When is a £2billion windfall a cause for righteous indignation? When you’re the SNP and eternally overdrawn from the bank of disgruntlement.
Philip Hammond unveiled the additional money to cheers from the Tory benches during yesterday’s Budget. Three hundred miles northwards, Derek Mackay seethed. The Scottish Government Finance Secretary greeted the boost to his coffers with the chutzpah of the ingrate, tweeting: ‘£2billion budget figure for Scotland is a con! #Budget2017 Financial Transactions account for half that sum, which due to the strings attached you can’t build roads / school / hospitals! These sums have to be repaid to the Treasury.’
It was a profoundly thankless statement, not to mention a dishonest one. In previous years, the SNP has used financial transactions to support affordable housing, the construction industry, and the alleviation of fuel poverty. If effrontery were a currency, the Scottish Government could bankroll the Treasury instead of the other way round.
A more fitting response would have been gratitude because Mr Hammond imparted two gifts: Cold, hard cash and a case study in constructing a credible financial statement in straitened circumstances.
Despite conceding slower than expected growth, he committed to an ambitious £44billion homes construction programme that he forecasts will build an additional 300,000 homes in England by the mid-2020s. Mr Hammond told MPs he was driven by his belief in ‘a prosperous and inclusive economy where everybody has the opportunity to shine’ and ‘where talent and hard work are rewarded’.
What an invigorating, forward-looking contrast with Derek Mackay, Scotland’s de facto chancellor. Under Mr Mackay’s unsteady stewardship of our economy, talent and effort have not been rewarded but discouraged. His top priority is not to ease the squeeze on the struggling middle but to tighten the tax vice around them.
He was already straining to make the case for hiking up income levies but the addition of £2billion to the Holyrood kitty represents a devastating blow to this enterprise. Mr Mackay’s tax discussion paper outlined four options, the most confiscatory of which would raise at most £290million in 2018/19. Even if we accept the SNP’s rationale for tax increases, the Chancellor’s allocation has removed the need for them by more than covering the potential revenues.
This throws up an explanation for Mr Mackay’s snippy comments. If the Finance Secretary had decided on tax hikes as a necessary evil to fund public services, surely he would have jumped for joy at yesterday’s Budget. The Chancellor would have got him out of a tight spot, allowing him to meet spending commitments without punishing the hard-workers and risk-takers who motor the economy, generate growth and create jobs.
Unless, of course, it isn’t about tough choices but easy ones and Mr Mackay is pursuing a tax grab for its own sake. Then it would make perfect sense for him to gripe over £2billion on a plate, for the Treasury would have exposed his tax blueprint as a political rather than a fiscal document. It would mean Derek Mackay has once again been found in rank ignorance of what produces prosperity and utter disregard for those who produce it.
Mr Mackay, like too many of the career time-servers at Holyrood, is far removed from the world of private enterprise. His six-figure salary is not earned through risk, innovation, and creativity; he has no sense of the gruelling hours, the sacrifices, the twice-mortgaged homes and run-down family cars — the daily grind that makes higher-rate payers resent politicians who lecture them from afar about the need to pay their ‘fair share’. As far as they’re concerned, they already pay their fair share and then some.
Even still, Mr Mackay is not yet a lost cause and can still convince Middle Scotland that he is on their side rather than on their back. Next month he gives his own Budget at Holyrood. He could take this opportunity to learn from the Chancellor’s example and turn in a financial plan that rewards rather than punishes aspiration.
Mr Hammond has alleviated the pressure on small firms by switching from retail price index to consumer price index to calculate business rates. It is estimated to be worth more than £2billion to British business across the coming five years. Compare this to the revaluation of rates in Scotland which proved so ruinous that one of Nicola Sturgeon’s own economic advisers, the brewer Petra Wetzel, has been forced to shutter her pub in Glasgow’s West End. To save other businesses from going the same way — and save face for the First Minister — Mr Mackay should copy the Treasury and extend rates relief to more firms.
The Chancellor’s sums also afford first-time buyers a reprieve from stamp duty on the first £300,000 they spend. That means a cut for 95% of people looking to snap up their dream home. Mr Mackay should act to reduce the SNP’s Land and Buildings Transaction Tax accordingly or he will condemn Scots to higher house prices, snatching the dream of home ownership from thousands. Those browsing at the top end of the market — a matter for pride, not shame — are now confronted by a £4,600 disadvantage compared to Londoners. It’s would be an odd Scottish nationalism that preferred to see the well-off buy houses in London than in Eastwood or Morningside.
And, yes, he should abandon plans to shunt up taxes but he should do more than that. In February, Mr Mackay froze the starting salary for the 40p income tax rate at £43,000 in a sop to the far-Left Greens in exchange for votes. This might have got the SNP out of a political bind but it delivered a sucker punch to almost 400,000 higher-rate payers who were left worse off than they would be if they lived in England. Next month’s Budget is an opportunity to rectify this disparity and remove another millstone from around the necks of Scotland’s families. This is no theoretical debate. Those who are hardest hit by Holyrood’s tax regime are the very people who have the means and motivation to up sticks for friendlier fiscal climes. And when they go, they take their money, businesses, and jobs with them.
Bearing this in mind, there is one more thing Derek Mackay could do. Something shocking, counter-intuitive to him and anathema to the benches behind him, but which would administer a shot in the arm to Scotland’s economy. Instead of forgoing a tax raid he could reward industrious Scots with a tax cut, allowing them to keep more of their own money. It would generate wealth, make Scotland competitive with the rest of the UK, and send a signal that the SNP was finally putting the country’s interests first. It might even encourage the best and brightest from south of the Border to settle in Scotland, bringing new jobs and increased national wealth. Any social democrat worth their salt understands that to fund precious public services and support for the most vulnerable in society, you must attract the high earners necessary for a booming economy.
There may be another reason for Mr Mackay’s displeasure at the Chancellor, an irritation echoed yesterday by Nicola Sturgeon and other senior Nationalists. Philip Hammond’s Budget drew sharp contrasts between the SNP benches and the 12 new Scottish Conservative MPs opposite them. The Chancellor noted wryly: ‘I am getting used to the new experience of having my ear bent by my 13 Scottish Conservative colleagues.’
Ruth Davidson’s baker’s dozen had convinced Mr Hammond — with some insistence, by the sounds of it — to scrap VAT on Police Scotland and the Scottish Fire and Rescue Service, adopt ‘transferable tax history’ for the North Sea, extend a fuel duty rebate for the islands, and hand more than £3million to Scottish charities. The SNP once boasted they alone would ‘stand up for Scotland’ at Westminster. As the Budget showed, 13 Scottish Tories have achieved more in five months than 56 grandstanding Nationalists did in two years.
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Originally published in the Scottish Daily Mail. Contact Stephen at firstname.lastname@example.org. Feature image © Chatham House by Creative Commons 2.0.