Scottish Budget: Higher taxes will just damage the economy – leader comment

The Scotsman hopes Finance Secretary Derek Mackay has resisted pressure to raise taxes to fund a public spending splurge as he prepared to announce the Budget.

Finance Secretary Derek Mackay had big decision to make about Scotland's budget, not helped by being forced to produce it before the UK Government reveals its own

It’s fair to say it is far from ideal that Derek Mackay has been effectively forced to produce Scotland’s budget before the UK budget reveals precisely how much Scotland will get to spend from Westminster.

The Finance Secretary should have a reasonable idea about the settlement and the late UK budget is partly the result of the December general election, but this is not how sound financial decisions are best made in the national interest.

Amid burgeoning attacks on the SNP’s record in government – the state of the health service and education in particular – and growing complaints about cuts to local authority funding, Mackay may have succumbed to the pressure to spend big.

A major public spending splurge could produce the sort of short-term boost to the economy that might help the SNP win the 2021 Holyrood election, potentially paving the way for a second independence referendum and the party’s ultimate ambition.

However, we hope he has resisted such temptations. All spending has to be paid for and raising taxes in Scotland would be a dangerous step to take, further widening the gap between Scotland and the rest of the UK. There is only so much of a gap that will be ignored by businesses and individuals alike before it starts to have a serious negative effect on Scotland’s economy. Higher taxes mean higher costs for businesses, putting them at a competitive disadvantage with rivals south of the Border. And even the perception of Scotland as a high-tax country or one that may be planning increases could put off potential investors.

Instead, we hope Mackay has been able to find smarter ways to make Scotland’s money go further through making efficiencies, cutting wasteful spending and, perhaps, being strong enough to make tough, potentially even unpopular, decisions.

If he has done this, then all those who value sound finances in Government should give him some credit for it because there will be plenty of people who will criticise Mackay and the Scottish Government most vociferously.

As we have said many times before, the key to fixing Scotland’s problems is to get the economy going. We are at the dawn of a new industrial revolution and there are opportunities aplenty.

The Government’s job should be to help, rather than hinder, our businesses to take them.