Derek Mackay hits back at opposition claims of Holyrood budget ‘massive con’

Holyrood Finance Secretary Derek Mackay has hit back at opposition politicians who branded his budget a “con” which will see the “heart ripped out of public services”.

In an “historic budget” which saw the Scottish Government take control over income-tax rates north of the border, Mr Mackay came under fire from Labour, the Liberal Democrats and the Greens for not increasing the charge to raise extra cash for public services.

He insisted his draft spending plans for 2017-18 would deliver £700 million of additional resources.

Mr Mackay said: “This is a budget for growth and public services, for our environment and our communities.

“It delivers increased investment in education, record investment in the NHS, protects low-income households from tax hikes and supports more and better jobs.”

Local government services would have an additional £240.6 million spending power in 2017-18 as a result of the budget, Mr Mackay said.

A u-turn by the SNP administration means local authorities can keep all the cash raised by changes to the council tax for those in more expensive homes – money which ministers had previously pledged to give direct to schools in a bid to close the educational attainment gap.

Instead, the Scottish Government will now hand £120 million from its own funds to headteachers in 2017-18 to do this.

But the Scottish Government’s draft budget document showed the amount of money local government will receive from Holyrood dropping from just under £10.1 billion in this year to slightly less than £9.65 billion in real terms in 2017-18

However, they will get £357 million of money from the NHS next year, with this to be used to pay for closer links between the health and social care sectors.

On income tax, the Finance Secretary opted to keep the basic rate and the top rate unchanged.

He also confirmed the threshold for the 40p rate of tax would only rise by the rate of inflation in Scotland – meaning this higher rate will be paid by those earning £43,430 north of the border compared to those on a salary of £45,000 or above in the rest of the UK.

Mr Mackay said that meant his budget would “not give a substantial real-terms tax cut to the top 10% of income earners”.

While he said he “sympathised” with calls for the 50p top rate of income tax to be reintroduced in Scotland for those earning £150,000 a year or more, he stressed he “had to balance that with the risk to our economy”.

Tory finance spokesman Murdo Fraser claimed “this budget is quite simply a massive con on the people of Scotland” as he accused ministers of “trying to pull a fast one on Scotland’s local services”.

Mr Fraser said: “Local councils face a real-terms cut in their grant of more than £300 million. It’s taking away with one hand, in order to give a little back with the other. What a shambles.

“This is a Scottish Government which wants to make Scotland the highest-taxed part of the United Kingdom. Scots will pay more but in return get a shambolic mess on education and the NHS.”

Scottish Labour leader Kezia Dugdale said: “The SNP Finance Secretary has unveiled a budget today that will see the heart ripped out of public services.”

She said councils would have a “real-terms cut of £327 million” as she claimed Mr Mackay was ” no better than a Tory chancellor”.

The Greens and the Liberal Democrats also argued Mr Mackay should have opted to increase income tax now Holyrood has the power to do so.

Green co-convener Patrick Harvie said: “We know the poorest third of our society will see their incomes go down next year while high earners will get a tax cut.

“Those may be UK Government decisions but the Scottish Government now has the power to reverse those it affects, and has chosen not to.”

While Lib Dem leader Willie Rennie welcomed the government’s u-turn on the use of council-tax funds, he added the budget fell “well short” of what was needed to improve education.

“With our international standing in education slipping and our faltering economy, there is an urgent need to use our brand-new powers to raise £500 million for education to get it back to its best,” he argued.

“That’s the way to boost our economy. We need transformation and this is not a transformational budget.”

Council and trade union leaders were also critical, with David O’Neill, president of local government body Cosla, stating they could “never endorse a reduction to the core local government settlement as announced as part of the budget statement today”.

Unite regional officer for Scotland William McGonigle said: “This budget takes us further down the austerity road towards social crisis in Scotland.

“Despite having new powers over taxation, the Scottish Government continues to follow Westminster’s austerity road.

“They might slow down the journey by tinkering with the higher income-tax bands and council tax but they’re fundamentally going down the same path as the Tories.”

Q&A: The low-down on Derek Mackay’s first Scottish budget

:: What makes this year’s draft Scottish budget so important?

Put simply Holyrood ministers will be responsible for raising about half their budget in 2017-18 – far more than ever before. Since the Scottish Government was set up in 1999 it operated within a fixed budget, spending money awarded to it by Westminster.

The Scottish Government was given limited powers over income tax north of the border in 2015, but chose not to use them as any changes would have had to be applied uniformly across the board. The latest changes brought in as part of the 2016 Scotland Act now give Holyrood power over income tax rates and thresholds in Scotland.

:: What is Mr Mackay likely to do with these new powers?

The Scottish Government has to first announce its budget plans to MSPs, with ministers not meant to reveal their proposals ahead of that. But the SNP did set out its approach to using the new tax powers in the run up to May’s Scottish Parliament elections.

Here the party pledged not to increase the basic rate of income tax for five years and also ruled out re-introducing a 50p top rate of tax in 2017-18. But nationalist leaders have also said they will not increase the threshold for the 40p rate of income tax, which the Conservatives have pledged to do in the rest of the UK.

According to the Scottish Government, opting out of this could raise up to £1.2 billion additional cash for ministers to spend over the course of this Parliament.

:: Now the SNP are in minority administration will the Scottish Government be able to pass its budget?

To do this Mr Mackay will have to persuade some opposition MSPs to either back his spending plans, or at least abstain when Holyrood votes on them.

At the moment it appears unlikely any other party will vote in favour of the budget, with Labour, the Scottish Greens and the Liberal Democrats all wanting the SNP to increase taxes, while Conservative MSPs are strongly opposed to making Scotland the highest taxed part of the UK.

However the Finance Secretary may be able to do a deal with one or more of the opposition parties at Holyrood so that they abstain during the budget vote, allowing the spending proposals to go through.

:: What happens if the Scottish Government fails to pass its budget?

There has been speculation that if the Government can not pass its budget, the SNP would be forced to call an early Holyrood election. The only precedent for such a situation is in 2009, when the budget was defeated at Holyrood by just one vote.

The then-first minister Alex Salmond said the Scottish Government would resubmit its spending plans, but warned that if MSPs voted against them for a second time, the government would not be able to remain in place.

The budget was then passed exactly one week later, after the SNP secured deals with both Labour and the Liberal Democrats.

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