pHILIP Hammond’s UK Budget last week was a lacklustre affair with some extra spending on health and housing, but grim economic figures. And then came a forecast from the Institute for Fiscal Studies that real wages won’t recover to pre-crash levels for another decade.
In a couple of weeks it will be Finance Secretary Derek Mackay’s turn to set out his tax and spending plans. He now has the necessary details of how much Scotland will be getting from the UK Government – though the UK says it is £2 billion while the SNP insists that in real terms it is more like half of that.
Some had urged Mr Hammond to deliver a “big and bold” budget to help put Theresa May’s beleaguered government on a better footing. And it was portrayed as a “make or break” moment for Mr Hammond personally amid speculation he could lose his job in a reshuffle.
But the extra cash for the NHS and for housing was modest – and it is to be funded by selling off two-thirds of the public stake in RBS despite the share value currently being half what the government paid when it bailed out the bank.
Mr Hammond abolished stamp duty for first-time buyers south of the border on houses under £300,000 but experts say the move is likely simply to increase house prices.
And he scrapped future VAT payments by Scotland’s emergency services, crediting the 13 Scottish Tory MPs for persuading him to change policy on the issue.
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Mr Mackay must now weigh up the investment and day-to-day funding he believes necessary and the options for using the Scottish Parliament’s recently acquired powers to increase income tax.
But the expectation is that income tax will go up, with an adjustment of the bands. That’s at least partly because as a minority government the SNP will need the support of at least one of the opposition parties to get its budget passed. And with the days of deals between Alex Salmond and the Tories’ Annabel Goldie long gone, all the other opposition parties argue income tax must rise.
The Greens are thought the most likely to provide the crucial votes to get the SNP’s budget through, but they want the most radical tax moves, including a 60 per cent rate for income over £150,000.
Budget time gives Holyrood’s opposition parties a real taste of power. Ministers need to talk to them – and more significantly listen – because otherwise they are not going to get their financial plans approved.
Last year the Greens secured a last-minute £160 million boost for local government as part of their negotiations with the Scottish Government.
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A repeat of that deal would be widely welcomed. Edinburgh and other councils across Scotland are currently looking at what they must do to balance the books for next year in the face of expected funding reductions – and it is a worrying picture.
Cuts in services, increased charges and further job losses seem inevitable. In Midlothian, where measures under consideration include closing all but one of their libraries, reducing road maintenance and scrapping lollipop patrols, council leader Derek Milligan said the level of cuts being forced on the authority amounted to “an attack on society itself”.
If taxes have to go up to make sure services – and civilisation – are maintained, that is a price many will believe is worth paying.