Johnstone’s View - Historic budget for Scottish Govt

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In one of the last actions by the Scottish Government before the Christmas recess, Finance Minister John Swinney introduced his budget for next year.

This was a historic budget for the Scottish Government. For the first time since the introduction of devolution in 1999, the Scottish Government’s finance secretary was not simply concerned with the distribution of the resources made available to him through the block grant from the United Kingdom Government in Westminster.

This time, for the first time, due to the provisions contained within the Scotland Act 2012, he had at his disposal a substantial power to vary the total resource in his budget by amending the rate of income tax.

With all these new powers at his disposal; the power, for the first time, to increase the amount of income tax paid in Scotland to better match the spending plans which he has been hinting at for the last eight years, what did he choose to do? The finance secretary chose to set the Scottish rate of income tax at exactly the same rate payable elsewhere in the United Kingdom.

Now this is not a criticism; I applaud that decision. I do not believe that hard-pressed families in Scotland should pay higher taxes than those elsewhere in the United Kingdom, but it must not be forgotten that the finance secretary had a choice in the matter, and he chose not to increase the resource available to him by levying additional taxes.

For all that we have heard about austerity and swingeing cuts, we must remember that the Scottish Government’s total budget for next year will be, in cash terms, nearly £400 million higher than in the current year. In real terms, taking inflation into account, there may be a small decrease, but that decrease is substantially less than the finance secretary’s most recent budget underspend. In that context, any talk of swingeing cuts simply looks ridiculous.

If it is still the position of SNP members that the Scottish budget is too low, then the solution is in their own hands. The finance secretary could have chosen to raise the rate of income tax but he decided not to. I trust that we will hear no more from SNP members about austerity and Westminster cuts, when they have made the choice not to increase the size of the budget available. They had their chance, and they flunked it.

There are some things in the budget which I can welcome, like the promised review of non-domestic rates—a straight lift from the Conservative party general election manifesto. Where the Conservatives lead it seems that the SNP follow. However, it is disappointing that there is no restoration of the SNP’s swingeing cuts to college budgets.

I was disappointed that the finance secretary did not correct the mistakes in his land and buildings transactions tax, introduced only nine months ago in April. The scheme is having a serious negative impact on the housing market in many parts of Scotland.

We also need to remember that John Swinney’s deliberate decision to target larger houses with his new tax, believing that he would be punishing the ‘rich’ and protecting the ‘poor’, means that his government is now looking at a collapse in the revenue previously predicted to be raised from residential property.

Anyone trying to sell a house in the Mearns at a price much above the average at the moment, will know exactly what this new tax, and it’s disproportionate banding, has done to the housing market.

When it came down to the details, the budget contained all the ‘sleight of hand’ we have come to expect. In his statement to parliament, the cabinet secretary said that he would be protecting the higher education budget, but according to the draft budget, it is falling by £35 million in cash terms. He also claimed in his statement that he would be protecting policing with a boost of over £100 million, but the Scottish Police Authority budget appears to have a real-terms cut of £12 million.

In one of his most widely praised measures, the cabinet secretary said in his statement that he will increase, “the budget for affordable housing next year by £90 million, enabling us to invest around £690 million in housing supply.”

In the budget document, the figure projected for the next year is £695.4 million, which is just £1 million more than the budget figure for last year. It appears that the cabinet secretary has either got his sums wrong or that there is a corresponding £90 million cut still to come.

Next Year, Scotland’s newly elected government will have at its disposal, all the additional taxation powers of the Scotland Act 2016. Then we’ll really find out how much extra tax we’re all willing to pay. Happy New Year!