Derek MacKay presented his draft budget to the Scottish Parliament on Wednesday the 12th of December.

The Draft Scottish Budget 2019 – 2020

Derek MacKay said:

Derek MacKay Finance Minister

“This is a budget of stimulus and stability. It delivers for today and invests in tomorrow and does so with fairness, equality and inclusiveness at its heart.

“This budget delivers the public services, social contract and economic investment people expect while mitigating, where we can, the impacts of the UK Government’s policies of austerity and Brexit that are causing so much harm.”

Brexit looms over the allocation of finances.

He said:

“It is disappointing that we are facing the prospect of having to revisit these plans in the event of a chaotic no-deal outcome. If leaving the EU can be avoided, those resources currently being directed towards essential preparations can be reinvested into our public services and economy.”

What has been the reaction elsewhere?

Conservatives

Murdo Fraser MSP, Shadow Cabinet Spokesman for Finance attacked the Scottish Government’s income tax proposals which sees those on the higher rates paying more than if they lived in rUK. He said this would make it harder to recruit talented people to Scotland.

He welcomed the additional money for the NHS but that the amount for local government fell well short of what was needed.

Murdo Fraser said:

“This is a pay more, get less budget.

“It does not have to be this way. There is a different route that the finance secretary can choose. We are happy to sit down and have a serious discussion with him about his budget, if he commits to reducing, not increasing, the tax gap with the rest of the UK, and if he commits to dropping the SNP’s ruinous plans for a second independence referendum.”

Labour

James Kelly, Shadow Finance Secretary described public services in Scotland as being at breaking point and a rail service that was in chaos.

He said the draft budget was ‘woeful’.

James Kelly said:

“There are nearly 3,000 fewer teachers in our schools, and nearly a third of children fail to reach the required level of literacy by the end of primary school.

“Few things better sum up the cruelty of the Tory Government than the two-child cap on tax credits and universal credit, which punishes people for raising a family, yet the SNP has refused to use its powers to put an end to that vile policy. With 230,000 children in Scotland living in poverty, the cabinet secretary should have backed calls to increase child benefit by £5 per week; that would lift 30,000 children out of poverty and put money in the pockets of families across Scotland. “

Labour have said that the Scottish Government should stop tinkering around the edges of Tory austerity policies and use its powers to end the 2 child benefit cap and rape clause.

Can the Scottish Government end the 2 Child Benefit Cap and Rape Clause?

see : Devolved and Reserved Matters 

And SPICe Briefing SC/S5/17/12/1

“Section 24 of the Scotland Act 2016 devolves the power to top up reserved benefits.

This power might potentially allow a top-up payment to be calculated for every claimant getting a UC or CTC award that included children.

The Scotland Act 2016 Explanatory Notes describe s.24 at para 192:

“Exception 5 provides the Scottish Parliament with legislative competence to introduce discretionary top-up payments to people in Scotland who are entitled to a reserved benefit. These top-up payments could be paid on an individual case by case basis or to provide on-going entitlement to specific or all benefit claimants.”

However, some larger families may not qualify for CTC/UC due to their level of income with only two children included in their claim, but might have qualified if all of their children were included. In this situation, the top-up power would not seem to be able to mitigate the effect. If there is no entitlement to a reserved benefit, it appears that there would be nothing to top up.”

Information on the UK Government’s 2 child limit: claiming benefits for more than 2 children

Scottish Greens

Patrick Harvie, Co-Convener of the Scottish Greens explained how Green pressure had resulted in the Scottish Government having to change their draft budgets in the past.

He said that local services faced increasing demands and that they should have the power themselves to raise additional income. He called on a reform of local taxation.

Patrick Harvie said:

“Scotland’s fairer income tax system, brought about by Green pressure, could still go further in reducing inequality, for example by looking again at the top rate paid by the very richest.

“On education, the continued use of Pupil Equity Funding is papering over the cracks when we have lost thousands of teachers under the SNP, and as ministers have wasted time on unwanted governance reforms instead of reversing the budget cuts of previous years.

“It’s also reckless for this budget to contain no measures to address the climate crisis. The science has changed and the situation has become more urgent but SNP Ministers’ attitude has yet to catch up. It’s why we need a Climate Emergency Bill and this budget should be driving the investment we need in cleaner transport, energy and food production but instead it appears to continue business as usual.”

Attacking Derek Mackay’s proposals for funding to local councils Patrick Harvie said,

““Derek Mackay has a brass neck trying to pass off hundreds of millions of pounds in council cuts as a funding increase. National policies like childcare expansion should be funded from national resources, not from a raid on council budgets. Councils across Scotland will now be forced to consider cutting vital services – threatening jobs – unless the Finance Secretary changes course and delivers a real real-terms funding increase.”

