Budget Panto Season

Amongst the hubbub of Brexit dealings and confidence votes, you could have been forgiven for forgetting about the humble old Scottish Budget, which was delivered by Finance Secretary, Derek Mackay, yesterday afternoon.

As I mentioned in a previous piece on the Programme for Government (which lays the foundations for the Budget), SNP policy making and announcements have a ‘business as usual’ feel about them at the moment. Perhaps this is only to be expected from a government in the middle of its third term. ‘Steady as she goes’ came the call.

Of course, big money was still being spent and decisions taken that affect our daily lives made. My colleague Paul offers an excellent run through of what the Budget contained and what it might mean for our sector.

A few observations and thoughts of my own:

Tax

For years, the SNP in particular bemoaned the fact that the Scottish Parliament was a ‘pocket money Parliament’ - responsible only for administering funds re-routed from Westminster.

With more devolution has come more responsibility for raising the money the Scottish Government spends and the recent devolution of income tax marked a watershed moment in the evolution of devolution.

I’m far from a tax expert and I’m probably about to lose both you and me at this juncture, but there is an interesting (honest) story behind the numbers.

Essentially, despite diverging from UK tax rates (meaning tax is generally higher in Scotland) Scottish Fiscal Commission analysis shows tax receipts actually fell (£550m less that forecast). An explanation for this isn’t yet available, but no doubt some analysis will be forthcoming.

The Scottish Tories will be sure to have a field day with this information - given their already heavy criticism of government tax policy. From a Scottish Government perspective, it’s a problem that has to be resolved sharpish.

This revelation should be borne in mind as the sector sets outs big asks in the future. We know there is a limited pot of money and we often try to offer helpful suggestions about where resources should come from. Cearly, tinkering with tax policy isn’t the simple game many think it is and we should be careful not to cause more damage by encouraging decisions that could see budgets fall.

Barnett Consequentials

Through the devolution settlement, Scotland gets a proportionate share of any additional spending decisions taken in England. So, when the UK Government makes big commitments on (for example and in this case) the NHS, Scotland will get roughly 10% of that sum added to its budget.

There is nothing to say that the Scottish Government should spend that money on the NHS in Scotland. The money could be routed to any departmental budget. But here lies the gist of my point: they won’t do that.

At SCVO we have toyed with the idea of lobbying for barnett consequentials (derived from a variety of UK spending decisions) to be spent on sector priorities. But, in reality, it would be politically difficult for the Scottish Government to spend the money in anything other than a mirror image way. Perhaps this is an issue we should give some brain power to - looking to see how such windfalls can be used in more constructive and transformative ways.

Brexit

Brexit remained the spectre at the feast - even overshadowing the very Budget announcement itself. With so much uncertainty in the atmosphere, crafting a budget that will hold up to radical change is tricky. Again, this could go some way to explaining why the budget feels so cautious and managerial.

Clearly the potential fallout from Brexit is not lost on the Scottish Government and this was reflected in budget spending commitments. The International & European relations budget (not a devolved competence) has been increased from £15.7m to£23.9m. Since July, £26.6m has been made available for Brexit-related work and 420 people (full-time equivalent) in the Scottish Government are spending more than 50% of their time on this work!

Political support

It is panto season, and Budget time is ultimate political panto - one of those red letter days were parties all get a chance to tear in to each other while we watch on. The horse trading, demands and red lines are all part of this cheap theatre - before ultimately a happy ending is reached and they all live happily ever after (until the next financial year).

Having said that, this year’s production does look set to be a bit different.

Over the last few years, the Green Party have ridden to the rescue, offering up the votes to get the Budget over the line. But, to ensure they are not viewed as the SNP’s patsy, one assumes this can’t go on indefinitely.

The Scottish Conservatives, as the main opposition, are unlikely to cut a deal. The Lib Dems, quite inexplicably, have chosen to withdraw from negotiations unless the SNP drop their commitment to independence (?!) and the Labour Party have arrived armed with a hefty shopping list of demands which - as a party insider let slip - hasn’t even been costed.

With this in mind, the Greens look to be in a very strong position and it’ll be interesting to see what they can extract from Mr Mackay as the price for their support. Local government funding (and the autonomy to raise money locally) looks set to be the key battleground on this issue.

The first vote on the budget will take place early in the new year. Amidst the din of Brexit, expect some argy bargy on the home front over Christmas as the Scottish Government look for allies and their opponents go on manoeuvres.