Don’t get me wrong; last week’s Scottish budget was good one. It’s great to see extra spending on the NHS, colleges, transport and a future increase to the Scottish Child Payment to £40 a week, making life easier for the lowest paid. And good to see the tax paid by low paid workers cut slightly through rising thresholds, as levies go up on private jets and luxury properties.
But. If we are being honest, these are marginal changes. Of course, if you are living on the margins, the changes can be life changing. But will it deliver the fair and prosperous society we aspire to be?
The constraints of devolution mean that in many of these areas the best the Scottish government can do is signal a direction of travel, not a reach a destination.
Labour claim that increases are only possible because of Westminster’s largesse with the UK Labour government providing a much better settlement than the Tories. But the better way to look at it is that the increases are so small because they are limited by Westminster.
Total Scottish government spending will rise from £64.5Bn this year to about £68Bn next. That’s about 6.5%. After rising costs have been factored in the Scottish Fiscal Commission reckon this will fund real term growth in spending of just over one percent per year. Now that’s better than a one percent cut, but let’s not pretend that’s going to end child poverty or eliminate long NHS waits.
Which is why talk of this being an election budget is misplaced. For sure, Shona Robison has done a decent job of bolstering public perceptions of competence, and there are signals aplenty of doing the right thing. But the budget headlines are unlikely to set the heather on fire amongst an electorate where the largest group on my canvass returns are the disengaged and disillusioned.
To do that we need to talk about the budget we didn’t have, the budget a Scotland in control of its own financial affairs could have. In that discussion we can both highlight the severe and absolute constraints that devolution places on Scotland, and illustrate the immense benefits that could come from controlling our own finances.
Let’s start with tax. The changes announced last week mean that most people paying income tax in Scotland (55%) will pay less than they would in England. That’s a strong campaigning point but it not a laurel to rest upon. The only people who will see their tax bill go down are those earning less than £43,662 per year, and that’s really not a lot of money for a family these days.
The tax system is not nearly progressive enough and we should aim to reduce the proportion paid by low- and middle-income earners by raising taxes on the highest paid. The Scottish government has increased the tax on top earners but there is a limit to how big a differential can be sustained in one region of a UK economy which has no control over the movement of labour or capital across its borders.
And the Scottish government has zero control over taxes on other income, particularly the cash the rich get for just having money in the first place. Nor does it have any control over the main taxes on business and spending which are key levers in building any fiscal framework.
If you don’t control the whole thing, the benefits of running just one bit of the tax system are limited. Arguably, sometimes even worse than nothing, as you not only fail to reap benefits but get the blame.
If Scotland governed itself a world of possibilities open up. Control of VAT means we could lower or remove it from arts and hospitality to boost these hard-pressed sectors, perhaps in return for meeting policy objectives like the real living wage. Or we could increase it for luxury goods bought, by definition, by those who could afford to pay.
Control over business tax means we can tailor it to support domestic small enterprises and stimulate growth, whilst having different bands which ask those making the biggest profits to pay more. Independence means that a Scottish stock market could impose a proper financial transactions tax on investment trading raising money to alleviate poverty and discouraging those who play our economy like a casino.
And in response to overhyped concerns that such measures will lead to a flight of personnel and jobs across the border let’s take a lesson from America. Basing taxation obligations on citizenship means that wherever in the world Scots have good fortune they continue to pay towards the social and physical infrastructure of their home country.
Independence offers the option of all this and more, and that’s before we even talk about the regulation of land and natural resources. Self-government doesn’t of course mean you have to do things this way, just that you have the choice.
And that’ll be a bigger motivation to vote than a one percent change in public spending next year.
