Scotland's Economy

The budget that split a nation; my take on it

Last weeks budget drew a lot of criticism in the conservative press, and even more social media posts championing it from people on the left of Scotland’s political spectrum.  I myself took some flack for not being very supportive of the tax rises, was well quoted in the press and even ended up on Alex Salmond’s LBC radio show on Sunday.

So first of all, was it a good budget? Yes, overall good news on business rates being calculated on CPI not RPI – they include slightly different things. RPI includes the costs of housing, mortgage interest costs and council tax for example, while CPI does not – so it will be cheaper. Increasing Research and Development (R&D) funding by 70% is vital for future growth and creating high value jobs as well as a commitment to deliver £600m to deliver super-fast broadband for all homes and businesses by 2021. Personally I was delighted to see a doubling of the cash for cycling and active transport investment.

The Finance Minister was also between a rock and hard place needing the Greens to back the budget, and they wanted tax rises. So what we got was a compromise, not a zeitgeist-setting taxation policy change. In 1999 John Swinney’s manifesto promised to use the tax varying powers to raise “a penny for Scotland”.  I opposed it but everyone insisted that the polls show it’s a very popular policy.  I know a wee bit about surveys and people will always support such policies until the next election, when the opposition campaign screams that Scotland is the highest taxed part of the UK it will morph into a policy no one would vote for.  If you are angry with me and want to explain that someone on 60k a year will only be 29p a week worse off then you have just lost the argument. Its not the amount but the principle that will do lasting political damage.

Brexit gives an ‘away from UK’ motivation.  It shows that there is not any competence in Westminster and the broken promises from 2014 show that Westminster can’t be trusted. Brexit may yet solve the “you will be out of the EU with independence” argument. Either with a soft Brexit, meaning no hard borders, or be disastrous with a hard Brexit requiring that devolution be rolled back to allow the UK Government to do trade deals that cut across devolved sectors such as health and education – finishing the UK.

Now the only weapon a future No campaign would have is the claim that Scotland will have high taxes and that’s poison to the ears of the mid-earning conservative (with a small ‘c’) aspirationals that will decide the next referendum. The psychological and political damage done by raising taxes isn’t worth it for an extra £164 – £300 million. It sounds like a lot but that’s a rounding error amount in our national accounts. If you want to tax more you have to actually do it, and raise enough new revenues to deliver a manifest improvement in services, you need to create a track record and defend it at the next election, but this tinkering at the edges doesn’t deliver that.

All it does is send a message that the SNP supports the same outdated socialist ideals as Corbyn’s Labour and so voters will see voting Corbyn as an easier way to get the same result they want achieve through independence.  It also sends a message to all voters the seats where the Conservative Party will be challengers to the independence candidate next time round and that indy means more taxes but no demonstrable uplift in services – poor Pete Wishart.

Bye-bye indy majority and chance of a second referendum if we don’t find a way to win an independence referendum before 2020.

Thats my problem. If the SNP are going to shake up the tax bands then bloody do it and raise enough to change everything, then point out again and again that we only have to do this because we don’t have the powers we need to raise more tax revenue through growing the economy with bespoke Scottish growth policies . Nor do we have the powers to go after the roughly £19bn in evaded Scottish Corporation Tax, behaviour that the UK Government has encouraged.  They could go after the absentee landowners, hammer a dozen people and open up the highlands and rural Scotland to a sustainable re-industrialisation and re-population boom. I don’t subscribe to the bigger tax rises argument, but going after tax evaders for sure and closing tax avoidance loopholes as well and grabbing under-developed land could have massive benefits (lets start with the banks of the Clyde) – the most underdeveloped riverside property in a major European city.  That I am all for.

There are other radical policies that would raise / cut Scottish Government costs by billions, not hundreds of millions, that BfS has presented to the Sustainable Growth Commission and if they are not part of the next economic plan the SNP present then they will have missed the opportunity that the global trend towards voters supporting alternative and radical thinking offers for Scotland.

Join us now

About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

3 Comments

  • Yes a rock and a hard place just about covers it. Why is it Conservatives, or the middle class, believe they are the only ones paying tax, lower earners pay much more in terms of VAT (a flat Tax) proportionately than higher earners. While Income increases for low earners is immediately fed back into the economy, not banked or invested offshore. Investment in the economy is clearly needed to grow the economy, and yes businesses need encouragement from government to do that, but when the returns come, if they are then syphoned back out of the economy the benefit is self defeating.

  • Scotland will have high taxes and that’s poison to the ears of the mid-earning conservative (with a small ‘c’) aspirationals that will decide the next referendum.
    Is that really the case that this group will decide the referendum ? I think the median wage in Scotland is around £26k so about 80% ? of working people will be unaffected and may actually support the idea of wealthier people paying more tax.
    The failure of the SNP is to promote the vision of a higher taxed country but with superior services

Leave a Comment