It’s official – Scotland to be the highest taxed part of UK
● Scots Budget: Mackay says no to UK tax break ● Council tax hike signalled
Finance secretary Derek Mackay yesterday signalled that local authorities could raise council tax by 3 per cent to meet the squeeze on council budgets.
The prospect of council tax rises was raised by the finance secretary as he presented the first ever Scottish Government budget to set a different income tax rate than the rest of the UK.
In his first budget, Mr Mackay also confirmed that Scotland would become the highest taxed part of the UK when he declined to pass on the UK government’s planned tax break that will see the threshold for higher-rate earners south of the Border increase from £43,000 to £50,000 over the next few years.
Mr mac kay presented his budget amid claims from opposition parties that council budgets will be cut by £327 million
Opposition parties quoted budget figures which suggested spending on local government in 2017-18 will be reduced by almost £448m since the previous year – a sum which will only be partially offset by a £121m increase in central government grants to councils.
The Conservatives, Labour and local authorities pointed out the difference between the two sums comes to around £327m. The Scottish Government, however,
claimed the reduction in council budgets amounted to just £47m which would be more than offset by the £111m raised by its plans to increase council tax across band E to H properties.
Faced with the reduction in council budgets, Mr Mackay said a further 3 per cent hike in council tax would raise an additional £70m when he presented his budget to Holyrood.
Mr Mackay said that another £107m would come to local authorities from the NHS budget to pay for the integration of health with social care.
In the face of strong opposition, Mr Mackay also performed a U-turn on the Scottish Government’s plans to use council tax rises to close the attainment gap by using the money to turn around schools in poor areas.
Opposition parties had argued that money raised locally should be spent locally.
Announcing his budget, Mr Mackay said: “The £111m that will be raised through council tax re-banding will be retained locally. And local authorities will also be free to increase the council tax generally by up to 3 per cent next year, generating – if they so choose – a further £70m.”
Closing the attainment gap, which sees pupils from affluent areas outperform their poorer counterparts in the classroom, is one of the Scottish Government’s key priorities. Mr Mackay said the Scottish Government will now hand £120m from its own funds to headteachers in 201718 to achieve this.
The finance secretary defied calls from Labour, the Lib Dems and the Greens to raise taxes further.
Labour’s Kezia Dugdale had called on the Scottish Government to use its new powers to increase the income tax rate from 45p to 50p for those earning more than £150,000.
While he said he “sympathised” with calls for the 50p top rate of income tax to be reintroduced in Scotland, Mr Mackay stressed he “had to balance that with the risk to our economy”.
This approach, he insisted, was “right thing to do for our economy, jobs and public services”.
But Conservative finance spokesman Murdo Fraser said: “When it comes to local government, this budget is quite simply a massive con on the people of Scotland.”
He added that the Scottish Government was “actually trying to pull a fast one on Scotland’s local services”.
Mr Fraser said: “Local councils face a real terms cut in their grant of more than £300m.
“It’s taking away with one hand, in order to give a little back with the other. What a shambles.
“This is a Scottish Government which wants to make Scotland the highest-taxed part of the United Kingdom. Scots will pay more but in return get a shambolic mess on education and the NHS.”
Ms Dugdale said: “The SNP finance secretary has unveiled a budget today that will see the heart ripped out of public services.”
She added: “However the finance secretary tries to spin it, today’s budget means a realterms cut of £327m from the SNP government to local services.
“They’re making up the difference by holding councils to ransom – forcing them to use their tax powers while they refuse to use theirs.
“They could have asked the richest 1 per cent to pay a little more with a 50p tax but they refuse.
“This budget passes on Tory cuts to the people of Scotland. It makes Derek Mackay no better than a Tory chancellor.”
With the SNP having pledged to increase free childcare for three- and four-year-olds and vulnerable two-year-olds, the finance secretary also promised £60m for early learning.
“We are prioritising education and this budget provides the resources to match,” the finance secretary told Holyrood.
There will be £470m of capital funding to help the Scottish Government with its goal of building 50,000 affordable new homes over the lifetime of the parliament.
Mr Mackay also announced £3m for a “targeted fare reductions” for rail passengers, but did not go as far as meeting Labour’s demand for a freeze on ticket prices.
The Scottish Government has faced calls from Labour to freeze train fares next year after Scotrail Abellio’s performance slipped below agreed standards
Mr Mackay said doing this “would compromise the investment programme that is so vital for improving the performance of our rail network”.
