Holyrood budget: What wasn't in it?

Derek Mackay
Image caption Derek Mackay delayed his first draft budget until December to take account of the Chancellor's Autumn Statement

In some speeches, it's what doesn't get said that matters more. And so it was with Derek Mackay's first draft budget as Scotland's finance minister.

What we got was a long list of manifesto commitments being referenced, as you might expect after an election victory - a down-payment on childcare, a direct payment to head teachers, a slight real terms increase for the NHS.

We got a minister who wanted to offer enticements to opponents sufficient to get their support when the budget legislation comes to pass.

But his political instinct and the parliamentary occasion demanded party points-scoring too.

And after expectations had been raised of a big hit to local authorities, the numbers were stacked up into a platform on which the SNP can fight the council elections next May - more funds with strings attached, more council tax income, but also more that's required from it.

Short horizons

What we did not get with the draft budget statement for 2016-17?

There was some talk of austerity, but not as much as you might be used to. This was a slightly bigger budget than its predecessor.

We got next to no idea of planning ahead for subsequent years, when Westminster has pencilled in some sharp cuts.

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Image caption The amount for concessionary fares - mainly for older people - was pared back

Nor was there discussion of long-term spending pressures. In the autumn statement at Westminster, Phillip Hammond made brief but significant mention of preparing for the implications of an ageing society.

He questioned whether the commitment to protect pensioner benefits could be retained after the next election.

In the Scottish budget, the amount for concessionary fares - mainly for older people - was pared back.

The government has said it wants to make sure that is affordable in future. But it's not opening up much discussion of whether other spending commitments are sustainable.

Behavioural effect

The new tax powers were deployed. After many years of MSPs asking for levers of power with which to transform Scotland, only one such new lever was pulled.

Such caution was to be expected in the wake of the SNP manifesto. The party leadership had explained that it would decline to implement Westminster's rise in the threshold, above inflation, at which higher rate income tax payers start paying 40%.

That leaves a £314 gap next year between the tax paid by a higher earner in Scotland and one in the rest of the UK. The change affects nearly 400,000 taxpayers in Scotland, or 15%, earning more than £43,430.

That's probably not enough to lead to a significant "behaviour effect"- one in which taxpayers shift their earning profile or their location to reduce their liability to the higher tax take in Scotland.

But continued over years, rising to £700 by the end of the decade? When would it have an effect? In the new tax politics of Britain, we won't know until we experiment.

Testing taxes

So how about that experimentation? Well, while this budget's use of tax powers was a cautious one for next year, that did not mean that radical thinking is barred.

With the SNP in its current dominant position in Scottish politics, this could have been the time to try some innovative thinking, on intermediate tax bands for instance - 30% at £30,000, let's say.

How about testing such options? A shift in the way property is taxed, away from transactions? Not yet. Not from Minister Mackay.

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Nor did we get much of a sense of where economic growth is going to come from in Scotland. That's partly because that role belongs to others in the cabinet.

As with Phillip Hammond in the Downing Street cabinet, the changed politics of 2016 mean that the blokes with the money bags are not as dominant. They do not appear to be running domestic politics the way Gordon Brown and George Osborne had licence to do.

Derek Mackay set out some changes to the business rates regime - a cut, in poundage, in line with Westminster, taking more companies out of its reach with a higher threshold for being eligible to pay, and fewer large companies angrily caught in the dragnet of the large firm supplement.

At the same time, he selected his biggest, sharpest axe for Scottish Enterprise and Highlands and Islands Enterprise. Why? No reason was given.

What are these agencies to do less, while charged with more roles to combat the economic and trading impact of Brexit?

Where do they fit into a strategy for economic growth, without which Mr Mackay and his successors will find their income tax revenue opens up a gap when compared to the rest of the UK?

Squeezed out

One key element of any growth plan is to put in place the infrastructure necessary. Yet where was the list of big new projects being funded?

There is continuation of projects where the concrete is already being poured. Some more distant projects were given a nudge down the procurement path. But big commitments to build?

That has been severely squeezed by a highly inconvenient change to accounting rules.

Image caption Aberdeen's western relief road is among the projects now being funded by the Scottish government

Instead of using private finance to spread the cost of capital spend over decades, some such projects - Aberdeen's western relief road, for instance - have to be brought onto the government balance sheet.

And to do that, more than £900m has had to be found, squeezing out other priorities, which ought to mean lower costs in future years.

There was something else missing from this budget speech. Only the lightest of references were made to the possibilities for re-fashioning the state and its finances with the powers of independence.

This did not have the feel of a budget and a finance minister preparing the ground for a second independence referendum.

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