John Swinney in £100m shop raid to pay for promises

JOHN Swinney has launched a fresh tax grab on the supermarkets as he used his crucial spending announce- ment to set out major reforms designed to ease the pressure on Scotland’s cash-starved public sector.

The SNP finance secretary announced he would be penalising large stores for selling alcohol and tobacco with a new higher business rate, in a move which will boost his coffers by an estimated £100 million over the next three years.

That cash will be used to top up a new £500m fund aimed at cutting back the rocketing demand on Scotland’s social services, justice system and the NHS by backing programmes which aim to prevent social problems emerging.

The proposal to back a revolution in so-called “preventative spending” came as Mr Swinney was forced to find deep cuts elsewhere in his budget, prompting a fierce backlash last night. Generous benefits, including a five-year council tax freeze, a guarantee of no tuition fees for students and free personal care for the elderly will continue to be paid for by the Scottish Government, with ministers having backed them all in May’s election campaign.

Mr Swinney also prioritised spending on infrastructure, unveiling a £9 billion spending plan over the next three years, designed to prevent the country tipping back into recession.

But with cash running short due to UK government efforts to cut the country’s huge budget deficit, the cost was becoming clear last night, as the finance secretary said that NHS workers and civil servants had to swallow a further year without any increase in their pay.

At the same time, take-home pay will be cut, as Mr Swinney said he would be increasing pension contributions for those public-sector workers by 3 per cent.

It prompted a furious reaction from unions and increases the likelihood that Scottish workers will join their English counterparts on strike later this year.

Meanwhile, local government leaders hit out at what they said amounted to a real-terms cut in their budget of about 7 per cent over the next three years.

They warned that the SNP’s commitment to a five-year council tax freeze would add further pressure on their future budgets, leading to a “significant reduction” in services.

Meanwhile, SNP sources said they were effectively holding out for one-off increases in their budget from Chancellor George Osborne over the coming years to keep the books in balance.

Mr Swinney’s Spending Review comes a year after he ushered in a deep round of cuts for the current financial year, and sets the course for the period from 2012 to April 2015.

In the budget last year, Mr Swinney tabled a retail levy on supermarkets and big stores, only to drop it due to opposition from across the parliament.

However, with the SNP now enjoying a majority, Mr Swinney used his statement yesterday to re-introduced a similar plan. Under the proposals, ministers will charge a supplementary business rate to large retailers of alcohol and tobacco from April next year.

Off-licences and small grocery stores are not expected to be covered. Officials said they estimate that the new tax will raise between £30m and £40m a year.

Mr Swinney said those funds would then be handed to local authorities to pay for programmes on preventative spending. Schemes to be supported include intensive work with children under three, fresh attempts to get repeat offenders to go straight, and a major drive to help elderly and sick people cope at home, rather than end up in hospital.

He added: “Over the next three years, through the joint priorities work of national and local government, preventative-spending initiatives will be boosted by a total of over £500m. Our focus will be on supporting adult social care, early years and tackling re offending.”

However, the plans were met with fury from the retail trade last night.

Scottish Retail Consortium director Ian Shearer said: “This new tax is a blatant fund-raising exercise which is illogical and discriminatory.

“Supermarket margins are already cut to the bone as stores compete to offer the best deals to cash-strapped consumers. The UK has some of the highest alcohol taxes in Europe. This tax would make it harder for food retailers to keep prices down for customers, and makes Scotland a less attractive place to do business, invest and create jobs.”

Jeremy Beadles, chief executive of the Wine and Spirit Trade Association, said: “We’re disappointed that the Scottish Government have announced this with no consultation. The tax on large retailers will place an additional burden on Scottish businesses and push the price up for all consumers regardless of whether they consume alcohol at all.”

But the plan to push extra tax revenue into preventative spending was backed by others.

John Downie of the Scottish Council for Voluntary Organisations, said: “We welcome the move as investing in preventative programmes, particularly in adult social care, early years and tackling re-offending, is the best approach to choke off demand for expensive health and care services that we can’t afford.”

The Spending Review saw the NHS – the biggest chunk of Scottish Government spending – receive protection from cutbacks. The biggest losers included Further Education Colleges, housing and the Scottish legal aid budget.

Labour’s finance spokesman Richard Baker said last night: “For a government that is meant to be keen on economic recovery there are some savage cuts that will not help that cause.”

But there was also concern in council chambers across the country at their own reductions.

Kevin Keenan, finance spokesman for the Convention of Scottish Local Authorities (Cosla) added: “The hard-nosed facts are that in reality Scottish local government is going to be 7 per cent down over the period of this spending review.”

Business leaders gave the plans a mixed reception, backing the increase in capital spending, but opposing the tax increases.

CBI Scotland director Iain MacMillan added: “The Scottish Government appears to be in denial with regard to the dire state of the UK public finances. The UK’s structural deficit must be reduced quickly along with the rising annual interest bill on the national debt. The Scottish Government appears to be quite content to see the UK’s public finances deteriorate further than planned and this is not a credible position to take.”