cash terms by £162m to £28.4 billion, but SPICe say this budget will “rise in cash terms by 1 per cent”. The budget was hailed by the government as one for jobs and growth, with an £80m cash injection aimed at boosting construction by delivering 69 schools – 12 more than planned, and earlier than scheduled.

It uses the non-profit distribution (NPD) model, where money goes to private firms for public sector building projects, such as schools and hospitals.

But the SPICe document states: “This involves an acceleration of NPD investment originally planned for 2015-16 and 2016-17 into 2014-15, and will not impact on capital investment in 2013-14.”

Funding for local councils was slashed on Thursday. This was largely put down to the creation of the new national police and fire services, which will see funding shifted from the local government portfolio to justice.

But excluding the police and fire service monies, this still “results in a 4.3 per cent reduction in the DEL budget in real terms” for councils, SPICe adds. Councils’ overall share of the Scottish Government’s budget will also fall by 0.8 per cent, SPICe reveals.

Conservative finance spokesman Gavin Brown said last night: “Sometimes budgets take a couple of weeks to unravel, but in the case of the Scottish Government it’s taken only 24 hours. The first page of this SPICe document contradicts three important claims made by John Swinney.

“The Cabinet secretary was quite clear that there was a cash-terms decrease, but this independent analysis states there was in fact a 1 per cent increase.”

Meanwhile analysis of the budget by independent think-tank the Centre for Public Policy for Regions (CPPR) showed that the government’s tax take from business is expected to rise by £163m next year and by a further £229m in 2014-15.

The CPPR report states: “Within the limitations of the current devolution settlement, one possible route to improving the growth rate – as previously argued by the Scottish Government itself – would be to cut business taxes.”

The report adds that this would be done “via corporation tax under independence or non-domestic rates under devolution.”

Business leaders branded the forecasts for the next two years “optimistic” as the economy flatlines, raising fears that Mr Swinney is instead planning to introduce new taxes on firms.

CBI Scotland’s assistant director, David Lonsdale, saidd: “The expectation of bumper revenues from business rates over the next couple of years – even if one discounts for a moment the Scottish Government’s £131m of additional taxes on larger retailers and on firms with empty premises – looks particularly optimistic, not least given the state of the economy and recent downgrades to forecasts for future growth.

“If there is a shortfall in the devolved administration’s income – due to less tax revenue than expected or a failure to achieve efficiency savings – then our fear is that ministers may seek to tap the business community once again with further tax rises.”

A Scottish Government spokeswoman said: “The reality is that Mr Swinney has delivered a budget for jobs and growth which maintains the Scottish Government’s key commitments to the people of Scotland in the face of cuts from Westminster.

“The budget for local government has actually increased. Allowing for police and fire changes, the local government budget is up £30m.”

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