Scottish Budget: John Swinney will turn into Ebenezer Scrooge if he hikes taxes on squeezed middle – Murdo Fraser

Tomorrow, the stand-in Finance Secretary, John Swinney, will deliver the Scottish Government’s budget for the coming year.
Will the spirit of Ebenezer Scrooge, seen here played by Tommy Steele, be John Swinney's guide when he delivers the Scottish Budget? (Picture: MJ Kim/Getty Images)Will the spirit of Ebenezer Scrooge, seen here played by Tommy Steele, be John Swinney's guide when he delivers the Scottish Budget? (Picture: MJ Kim/Getty Images)
Will the spirit of Ebenezer Scrooge, seen here played by Tommy Steele, be John Swinney's guide when he delivers the Scottish Budget? (Picture: MJ Kim/Getty Images)

No one realistically expects him to play the role of a benevolent Father Christmas in the week before we all break for festive jollity. Rather, Swinney is shaping up to be the Ebeneezer Scrooge of the SNP administration, with briefings to the media that middle-earners can expect taxes to be hiked.

Speaking on BBC Scotland at the weekend, his Cabinet colleague Shona Robison talked about the principle of progressive taxation that the SNP had applied in government, saying: “Those with the broadest shoulders should pay more.”

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This is code for middle-earners having to cough up more taxes, at a time when they are already suffering from the impact of rocketing inflation, rising food prices and huge energy bills. It is against a backdrop where already anyone earning more than £27,850 in Scotland pays more tax than if they lived south of the Border, yet sees very little in return.

When delivering his Budget, Swinney will no doubt repeat the usual tiresome message from SNP ministers that the current economic challenges we face are all the fault of the “Westminster Tories” bogeymen. The reality is, of course, somewhat different. All western economies are dealing with the economic consequences of the double external shocks that were the Covid shutdowns and Putin’s invasion of Ukraine. The inflation rate in the EU in October was 11.5 per cent, actually higher than in the UK.

The Scottish Government will always claim that their funding has been reduced by Westminster, but again the facts say something different. In the current financial year, the Scottish Government has the highest block grant in the history of devolution, if we discount the extraordinary additional Covid monies paid in previous years.

And while inflation has had an impact, according to the respected Fraser of Allander Institute this has been overstated by John Swinney, and the truth is that Treasury funding increases for next year onwards, in their words, “offset or almost offset the effects of higher than expected inflation”. So the amount of money the Scottish Government will have to play with will continues to be at record levels.

That is not to say that there are not pressures on the public purse. Across the public sector, we see demands for pay rises to meet inflation. Even leaving those aside, current Scottish Government commitments mean that they have over-promised in a variety of areas, not least in devolved social security where budgets are expected to balloon in coming years. If there is not to be a policy rethink, then where is the money to come from to pay for these?

Hitting middle- and higher-earners with increased taxes may appear to be an easy option, and fits with the SNP’s self-defined “progressive” status, but it comes at a cost. We already know that the exercise of devolved tax powers by this government, meaning a substantial tax differential for those earning £50,000 or more in Scotland compared to the rest of the UK, doesn’t actually deliver any more money than would have been the case had tax rates continued to be set at Westminster.

Whilst raising the tax rate on the highest earners might seem a populist move, the reality is that there are only around 23,000 additional rate taxpayers in Scotland, and any attempt to tax them more highly might well lead to some, at least, relocating elsewhere in the UK, resulting in a net loss of revenue to the Scottish Government.

So we are in a position where the government has a record amount of money to spend, but is still finding that its commitments exceed its income. If it is not going to increase taxes to fill the gap, what other options are available to it? Some hint of these was provided in the recent report from Scotland’s Auditor-General, Stephen Boyle, with some important criticism of the way that the Scottish Government addresses its accounts.

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Boyle highlighted the underspend of £2 billion in the budget for the last financial year, and raised concerns about the lack of transparency in government spending, making it hard to track where exactly all funds from the UK Government have been spent, not least when it came to Covid support grants.

He also pointed to a range of areas where Scottish Government choices have led to large sums being lost to the public purse. Among these was a repayment made to the European Commission of £43 million after the Scottish Government failed to comply with spending rules for the European Social Fund, and the malicious prosecution of those associated with the administration of Rangers Football Club, where the bill is £60 million so far, with more likely to come.

Then we have Prestwick Airport, now marginally in profit but having cost the taxpayer some £50 million, the loss on the BiFab plant in Fife of £37 million, the potential liability for the guarantees for Sanjeev Gupta’s purchase of the aluminium smelter in Fort William, not to mention the hundreds of millions spent at Ferguson Marine for the construction of two long-delayed ferries which may never actually be delivered.

On top of all this, the SNP government are proposing to spend an estimated £1.3 billion in the coming years on the creation of a National Care Agency, a proposal which has little support from stakeholders, and where the financial case has been ridiculed by the cross-party Finance Committee at Holyrood.

There is no shortage of options available to John Swinney to balance the books before he starts dipping his hands deeper into the pockets of those who are already paying the highest taxes in the United Kingdom. We will know soon enough whether he is to play Santa Claus, or Scrooge, in this seasonal pantomime.

Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife

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