The SNP’s budget choices – which way will Derek turn?

The SNP’s budget choices – which way will Derek turn?

by Murdo Fraser
article from Friday 26, October, 2018

ON MONDAY we will have the UK Government’s Budget from the Chancellor of the Exchequer. This is eagerly awaited in Scotland, because it will help identify the overall size of the Scottish Government’s budget for the coming year. Amongst other measures, it is widely expected that a substantial uplift in health spending will be announced, which will feed through in Barnett consequentials to the Scottish public finances.

Of course, the block grant makes up an increasingly small proportion of the Scottish Government’s overall spending, with now nearly half of the total made up from taxes raised within Scotland – Income Tax, LBTT and Landfill Tax. From next year, one-half of the total VAT take in Scotland will also be assigned.

Monday marks the point that Derek Mackay, the Scottish Finance Secretary, can set about with serious intent on preparing his own budget, due to be presented to the Scottish Parliament in December. As the SNP are a minority government, they will need the support of at least one opposition party for the budget to pass. And, already, opposition parties are setting out their demands.

Both this year, and last year, it was the Greens who came to the rescue of the SNP, in both cases demanding additional tax rises over and above what the SNP originally proposed. The intent to put Scotland at a competitive disadvantage in tax compared to the rest of the United Kingdom meant that the Scottish Conservatives could not even entertain serious budget discussions.

But this year might well be different. Already the Greens have suggested they are much less likely to do a deal with the SNP than previously. Without clear progress being made on the reform of local government taxation, the Greens will withhold their support. And Derek Mackay, looking at the tragic history of governments which have tried to reform local taxes, is most reluctant to concede on this point.

But there is another option. On Tuesday, along with my colleague Rachael Hamilton MSP, the Shadow Secretary for Culture and Tourism, I set out the Scottish Conservative position on the budget for next year. And, in that, I was keen to highlight areas where both the Conservatives and the SNP could work together.

Last year’s budget deal between the SNP and Greens was bad for jobs, and bad for the Scottish economy. We do not want to see that repeated this year, and for that reason the Scottish Conservatives have made it clear that if the SNP are prepared to deliver a budget that puts the needs of the Scottish economy first, then it could win our support.

It is essential that the SNP drop their plans for a second independence referendum, ruling it out until at least 2021. There is no public demand for this, and the constant threat of a referendum continues to act as a drag on Scottish economic recovery. Moreover, from any practical sense a referendum before 2021 must now be highly unlikely, so it is hardly an unreasonable request to make of the party in government.

Beyond this, both the Scottish Conservatives and the SNP already support action to reduce Air Passenger Duty (or Air Departure Tax, once devolved). Research has shown that this could encourage as many as 20 new connections from Scottish airports, massively boosting the economy, and opening Scotland to the world in a post-Brexit environment.

There are legal issues around the current State Aid exemption for Highlands and Islands airports to be overcome, but we want to see the Scottish Government working with the UK Treasury to find ways around these. With the right political will, we believe this is a policy that can be delivered, and one for which there is a clear majority in the Scottish Parliament.

In addition, we want to work with the SNP to give greater support for our struggling retail sector. High streets across Scotland are suffering, with a loss of a whole list of household names. Only this week Debenhams announced the likely closure of 50 stores across the UK, putting at risk some 4,000 jobs. Scotland will be taking its share. We need real action on business rates, reducing the Large Business Supplement which sits far higher in Scotland than the rest of the UK, and improving the Small Business Bonus scheme.

And all this must be underpinned by a competitive income tax regime in Scotland that means we no longer deter jobs and investment. If the SNP can deliver on these modest asks, then we might well have the basis of a deal.

Derek Mackay is fond of telling business leaders that he is on their side, and that his priority is economic growth. In a few weeks’ time, he will have the chance to prove it.

If he wants to hold back Scotland’s economy, he can once again do a deal with the Greens. If, however, he is serious about growing our economy, and boosting our tax revenues as a result, then he can work with the Scottish Conservatives to deliver a budget for growth.

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