The Scottish Budget Challenge: Raise revenue to deliver on promises without raiding local services & without hitting low earners
A budget, from either government, is always a critical point on the parliamentary calendar. It’s true that budget documents are only fully understood in the days or weeks after publication, but I guess we all need to make a first stab it is, so here’s mine.
All governments play a bit of a game with their budgets, drawing attention to the good news and hiding the bad. It’s often called “smoke and mirrors”, but given the way governments try to lead their rivals to pick on the wrong aspects to criticise, I think the old cup-and-ball routine is a better metaphor.
But the process this year is even more complicated. It’s the first time that a UK budget has been produced in the new November slot, leading to a frantically short period for the devolved institutions to agree their own budgets. It’s also the first time that the Scottish picture is based on the new, hideously complex “fiscal framework”. The broad brush strokes have been set by the Chancellor, but we now need the independent projections of Scottish tax revenues, followed by a decision by the Scottish cabinet about the tax rates they propose. Only with all these elements in place will we know the total Scottish budget for next year, and the potential for investment in areas like public sector pay, local services, and housing.
On housing, all parts of the UK face serious challenges. The cost of housing both for rent and sale, and the barriers to getting new social housing constructed, must be addressed urgently. Sadly the UK Government’s solution seems doomed to fail.
It’s generally agreed by everyone except the Tories themselves that their cut to Stamp Duty (which has been replaced by a devolved tax here, known as Land and Buildings Transaction Tax) will only force house prices even higher. That’ll be fine for people selling a home… unless the place they’re moving to also goes up! But it won’t help first time buyers at all. They’ll pay a bit less tax, but they’ll pay more for the purchase price, ending up no better off. And the UK government approaches to stimulating supply, and to giving so-called “Help to buy” will suffer from a similar effect – just throwing more money into a dysfunctional housing market won’t actually solve the underlying problems.
New housing is needed of course, but we must also find ways to bring prices down, and drive supply according to social need instead of speculative investment. Greens have been pushing for councils to have to right to buy land at current “use value” – before the price goes up as a result of planning permission. This would massively cut the cost of new supply, and give some public control of the housing mix being developed. That would be a real solution to make the housing market function in the public interest.
Finance Secretary Derek Mackay isn’t likely to be in a position to offer new tax giveaways, so I doubt he’ll be planning to copy this foolish UK policy even if he wanted to. Indeed he should be very grateful to the Greens for forcing him to find a pretext for postponing his tax break for the airlines – a policy which should simply be ditched altogether.
No, Derek’s real challenge will be in constructing an Income tax proposal which meets multiple needs. He must raise enough revenue to deliver on promises like a real terms pay rise, without raiding local services to pay for it, and without hitting low earners who are already struggling. The Green proposals have shown that this is achievable, though as our preference was to match national tax powers with local ones, and the SNP has stalled on local tax reform, he’ll need to go further on income tax if he wants to make progress.
In other news, this was also the week when Richard Leonard gave his debut FMQ performance as the Leader of Scottish Labour. The social media response to his performance was entirely predictable – opponents of Labour generally derided him, while supporters claimed it as a solid start. The only surprise was from his predecessor Kez Dugdale, who had already managed to upstage him last week by announcing her reality TV gig right before the leadership election result. Come Thursday, she did it again with the release of a grim video clip of her wading through fish guts, just as Richard got to his feet in the chamber.
Kez, for whom I have far more time than most of her party seem to, tried to justify her stint on I’m a Celeb by claiming she’ll be able to connect with viewers about Labour values… and then proceeded to allude to her former colleagues as rats and snakes. I believe this is what the young people call shade.
This article first appeared in the National