Highs and lows for Scottish Government budget according to campaign groups

Caitlin Logan

CommonSpace rounds up reactions to Derek Mackay’s budget from outside the world of party politics

THURSDAY BROUGHT the announcement of the Scottish Government’s tax and spending plans for the next year from Finance Secretary Derek Mackay, and with it a mixed reaction from leading campaign groups and think tanks.

Key budget announcements included the creation of a new income tax band, marginally reducing tax for the lowest earners and raising it on higher earners; the introduction of a Land and Building Transaction Tax exemption for first time buyers; and a commitment to raise the pay cap on public sector workers to three per cent for those on 30k or less and two per cent for those earning more, while those on 80k or more will be capped at a £1,600 increase.

READ MORE: #ScotBudget 2017: What you need to know

The government also committed to an increase in carers’ allowance; an increase to local government budgets in cash terms and to capital funding in real terms; scrapping the tax exemption for private schools; increasing investments in broadband, childcare and additional support needs provision in schools; and revealed details of funding and plans for the Scottish National Investment Bank.

CommonSpace rounds up some of the key opinions from outside parliament on how the announcements are likely to impact on a number of issues affecting people in Scotland.

Institute for Public Policy Research (IPPR) Scotland

Russell Gunson, director of IPPR Scotland, one of the UK’s leading progressive think tanks, welcomed the proposals to raise income taxes, noting that this will shield “most departments” from cuts this year.

However, he said: “At this level they will only provide short-term relief for public funding in Scotland, buying us only a year or so before public spending cuts will likely have to return.

“Without a stronger economy in Scotland, raising taxes will be like running to stand still. We want to see inclusive growth in Scotland and to deliver it we must now see further reform to go along with today’s proposed tax rises.”

Gunson was critical of the Scottish Government’s decision to opt for a tax cut for lowest earners under £13, 850– a move pushed for by the Scottish Greens – arguing that “a much better targeted way to help poorer households, and to contribute to tackling poverty and inequality in Scotland, would be to invest further in the Scottish social security system”.

Gunson suggested that the tax cut is likely to benefit a number of second earners in higher income households, while missing those who are out of work. “With UK Government decisions to cut benefits over the coming years”, he said, the money would be “much better spent on topping up benefits through the Scottish Parliament’s new powers.”

Child Poverty Action Group (CPAG)

John Dickie, director of CPAG, was positive about the government’s promise to use the funds raised from the tax increase to “harness that wealth to prevent poverty”, in light of the fact that  over one four children  are growing up in poverty in Scotland.

“As a society we really do need to invest more in the social and economic infrastructure that is needed, along with a fairer labour market, to end child poverty, and income tax is one vital tool to ensure we have the resources to make that investment,” he said.

Dickie emphasised that the resources “must be directed at the services and social security that we know work to prevent and reduce poverty”.

He added: “It is now vital that the government builds on the welcome investment in childcare, mitigating UK welfare reform and the tackling child poverty fund with the kind of step change boost to family incomes needed to meet its own child poverty targets.

“Using social security top up powers to boost support for family incomes need to be added to this Budget as a matter of urgency. A £5 top up to child benefit for example, as supported by faith groups, the children’s commissioner and children charities, would in itself lift up to 30, 000 children out of poverty.”

Common Weal

Ben Wray, head of policy for the left wing think-and-do tank Common Weal, was critical of the announced tax exemption on first-time buyers, which will take 80 per cent out of LBTT, saying that the Scottish Government has “replicated in full the UK Government’s recent Budget announcement on housing”.

He said: “This is a big mistake: not only has the OBR already shown that this policy will actually push up house prices, making the problem of lack of affordability even worse, but it takes away over £30m of vital revenues in coming years which could have went towards increasing investment in public rental housing.

“On the day we discover rent rises in Scotland are outstripping England(LINK), this is extremely disappointing. Tory market-led solutions to the housing crisis have continually failed – why the Finance Minister thinks they will succeed in Scotland is anyone’s guess.”

Wray also said that funding to local government, which in real terms is expected to amount to a reduction after inflation, could be improved substantially by scrapping the Council Tax and introducing a property tax levied on house prices and paid by property owners.

Craig Dalzell, head of research for Common Weal also commented, calling the income tax changes a “move in the right direction”, while warning that the change should not be overestimated.

“Those on low incomes will be very marginally better off, while those on middle and higher incomes will be very marginally worse off,” Dalzell said. “The super-rich in particular are still not paying their fair share.”

Arguing that the focus should be on tackling wealth inequality, he said the Scottish Government should  “reform local taxation and press for the devolution of powers over taxes such as capital gains and corporation tax”.

Dalzell welcomed the news of £341m capitalisation of the SNIB from 2019-21, which was a similar level to that proposed by Common Weal. “Our proposals require this funding to be matched over a number years so the announcement of the setting up of financial transaction infrastructure to allow funding in the future is encouraging,” he added.

Women for Independence (WFI)

Rosemary Hunter, national committee member of WFI described the budget as “fair and constructive” in the context of austerity policies and the block grant from the UK Government.

