COMMENT

Like a good drama, yesterday’s Budget needs to be considered in Scotland as the first half of a two-act play. With government’s fiscal levers split between Holyrood and Westminster, and the economic performance of both nations interconnected, the statement laid out several questions which need resolved after the interval. It will be up to finance secretary Derek Mackay to deliver the denouement in next month’s Scottish Budget.

Like any good play, resolving all the points raised will take imagination and require courage. Although the Budget contained some £2 billion of Barnett consequentials for Scotland’s devolved administration, once that figure is broken down by capital, revenue, and innumerable other complex accounting rules, there won’t be much cash left for public sector spending increases.

Of course, Chancellor Hammond had little room for manoeuvre. In the main that’s the result of the downgrade by the OBR to UK productivity growth forecasts, and consequently economic growth. The prediction the UK economy won’t reach 2 per cent economic growth over the next five years is very concerning, and has serious implications for government revenue, consumer spending, and more importantly jobs and living standards. Of course, the £3bn set aside for Brexit preparations also has an impact on the money available, hence the decision to loosen borrowing restrictions over the next few years.

Nonetheless, there were some welcome announcements. The news business rates revaluations in England and Wales will now be every three years is sensible, and of course follows the lead set by the Scottish Government earlier this year. The more important announcement was that business rates indexation will now be based on CPI. That’s something the SRC has also called for, and we hope Mr Mackay will bring Scottish business rates into line with CPI as well.

Consumers will be pleased that the income tax personal allowance will continue to increase, although of course it will be up to the Scottish Government whether to top this up. Indeed, when wrapped in with the Chancellor’s surprise announcement on abolishing stamp duty for first-time buyers for properties up to £300,000, there are several personal taxation measures where Holyrood must choose whether to take a different approach to Westminster.

That’s going to be a difficult decision. The UK growth downgrade probably means Scottish economic growth rates are in even more peril than before. With current GDP figures fragile, any moves to increase costs to business or consumers puts the economy in jeopardy. In particular, retailers would be very concerned at measures which would put up income tax, especially as they are already facing rising inflation and interest rates.

Ultimately though, the answer for the Scottish Government is the same as the UK government. Only through growing the economy can they increase revenue, through higher wages, employment, and consumer spending. Delivering that ought to be the priority for both governments. l Ewan Macdonald-russell is head of policy at the Scottish Retail Consortium

“Like any good play, resolving all the points raised will take imagination and require courage”