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Mackay’s Magic Money Tree Bears Fruit

by Murdo Fraser

IN LAST WEEK'S budget debate in the Scottish Parliament, Conservative speakers were challenged by the SNP, among them the Finance Secretary Derek Mackay, as to how we would square the circle in terms of supporting public expenditure whilst simultaneously arguing for tax cuts.

As I have argued on this blog previously, the answer to that is self-evident. Once upon a time the SNP leadership believed that cutting taxes would grow the economy, and therefore grow tax revenues. Sadly, today’s SNP has long since departed from the economic orthodoxy of Alex Salmond, and has shifted leftwards to a position whereby its MSPs seem to believe that the Scottish economy, and therefore the tax take from it, is of a set size – and this is all therefore a zero-sum game.

So the Conservatives in the debate were accused of having a “magic money tree”, which would fill the (supposed) gap in tax revenues which would arise from reducing the tax burden (despite all the evidence to the contrary).

What has become clear this week is that there is indeed a magic money tree in the world of Scottish politics, but far from belonging to the Conservatives, it is the exclusive property of the Finance Secretary Derek Mackay.

All this became apparent at Wednesday’s meeting of the Scottish Parliament Finance Committee. 

When presenting last week’s Budget Bill to Parliament, Derek Mackay revealed that his deal with the Greens included additional spending of more than £200 million, divided between local government, police reform, and Scottish Enterprise. It only became clear this week, however, where exactly that money came from.

Of the total £220 million increase, £29 million comes from the freeze in the Higher Rate Threshold, which punishes middle class Scottish families. £6 million comes from savings in borrowing charges, £60 million from the “business rates pool” and £125 million in underspend for projects in the current financial year. So, effectively, Derek Mackay had £185 million down the back of the sofa, just waiting to buy-off whichever opposition Party he could find to do a deal with.

This raises all sorts of important questions in relation to budget scrutiny by the Scottish Parliament and its committees. The draft budget which was presented to Parliament in December, and on which scrutiny was conducted, turns out to be around £200 million lower than the final total. That is a substantial degree of wriggle room for any Finance Secretary to have, and yet this was all concealed from opposition parties. 

In the Finance Committee I asked Derek Mackay to state when he became aware of these additional sums, but he refused to disclose this information. And yet this is a Finance Secretary who, when presenting his draft Budget, challenged the opposition Parties to say how they would pay for any additional spending that they requested. Had it been known back then that these additional sums were lying around in reserve, then that would have made the whole budget negotiation a much more productive process.

More interesting still is the fact that the justification for the SNP’s tax grab on working people in Scotland has disappeared. The SNP told us it was necessary to create a tax differential between Scotland and the rest of the UK in order to pay from vital public services. And yet the £108 million that this policy will raise is substantially less than the £185 million now revealed to be lying spare in the Government’s kitty.

The Scottish Conservatives made a generous offer to the SNP in relation to their budget: we said that if they dropped their plans to make Scotland the highest taxed part of the United Kingdom, then we would sit down with them and devise a budget to grow the Scottish economy. The SNP refused our approach, preferring instead to stitch up a deal with the hard-left Green Party to impose even higher taxes. We now know that there was absolutely no need for the SNP to do so, and that the imposition of higher taxes is simply a political choice, rather than a necessity.

Last week we learned that Scotland is to become the highest taxed part of the United Kingdom. We learned this week that this was not just bad government, and bad policy, but it was utterly unnecessary as well.

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Article from Friday 10, February, 2017