Amidst all the furore last week surrounding the resignation of Derek Mackay as Finance Secretary in the Scottish Government, the actual content of the Budget he had prepared was rather overlooked. And yet the detail of what is being proposed for both tax and spending for Scotland over the coming year is of considerably more significance than the resignation of a Government minister, however senior.
The backdrop to this year’s Budget was characterised by a substantial rise in the resources available to the Scottish Government, thanks to increased spending at Westminster. A “Boris bonus” of £1.1 billion in ‘Barnett consequentials’ meant that this would be the highest budget total for years, obviating the need either for additional tax rises, or for any further cuts in public spending.
In recent Budgets, as a consequence of SNP deals with the Green Party, we have seen a growing tax gap between Scotland and the rest of the UK. An individual earning £50,000 in Scotland will now pay around £1,500 more in income tax than their equivalent living south of the Border. The irony is that these tax changes have not actually generated any additional net funds for spending on Scottish public services. According to analysis by the independent Fraser of Allander Institute, all these tax changes have done is balance out the overall decline in Scottish income tax revenues relative to performance in the rest of the UK.
Irony of ‘climate emergency’ Budget
We will not know until 11 March what the UK Chancellor has in mind for income tax elsewhere, but it would be a reasonable assumption that thresholds will be raised in line with inflation. The Scottish Budget proposes inflationary increases in the thresholds for the basic and intermediate rates, but for the higher and top rates these will be frozen, widening the tax gap, and increasing the overall income tax burden by £51 million in the coming year.
At the same time, funding for local government, which has borne the brunt of budget cuts from the SNP in recent years, will again see a reduction in support for core services. According to Cosla, revenue budgets are cut by £95m, while capital funding sees a fall of £117m. On the top of reductions in previous years of more than seven per cent since 2013, this is bound to have yet another negative impact on local services.
Research by the GMB Union has revealed that Scotland has lost 163 lollipop men and women over the past decade: a simple illustration of the impact that SNP cuts have been having on communities.
Meeting my own local council in Perth and Kinross last week, they told me that one consequence of further budget cuts could be the closure of local recycling centres in rural communities, meaning that individuals in these areas with items to recycle will either have to just consign them to general waste for landfill in future, or alternatively face a substantial round trip in their cars to the nearest urban recycling centre. It would be deeply ironic if a Budget which was labelled as being a response to the global climate emergency were to result in a reduction in recycling, or an increase in carbon emissions, because of the impact on council services of cuts from the centre.
How much is in the kitty?
There were aspects of the Budget that were welcome, among them additional funding for the NHS (only made possible because of positions taken in Westminster) and some additional support for the police, although this falls short of what is required. As it stands, with proposals to both increase the tax gap and cut spending on vital services, this is not a Budget that the Scottish Conservatives can support. That said, we will be happy to sit down with the SNP to see whether they are prepared to make changes, particularly to support spending on vital public services, to find common ground.
The good news is that there should be more resources in hand. In his past three budgets, Derek Mackay held back resources in order to lubricate his Budget negotiations with other parties. Whilst the Scottish Government is not for now telling us how much additional sums might be available, we know that there is always a kitty.
In addition, it is a reasonable expectation that after 11 March, when the UK Budget is announced, there will be additional Barnett consequentials coming to Scotland, which will provide resources which can be allocated after that event – these should also form part of the discussion.
The Budget negotiations are now in the hands of the Minister for Public Finance, Kate Forbes, viewed by many as a rising star within the SNP. The next few weeks will prove a real test of her mettle.
Murdo Fraser is a Conservative MSP for Mid-Scotland and Fife