“There are some excellent highlights in the new income tax legislation which will benefit the lower paid, and as women are disproportionately lower earners this will benefit many women,” she said.

“I think the progressive public sector pay policy is a stroke of genius.  Finally giving our public sector workers a proper pay rise and setting a pay cap sends out a signal that hopefully the private sector might take notice of.”

Hunter said that the investments in nurseries and the childcare sector would allow women to re-enter the workforce, and that additional funding Additional Support Needs in schools was “very welcome and has been an issue brought up many times by WFI members”.

Welcoming the announcement that carers’ allowance will be increased from summer 2018 and backdated to the April, Hunter said: “The majority of carers (although not all) are women, who often end up supporting older relatives while often also being responsible for their children too. This sends out a strong message of how we value people in our Scottish society in contrast to the Westminster Government.”

Hunter also welcomed the investments in on justice, noting that WFI has recently published a Justice Watch report, and in superfast broadband which, she said, “will allow women to engage in enterprise and provides much greater flexibility in the working environment”.

Scottish Trades Union Congress (STUC)

A spokesperson for STUC expressed disappointment with the budget, saying it fell “short of the commitment to our public workers and services that Scotland deserves”.

The spokesperson said: “It is not acceptable that so many public service workers, including teachers, fire fighters and many nurses, should face further pay cuts.

“Public workers will now be seriously doubting this government’s commitment to our services.

“Every public worker in Scotland deserves a pay-rise at inflation-level or above. This means that the Finance Secretary has to be clear he is funding every area of public sector provision to ensure this can be delivered.

We will be looking particularly closely at the detail of the budget, but are disappointed in the real terms cuts in resource funding for local government.”

Arguing that the tax increase also failed to go far enough, STUC added: “£20 a week additional tax for someone earning £2000 a week is simply too little when public services are at breaking point.

“To find more resources the Finance Secretary could have abandoned the Small Business Bonus scheme which drains the economy of £200 million a year with no evidence that it is the best way to invest in local economies. If it is to exist, it must focus on creating jobs that pay at least the Living Wage.

Acknowledging the difficulty in protecting Scotland’s budget in light of Westminster austerity, the spokesperson said: “The smug self-satisfaction of the Scottish Tories belies the havoc that their government is wreaking on public services across the UK.”

Scottish Federation of Housing Associations (SFHA)

Sarah Boyack, SFHA Head of Public Affairs, welcomed the announcement of an additional £138.9 to be invested in the More Homes Programme.

She said: “This funding – and the increase in the planning budget of £4.1 million – should further assist our members in contributing towards the Scottish Government’s 50,000 affordable homes target and help to house more people who are in desperate need of a home of their own.

“The investment will also secure jobs and training opportunities, key challenges identified by our members in our Brexit report earlier this year.”

Acknowledging the additional £4.3m investment for social security, Boyack said this was “welcome funding for mitigating welfare reform policies such as the ‘bedroom tax’”.

Boyack was also positive about the budget’s commitment to invest £60m in a Low Carbon Innovation Fund for infrastructure development, but said the SFHA was “disappointed to see that there is only an increase of £0.2m in funding for fuel poverty and energy efficiency.

“The recent Scottish Household Condition survey showed that there are more housing association households in fuel poverty compared to the national average and, in order to tackle this and invest in energy efficiency, our members will require further funding.”

National Union of Students (NUS) Scotland

NUS Scotland president, Luke Humberstone described the budget as a “missed opportunity to fix Scotland’s broken student support system”.

He said: “In higher education, the poorest students are forced to take on the highest debt to meet basic living costs, while further education students have no guarantee of support at all.

“The investment put in place by the Scottish Government for initial implementation of the findings of the student support review is a positive start – but it is still a long way from the reform that students, particularly the poorest students, need.”

Humberstone said that it was also disappointing that no progress was made on the Scottish Government’s commitment to increasing the student loan repayment threshold, and said that more needed to be done to address insufficient provision of mental health services across college and university campuses.

“As the budget progresses through parliament, NUS Scotland will be continuing our Budget for Better campaign, calling for the Scottish Government to deliver a world-class student support system to match our world-class education system”, he added.

Friends of the Earth (Foe) Scotland

Mary Church, head of campaigns for FoE Scotland, said welcomed the government’s commitments on the SNIB, emphasising the need for the bank to forward a progressive agenda.

“The bank must be given a remit that enables it to have a real impact in tackling inequality and building the zero carbon economy, investing in the transformation of our transport, heating, housing and electricity,” Church said.

“Going forward the Scottish National Investment Bank should work closely with the recently announced Just Transition Commission and government-owned energy company to deliver a joined up economic strategy that puts tackling climate change at its heart.

“The Scottish Government has previously stated it wants to ‘seize the economic opportunities of tackling climate change’ and that the Bank will be purposed with ‘accelerating the transformation to a low carbon, high-tech, connected, globally competitive and inclusive economy’.”

Church added that future budgets must be “strictly aligned to Government plans to deliver on our climate change targets, and a just transition to a zero carbon economy”, and that such a commitment should be enshrined in the new Climate Change Bill.

Picture courtesy of Scottish Government

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