Built on sand
Jim O’Neill examines the Scottish Budget in depth, finding some things to cheer but much to be concerned by.
In the spirit of the season, Derek Mackay’s budget can be responded to in three ways. First there are some elements to which I can give an unconditional hurrah. There are those bits for which there are small hurrahs, but substantial reservations. And then the baddies arrive to resounding boos. And then here comes the Scottish Financial Commission, our own OBR, with a shocking bucketful of reality. It’s wet fish across the chops time. Oh yes it is!
Let’s deal with these in turn.
Firstly, I’m cheering wildly about the much needed Carers’ Allowance. My very good friends in the caring community deserve to have the costs on their lives repaid. But they can speak for themselves.
The additional funding for primary care is welcome. I hope, however, that the Trusts will actually use the extra funds for primary care, mental health and social care and not to add to the additional £400m to sort out their black holes.
Further, the additional funding for childcare and for the Attainment Scotland Fund are very welcome. Both work towards improving the lives of our next generation.
Finally, the Scottish Investment Bank and the extra funding for housing address a number of key elements in driving forward the Scottish economy but, without looking at the detail in the budget document, I do not know if he has resolved the issue of land cost, the biggest block on housing development. I suspect not, or he would have been shouting it from the rooftops.
Cybernat alert! I turn now to the areas that I have some issues with. I am glad that the Finance Secretary has created a five-band income tax system. It is how I responded to the consultation. However, I have one concern about the bands. My proposal included a higher band, starting at say £300,000, with a tax band of 50%. But we heard the same weasel words from Mackay as we have heard before from Hammond. I have to say, if a higher rate will cause a mass of wealth people leaving the country, why are we not awash with Germans, French and Scandinavian millionaires who seem quite happy to pay a higher tax rate in return for the better opportunities in their own countries?
Instead the Finance Secretary introduced a piece of political flimflam, to great applause from the seals in the background (led by the ever more ludicrous John Swinney) by cutting the tax liability for the £11,850 to £13,850 group by all of 1%. What he didn’t say was that everyone else gets that too. At least when Gordon Brown made this mistake he actually made a substantial cut to 10%, to the howls, if I remember, of the SNP members among others. We all remember the abuse that he, rightly, took and the band was reversed later. If we are going to sort the tax system out, let’s do it by taking from those who have and giving to those in need.
My next area of cautious welcome is the lifting of the cap on public sector salaries. I did not say remove because all he has done is raise the cap to a new level still under the current CPI rate of inflation and still well below the RPI rate. However, unlike the Westminster Chancellor, he did not offer to fund this increase, especially in the NHS nor in local government. Since these two are the highest employers in the public sector, they have the greatest problem. It is clear that the public services will have to pay for any cost of living increase from their somewhat limited resources.
So, we now turn to the Boooo bits. Yet again there is no plan on Council Tax. If Councils were allowed to increase their own tax bands by another, say, two, this would create the facility to cut the costs of those living in a and b band houses and ask those who have benefited from the great housing price increases over the past 20 years to pay a little more. It would also improve the percentage income raised by councils. Far be it from me to suggest that it suits the nats to ensure finance remains centralised…
Councils waited with bated breath for the announcement. Some SNP-led councils have gone public that they can’t cope. Labour councils, like my own in North Ayrshire, just get on with delivering budgets without cuts, and ensuring that those in most need are focused on. But CoSLA said that the councils’ need was in excess of £550m just to get back to the 2011 position. Thus, with a standstill revenue budget, councils already are facing a 3.1% cut plus the increased problem of facing staff expecting a 3% increase in April.
So the supposed largesse to councils is more flimflam. Even the increase of capital costs are a chimera, because to build you need staff, both at the planning and delivery stages. Wages etc are not covered by capital funding. The poor old councils, providing the majority of public services that touch both you and me, are hit yet again.
But who is this riding to the rescue of young Derek, as the OBR has ridden to the rescue of Chancellors at Westminster? It is our own Scottish Financial Commission, Scotland’s version of the OBR.
Woopsee, Derek is deep in the sticky stuff. We all remember the ridicule that was heaped on the Tories when it was announced by OBR that growth would be low at 1.6% and would stay low for a number of years. Surely Scotland can beat that. There was a stunned silence when it was revealed that growth in Scotland was 0.7% this year and would stay below 1% for at least another 4 years.
The Finance Department have done their sums on a growth figure of 3%. Thus the tax take will be £164m, more than for the past but a bit below the funding removed by Westminster. Over the next few years, if the FSC is correct, the Finance Secretary will underperform on tax raising. Not my words. Read the 300 or so pages of the FSC analysis of the budget.
So in summary I am not greatly impressed by this budget. He says he is limited in what he can do, but he can, for instance, go after the Scottish Limited Liability Partnerships, which are disfiguring our streets, and are nothing more than vehicles to move the ill-gotten gains of Eastern oligarchs into off-shore accounts. Just an idea.
Derek Mackay’s first budget is full of missed opportunities, but most of all is built on the weak and ever-shifting sands of Scots productivity and growth. I do hope that Mackay is right and can work with local organisations to create growth. In North Ayrshire, one of the most deprived areas in the country, it is time for our parliamentarians (all SNP) to demand action and not just vote, like lemmings, for the continued poverty of their constituents. I am sure it is the same elsewhere. If they can do it at Westminster, surely all humanity demands that they can do it at Holyrood.