The Finance Secretary, Derek Mackay, announces Scotland’s first annual budget since the Scottish Government received new tax powers under the postreferendum Smith Commission measures and for now, it seems as though the main public debate will be over a few small variations in income tax that could result from that change. The Conservatives want lower taxes wherever possible, in order to make Scotland “more competitive” – although recent economic history suggests that there are better competitions to join than the one to attract the kind of high earner who resents paying a few extra quid to support the country’s basic physical and social infrastructure.
Labour, by contrast, wants a 50p tax rate on the top 1 per cent of earners, and a 1p rate increase all round, mainly to help boost Scotland’s struggling local services. And the SNP, it seems, will dip a timid toe into the stormy waters of differential tax rates between Scotland and England by raising the level at which the higher tax rate kicks in only in line with inflation, rather than giving those earning more than £43,000 a year the small extra boost recently signalled by the Westminster government.
The Tories and the Daily Telegraph, of course, call this “clobbering hard-working families”, and attacking the living standards of “middle-class Scots”. Yet in fact, people earning at this level are in or close to the top 10 per cent of earners, far above the “middle” of society. And the additional sum they are being asked to pay is about £6.50 a week, roughly the price of a single large glass of wine in a pub – I would be interested to see substantial evidence, after the fact, that any of them will miss the money at all.
It is, in other words, something of a pity that this exaggerated yowling and breastbeating about very minor tax-rises for the better off has become such an ideological fixation in UK political debate; for if the case for some higher taxation is almost unanswerable, after eight years of austerity, there are many other aspects of the SNP’S current programme that need the sharpest scrutiny, and betray the party’s apparently almost infinite capacity for ideological inconsistency and confusion.
This is a party for, example, that says it wants to reduce tax breaks for the welloff; but is apparently determined to cut Air Passenger Duty, a measure which is not only environmentally questionable, but also disproportionately benefits Scotland’s tiny minority of affluent frequent flyers. This is a party which talks the talk on workers’ rights, and a decent living wage; but also cultivates friendly relations with companies like Amazon – when this week it was claimed that some of its Dunfermline warehouse workers were living in tents at the site, rather than attempt the impossible feat of working long hours, and commuting to and from their homes in Perth on the minimal wages they earn. This is a party which talks about empowering Scottish communities, but has presided over a further drastic decline in the financial autonomy and status of Scottish local government; this year, Scotland’s capital is apparently so cash-strapped that it cannot even afford any significant Christmas lights outside the city centre.
Above all, this is a party that constantly trumpets its green credentials; but which seems incapable of developing a policy on transport, and particularly on new roads and bridge construction, that bears any relation to its low-carbon commitments. And its relationship with the North Sea oil industry suffers from the same ambiguity. As Bank of England governor Mark Carney pointed out this week, carbon reduction targets dictate that most hydrocarbons now still underground will have to remain there. Yet yesterday in the Scottish Parliament, climate change champion Nicola Sturgeon was to be heard heartily agreeing with one of her own MSPS that there are still massive untapped reserves of oil in the North Sea, and that the industry must be supported in exploiting them.
The Scottish Government is not alone, of course, in sending out such mixed signals; they are the depressing common currency of western politics. There are two reasons, though, why this failure of clarity on the part of the Scottish Government is particularly frustrating.
The first concerns its very strong political position – even with the worst possible political luck, the SNP has another four and a half years of government ahead of it at Holyrood, and is likely to be the largest party there until at least 2026. Under these circumstances, it has no excuse for the kind of short-termism that plagues democratic government across the West.
It could afford to take long views, to set up think-tanks and research institutes to develop serious strategic policies, and to demand consistency in pursuing those strategic goals across all departments of government – yet still it does not do so, in ways that could cost us all dearly over time.
And then secondly, this failure is frustrating because Scotland’s potential, in these years of transition away from a carbon-based economy, is so obvious, and so vast. The truth is that if we seize the global opportunities that are emerging now, and use all our expertise to invest in an industrial and energy infrastructure that serves that new low-carbon economy, this country could be looking at a immensely exciting and prosperous future, generating sustainable jobs and an ever-higher quality of life for a growing population who have chosen to make their lives here.
Yet instead, we waste time bickering over the remnants of a neoliberal low-tax ideology that has had its day, and over the prolonging of the most recent wave of hydrocarbon exploitation to come into Scottish communities for a few decades, and then disappear again, leaving them for dead. To say that this is not the way of the future is to state the obvious.
And the greatest gift Nicola Sturgeon and her government could give Scotland now would be to lift their eyes for a moment from the detail of day-to-day policy, and start drawing a clearer picture of the future to which they want to take us; and of how the paths they are pursuing now will lead us, in time, from here to there.
The SNP needs to be clear
on the future it wants for Scotland, and how it will take us there, writes
Joyce Mcmillan