2007 - 2020

Cool Kate Brings in the Scottish Budget But No Indyref Fireworks To be Seen

THIS year’s Holyrood Budget (actually for 2020-21) has turned out to be memorable for reasons nothing to do with the public finances. However, the fallout resulted in the first ever budget presentation by a female MSP, the cool-under-fire Kate Forbes. Mind you, Westminster has never had a female Chancellor either.

The first thing to say is that there is certainly more cash around next year. Scottish Government spending is slated to rise in real terms thanks to Boris’ plan to buy popularity and pay off his hedge fund backers with a mini speculative boom. Scotland gets the Barnett consequentials, though we won’t know the full details till the UK Budget on 11 March. However, before Jackson Carlaw starts crowing about a “Boris bonus”, is that real Scottish spending levels are still shy of where they were in 2010.

Understandably, most of the extra Barnett cash goes to care and health – now taking over £15bn of total Holyrood spending for the first time. Meanwhile, capital spending is being refocused long-term on climate change projects, with circa £1.8bn in investment promised for specific (and rather random) projects to reduce emissions.

Scottish income tax rates stay on hold, but thresholds are raised in line with inflation except for the two higher rates (which should net an extra £51m). Ms Forbes claims “Scotland will continue to be the lowest-taxed part of the UK for the majority of income taxpayers”. Quite why she or the SNP leadership should be proud of such a claim continues to perplex me.

The SNP Government took the decision very early on to protect real spending on the NHS. But if your overall spending is caught in Westminster’s austerity vice, and you elect (with voter support) to protect the NHS, then something has to give fiscally. That something was local government. This Budget however, Kate claims to have found an extra half billion to deliver a rare real increase in council spending. The pathways and ring-fencing of local authority funding are nightmarish to fathom, but I suspect councils are getting a bit more. Sadly, this is nowhere near making up for the real squeeze of the last decade.

Overall then, a typical workmanlike SNP Budget that manages to deliver a little something for everyone; doesn’t offer too many political hostages; and pays attention to genuine social priorities. However, such Budgets always run the risk of undershooting in the long run because firefighting every problem never focuses enough cash on solving any particular one.

That might be the dilemma of all democratic administrations everywhere, of course. But eventually such satisfying behaviour often ends up frustrating the electorate. One example: the new Scottish Child Payment (SCP) is a brilliant, compassionate policy designed to help stem the unconscionable rise in child poverty that resulted from the Westminster-imposed welfare spending cap (introduced in 2014 with Labour support). Kate Forbes announced the £10 weekly SCP supplement to UK child benefit would start later this year. Wonderful, except that even when rolled out fully in 2021, the SCP is unlikely to substantially reverse child poverty. That’s why we need independence.

NOT A BUDGET FOR INDEPENDENCE…

Here’s the rub: this was not a Budget to prime an independence campaign or even challenge Tory Treasury rules on spending. It played by the Westminster rules yet again.

Far from expecting an imminent referendum, Kate’s Budget seems to assume we’ll be in the Union for at least another decade. Her Budget speech contained some formulations – possibly authored by her predecessor. For instance, she promised to invest more than a quarter of a billion pounds in peatland restoration “over the next ten years”. And again, “we commit now that we will ring-fence an additional £2 billion of transformational infrastructure investment over the next Parliamentary term…”

If you truly expected a referendum this year – and a Yes result – surely , you would not be talking about the next term in this devolved Parliament? Or making a modest £25m per annum investment in peat reclamation sound more impressive by adding it up over a decade – the very decade one would hope an independent Scotland would be in a position to transform land tenure and management in its entirety.

I know that Holyrood budgets have to be presented within constraints, especially if you are a minority government. But equally, this was not by any stretch of the imagination either a fighting budget designed to precede a militant referendum campaign.

…MORE A NEGOTIATIONG POSITION

Of course, much of what Kate Forbes proposed today is provisional, to say the least. First, the SNP government has to find support across the aisle if it is to secure a majority to get the budget passed. That could have been baked in early by offering something more inspirational on climate change. Say, free bus fares for young people. That could have brought on board Labour and the Greens and played well in the country. I’m still flummoxed why Nicola’s team seems reluctant to go in this direction. True we got a scatter of new green projects, but I fear the impact will be lost in the crush. An extra £5m for electric police cars is minor compared to turning the younger generation on to public transport so they lean not to need cars in the first place.

The other problem is that this Scottish budget remains at the mercy of whatever Chancellor Sajid Javid proposes in his budget performance on 11 March. That’s assuming he is still Chancellor by then. It is now clear that Dominic Cummings, the neo-fascist obsessive in the woolly hat who runs Boris Johnson’s policy unit, has been briefing outrageously against Javid, who he sees as too fiscally conservative.

If Javid makes (or is forced to make) major cuts in tax rates and thresholds, that could have an impact north of the Border. Lower rates in England, means a bigger gap for the Scottish government to fill from its share of income tax revenue – that’s before you get any net income to spend. And without control over non-earned income, the income tax loss to Scotland could just get wider. Never mind the added complication that adjustments to the block grant income from the Treasury get done in retrospect.

