The Scottish Budget: what to expect

By December 13, 2016Public Affairs

The budget

On Thursday, Cabinet Secretary for Finance Derek Mackay will deliver the Budget, his first since taking the job following May’s Scottish Parliament elections, just one week before parliament enters recess.

It won’t be missed by many that this means there will be very little time for scrutiny by MSPs. Once reconvened in January, the Scottish Government will need to have the Budget agreed and passed by the end of February if it is to allow local authorities and other public bodies enough time to pass their own budgets for the upcoming financial year.

Aside from the issue of scrutiny, the tricky timetable is compounded by particular issues this year. Firstly, it is the first Budget the SNP has had to pass without a majority since 2011. That lack of governing majority means the government will have to find the support of at least one other party to secure its passage.

Back in 2009 Alex Salmond found out just how tricky things could get when the Green Party withdrew its support shortly before the final vote, causing the government to lose by just one and delaying the entire Budget process. With the ministers having little room to manoeuvre this year, there’s ample opportunity for opposition parties to extract concessions in return for their support.

A second issue is that the 2017-18 Budget is the first to exercise the further powers and responsibilities in the Scotland Act 2016 and more of the spending settlement will be funded by the collection of devolved tax receipts; around 40 per cent of estimated devolved expenditure. So, MSPs and other scrutineers need to act very quickly if they are to conduct a thorough analysis of the Budget’s treatment of this extra responsibility and pick up any concerns in such a condensed period.

While the Finance Secretary is clearly keen to keep his cards close to his chest, here’s a couple of things we’ll be looking out for:

Council budgets

The end of council tax freeze is approaching and from next year local authorities will have the power to increase council tax by up to 3 per cent. However, 2017 is a local election year and many councillors will be looking for ways to avoid a tax rise for potential voters. To what extent a rise is avoidable will depend greatly on the Scottish Government’s national budget setting. Local government body COSLA has warned that further cuts to council budgets would be disastrous, however we may find that the Scottish Government is not averse to letting Council’s pass on a local tax rise.

Income tax

The SNP’s pre-election manifesto pledged to freeze income tax rates and so we’re unlikely to see much movement here despite the Scottish Government’s new powers to set its own levels. However, Labour, the Lib Dems and Greens all support tax rises, and without a voting majority for the Scottish Government, this might be one area where opposition parties seek to exert their influence. The SNP manifesto also confirmed that the higher rate threshold would not increase, as it will do in the rest of the UK, to £45,000. Instead the threshold is expected to increase with inflation from £43,000 to £43,387, meaning that higher income earners pay more tax north of the border.

Education

Last week’s PISA scores were bad news for the Scottish Government as they showed a broad decline in the standards of the education system under the Scottish Parliament’s watch. Nicola Sturgeon has made it clear that education is her priority as First Minister and so the Budget may well include more measures to tackle attainment. That being said, full scale reform is expected in 2017 with a review of school governance currently underway and an Education Bill promised in the second year of the parliament. Therefore any announcements this week are more likely to be short term measures designed to mitigate some of the criticisms from opposition parties.

As always, Indigo will be keeping a close watch on the Budget and providing analysis for clients across the UK.  If you would like to learn more about what’s going on, contact petersmyth@indigopr.com