He said that the clock was ticking and the Scottish Greens would not support the budget unless there was action taken to reform local taxation.

Liberal Democrats

Willie Rennie, Leader of the Liberal Democrats in Scotland said that Scotland was beset with low productivity and called on the Scottish Government to cease their pursuit of independence which he said would lead to more chaos. He described the budget as failing to meet the challenges that were holding Scotland back.

Willie Rennie said:

“Our priorities for this budget are investment in mental health services, a decent pay deal for teachers and a fair deal for local government. “

““The SNP have been in power for 11 years. They have been ignoring our positive suggestions on mental health and education for most of that time. So it is a bit steep for them to now expect us to step in to save them while their focus remains on their independence campaign.

“Brexit is costly and damaging. The lessons of Brexit are the lessons for independence. Unless the SNP park their independence campaign the risks to the Scottish economy and productivity will remain.

“This budget fails to address the challenges which are holding Scotland back. Derek Mackay’s fate is now in the hands of the Green Party.”

Willie Rennie has stated that the Liberal Democrats will not negotiate over the draft budget.

COSLA

COSLA is the organisation which represents Scotland’s local authorities. It said that the draft budget was a cash cut to its core funding but that it would engage with the Scottish Government to try and get a better deal.

Councillor Gail Macgregor, COSLA’s Resources Spokesperson  said:

“First and foremost my feeling is one of disappointment. Disappointment for councils, disappointment for communities and disappointment that Local Government’s role as a deliverer of vital services, an employer and a procurer has not been recognised.

“There is always smoke and mirrors around how those at the centre present their budget. The one message that the Scottish people need to take from today’s budget is that the Local Government’s core budget which provides our essential services has taken a hit.

Councillor Alison Evison  the President of COSLA said:

“Whichever way you want to dress it up, the reality of the situation is that yet again the totality of the essential services Councils deliver has been neglected by the Scottish Government.

“There is no scope for Local Government to mitigate the impact of these cuts as there has been no movement yet on local taxation – the 3% Council Tax Cap remains and there is no indication about discretionary taxation, including Tourist Tax.

“What we have today is a bad deal for communities and for jobs. Given these proposals today, serious financial challenges lie ahead for councils.”

For the reaction from Orkney Islands Council click on this link: OIC to Press For More Funding in Budget for Internal Ferries

CBI

The CBI in Scotland which represents the business community recognised the challenges presented by a possible no deal Brexit and that the Scottish Government had to make tough choices.

Tracy Black  Director of CBI Scotland said:

“We welcome the fact that the Finance Secretary has listened to CBI Scotland and other stakeholders on business rates, scrapping the unhelpful out-of-town levy, capping the poundage rate and confirming the switch from RPI to CPI for the duration of this parliament.

“Scotland’s workforce is one of our greatest assets and we would like to see further detail on upskilling and retraining plans. Making use of the full talent we have available is key to boosting productivity and we’re encouraged by the Finance Secretary’s specific commitment to helping more women return to work.

Like the Conservatives they also voiced  concerns over the rate of income tax for those on higher wages and that it would deter talented people from working in Scotland

Is there room to manoeuvre ?

The Scottish Budget is a draft which means to a certain extent it can be changed. It may also need to be altered as the fall out of Brexit becomes clearer.

The Liberal Democrats have said they won’t negotiate and the Conservatives want changes made to the higher rate of income tax, bringing it down to be the same level as in rUK. Derek MacKay has made it clear that won’t be happening.

This just leaves Labour and the Scottish Greens to try and get some of their ideas incorporated into the Budget. COSLA too may have an opportunity to press their case.

Some of the allocation of funds to local authorities are ring fenced. This means that the money is supposed to be spent on those national priorities and not diverted elsewhere.

Scotland’s taxes are paid into the UK exchequer and then a proportion of those are returned, this is known as the Block Grant. The Block Grant is calculated by means of the Barnett Formula. It can be changed by the UK Treasury whenever it wishes to. Over recent years the Block Grant has been cut in real terms. The Scottish Government now has limited powers to raise its own finance. One of the ways of doing this is through minor adjustments to income tax levels.

Mitigating the effects of the UK Government’s Welfare ‘Reforms’, a teachers’ 10% pay demand and the possibility of a No-Deal Brexit will put increasing strain on Scotland’s finances. Where will the additional money come from to fund the demands expected by Labour, the Scottish Greens and COSLA? The Scottish Government is a minority one which means it will need the support of at least one other political party in the Scottish Parliament if Derek Mackay’s budget is to be passed.

You can read all the documents for the draft Scottish Budget 2019 -2020 here: Scottish Budget 

Reporter: Fiona Grahame