To date, the Scottish Fiscal Commission’s forecasts of income tax revenue have been rubbish, meaning sudden big holes in the Holyrood purse. For instance, because of past forecasting errors, £200m will be deducted from 2021 block grant this April. The deduction for next year could be three times as big.

Expect to see Kate Forbes making more budget statements between now and March. But on today’s form, she’ll be good at it.

Comments (11)

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  1. Graeme Purves says:

    The line that “Scotland is the lowest-taxed part of the UK for the majority of income taxpayers” is closely associated with Derek MacKay. This would seem a good time to abandon it.

    I strongly agree with the points made about the way in which budgets from a party intent on independence should be framed.

    1. Jo says:

      Graeme

      I’d say again that there’s an election next year and many mega-urgent issues to address in order to do well in it. Domestic matters, certainly, but urgent ones that have attracted and continue to attract a lot of press coverage. (The Mackay bombshell will also have rocked the SG and maybe more is still to emerge there. I’m glad Kate Forbes got on with it yesterday in a dignified manner.)

      There are two Public Inquiries to happen. The Sheik Bayou death. The QEUH and the Sick Children’s Hospital in Edinburgh. It’s looking like we could have yet another one headed our way with the ferries business. This doesn’t count separate reviews the SG ordered into other issues including Care related matters. Those will require meaningful responses too.

      So I’d say there’s a great deal to do before putting out what George calls a “budget for independence”.

  2. Doghouse Reilly says:

    I wondered a bit at the £25,000 a year for peat land reclamation too, describing it as “over a quarter of a billion pounds over ten years” seemed to me to be trying just a bit too hard to polish something that isn’t naturally all that shiny.

    But I was most struck by the very very modest £137m dedicated to home energy efficiency measures such as the provision of insulation, new heating systems and advice and information for renters and homeowners. An increase of £18m on 2019/20.

    To put that in context Housing Associations and Councils have been spending the better part of £100m a year over the past five years on improving the energy efficiency of their homes. About 90% of this has come from rents by the way.

    £137m a year from government just doesn’t feel to me like a climate emergency response.

  3. SleepingDog says:

    It is the socialization process for turning young people into public transport travellers that will be significant, I believe, in the success and failure of great collectivist endeavours, like the transformation of society in facing up to current threats. And with the Doomsday Clock now counting down the seconds, let alone minutes, to midnight, perhaps the Scottish Budget could have been more, er, lit.
    https://thebulletin.org/doomsday-clock/current-time/

  4. Shaun Downing says:

    I cannot wait for guys to go independent.
    Nothing ventured nothing gained.
    SNP should holding Westminster by the short and curlys.
    You guys go.

  5. Morag Williams says:

    I think Kate’s comments re lowest taxed part of the UK for most tax payers is simply a straightforward rebuttal of Boris Johnson’s assertions that Scotland has the highest tax rates in the UK. The higher taxation for higher earners remains insignificant to the payers and the budget but that will not stop Boris et al from carrying on SNP bad/higher taxation in Scotland and so on. The principle is important, the direction is important and Kate has done an outstanding job.

    1. Jo says:

      Morag

      Perhaps George is getting at something else.

      It’s now considered political suicide to mention paying more tax. That’s a problem when so much is needed in terms of services and investment.

      When Thatcher arrived in 1979 her chief aim was to drive down tax rates, especially higher rates. At that time there was a range of higher rates going from up to 83% . The basic rate was 33%. She began immediately until she’d abolished most higher rates and left a single higher rate of 40%. Today we have a basic rate of 20% and the higher rate situation hasn’t changed much. Anyone thinking of altering that arrangement usually gets short shrift.

      People are greedy, Morag, and selfish too. People want low tax rates. They want services but they want some other way to fund them. Remember the howls of protest over the “penny for Scotland” idea?

      It’s become the thing for Parties to make a point of saying no to higher taxation. That’s what I think George is getting at.

      1. SleepingDog says:

        @Jo yet Thatcher raised VAT from 8% to 15%, and John Major’s government raised it further. And of course the Poll Tax was another tax hike on the poorest. I would say that Thatcher spent a lot of time talking (and sometimes lying) about lowering taxes.

  6. Delta says:

    Oh Shaun Downing lets to indy

    We’ve been in charge of education policy since the time of John Knox and it was fine until…well the SNP got their hands on it and we’ve had to withdraw from PISA

    We spend 20% more on health than the rest of the UK per head and…er well some of us have been waiting three – yes three years to move into the new Sick Kids now we/ve been told this spring – money amongst “those who know” is next spring – but we are devolved for health. And all the SNP can say is we are doing better than England – well I should hope so – and dosnt that remark reveal the abject lack of imagination or policy at the heart of the SNP when all they can aspire to is being better than England.

    Then Police – well if Susan Deacon couldn’t get a handle on it – no one will

    But hey it’s all about tory cuts

    And we will be the land of Milk and Honey after we get independance and join the EU – hard border with our biggest market(England) and France and Germany “helping” us the way they did Greece and Ireland and oh….bring on the Euro!

  7. CHRIS Jaques says:

    When we refer to child poverty has anyone ever researched what the parent or parents spend the family income on?

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