Scottish Budget 2024 - Still Spinning Plates

Craig Dalzell

Finance Secretary Shona Robison must have breathed a sigh of relief at the UK budget the other month (covered by me here) but if she did, it was the shallowest one she could get away with. The extra money from the UK that has gone into this year’s Scottish Budget has largely been accounted for in terms of public sector pay deals and reserved tax rises applied to those wages (not that I’m complaining about those pay deals – quite the contrary, even with them many public sector works are still lagging behind fair pay after over a decade and a half of austerity) or has gone into replacing cuts from last year’s budget so it’s clear that despite the relative expansion to Scottish finances there still wasn’t going to be a huge amount of play in the figures to do much more than work a little less hard to keep all of the plates spinning in the air.

That said, this was the last full year before the next Scottish election in 2026 so if there was a time to start throwing some pre-election promises into the air then now was the time to do it.

I don’t intend to micro-analyse the entire budget but it was noteworthy that Robison’s speech was kicked off with the announcement of the cancellation of the £300 million raid on the ScotWind funds (meagre though those funds are in comparison to what they could have been) which was a calculated move given the amount of political flak she took from the announcement of the raid (however we shouldn’t give out cookies for deciding to no longer do the wrong thing).

The Government decided to not use this budget to make substantial changes to the one major tax lever devolved to it – Income Tax – but that isn’t quite the same as saying there was no change. The excuse for not moving the upper income tax bracket much higher than it is is that it’s too easy for the ultra-rich in Scotland to dodge that tax by, for example, taking less of their income as a salary and more of it as shares and dividends which attract the much lower Capital Gains tax rate. A reasonable argument, however with the UK Government increasing the rate of Capital Gains even without discussing options like a ‘millionaire rate’ on the very very highest earners, I would have expected the Scottish Government to consider increasing the top rate of income tax to avoid narrowing that gap (the true solution of equalising Capital Gains and Income Tax or just treating all personal income as income is one that lies at Westminster and is apparently just as beyond the ken of the UK Labour Party as it was the Conservatives). Instead we got a pledge to NOT increase rates or add new bands and a freeze to the thresholds for the lower tax bands while letting the higher ones uprate by inflation.

Most disappointing though was the tax reform we didn’t get. This was the last opportunity for the SNP to meet their 2021 manifesto promise to introduce a Citizens’ Assembly on reform of local government finance and reform of Council Tax specifically. That policy was never, as far as I can see, formally cancelled but it was never implemented either and there is no time left to complete that task before the deadline of the end of Parliament. This is important because despite promises of more funding for Local Authorities, and a promise to not repeat last year’s folly of an unexpected and unfunded Council Tax freeze, the Government wants to remain in tight control of local government budgets. It’s only two years ago that now First Minister and then acting Finance Secretary John Swinney declared that he had already devolved power to local authorities to – as he deemed – “maximum extent that is responsible” (Reminder: Scotland is the most politically centralised democracy in Europe).

And so this budget was the last chance this Parliament for Government to reform Council Tax (see my commentary on the 2022 budget for the detailed reasons of how and why it should be done) and again they failed to do so, I suspect to limit the power of local democracy – a fiscally autonomous local council is, after all, one that cannot be threatened with another Council Tax freeze next year.

Similarly, Common Weal has spent a good chunk of this year trying to bring the Land Reform Bill up to an adequate standard and as part of it we’ve argued for a land tax. Land is the largest and most concentrated store of wealth in Scotland (Andy Wightman’s estimate of how few people own half of Scotland keeps going down with each refinement and now stands at around 421 individuals or companies) and is almost entirely untaxed infamously leading to Danish billionaire Anders Povlsen paying more tax to own his Scottish land to Denmark than he does to Scotland because Denmark charges their citizens a land tax on foreign holdings (minus anything they pay to their host government, which in Scotland is zero).

During our lobbying Government officials kept telling us throughout the year that we shouldn’t talk about land taxes while talking about land reform because they could only talk about new taxes at budget time. Well, it’s budget time and, guess what, they didn’t want to talk about land taxes then now either. We can only conclude that – in addition to the Government’s stance on protecting the wealthiest land owners from inheritance tax rises that they wouldn’t have to pay if Scotland had a more European distribution of land ownership – that the Government simply doesn’t want to enact substantial land reform or to tax those who own far too much of the land under our feet. There are no technical reasons for not enacting these reforms. There aren’t even any mathematical reasons (if anything, Council Tax reform and a land tax would have made it easier to win progressive votes in Parliament for the budget). There aren’t any objections from their members (indeed, quite the opposite, by not enacting those reforms the SNP are running directly against motions passed overwhelmingly at recent conferences) There is only the lack of will from the Government to make it happen.

Next year will not be a budget of action because only weeks after it passes, the Parliament will dissolve, there will be an election and a new Government will return with new promises (perhaps it will include the SNP, perhaps not). The next budget will, however, be full of promises of what the current Government will do if re-elected. A question I’ll be asking then will be fairly simple: Why didn’t you do any of that last year, when you had the chance?