'Tis the season to be grim': What does the Scottish budget have in store?

Humza Yousaf will be determined to put off any pain for as long as possible, writes Bernard Ponsonby.

What does the Scottish budget have in store? Getty Images

It might only be a week to Christmas day, but on Tuesday the Scottish finance secretary Shona Robison, is unlikely to be in festive mood.

Before MSPs, she will outline the Scottish Government’s tax and spending plans for the financial year 2024-25.

The pre-budget chat has been about plugging an alleged £1bn (at least) black hole in spending plans.

An unwelcome mix of persistently high inflation, a huge bill for public sector pay awards and further financial demands to allow public services to creak a little less, means that the statement looks set to be one huge exercise in bah humbug.

Shona Robison
Scottish finance secretary Shona Robison.

There is likely to be one rabbit pulled from the finance secretary’s hat, as is mandatory on budget day, but given the constraints it might be a pretty small one.

The First Minister, in a sense, has already stolen Robison’s thunder when he announced a freeze in council tax bills next year. That he forgot to mention this to Scottish council leaders has strained relations, a price that has been paid for the sake of a headline at the SNP conference in October.

The budget for councils – which are on the frontline of providing services – could take a further squeeze and will raise, for the first time, a real difficulty for authorities balancing the books while discharging their statutory obligations across a range services.

I predict some tough post budget words from COSLA.

The Scottish Government has a problem with increasing tax to plug the spending gap. For one, hitting basic rate taxpayers on modest incomes during a cost of living crisis would appear to be a nonstarter.

Already, folk who earn just over £28,000, pay more in tax in Scotland than someone earning the same pay south of the border.

Higher rate earners pay significantly more than people on the same income in England and Wales. Someone on £50,000 pays about £1,500 per year more.

Further widening that gap would raise an issue of fairness but is also undermined by the fact that the yield to the Scottish Exchequer by raising the rate by 1p in the pound raises a very modest amount of money.

The First Minister, for many months, flirted with STUC proposals for what amounts to a basket of tax increases.

The Government won’t back these in their entirety although speculation is still rife about a new tax band of 45% for those on incomes between £75,000-£125,000. Again, the yield from this is quite small, perhaps as little as £40m

Raising tax that yields little in comparison to the level of potential shortfall is not good politics and is probably also bad economics in the circumstances in which families currently find themselves.

All budget statements are an exercise in smoke and mirrors.

Chancellor Jeremy Hunt recently signaled a cut in national insurance in the new year and yet, given what is happening elsewhere with tax allowances, the tax burden will still increase despite the national insurance cut.

Tuesday, is likely to take the smoke and mirrors culture to a whole new level. Expect spending earmarked for future years to be “re-profiled” or in everyday language, scaled back or binned.

What is clear is that having moved on just about every pay claim made in the last year, the Scottish Government will double down on future increases.

In fact, the finance secretary talks of the need for public sector reform without stating what reform looks like.

Almost certainly, “reform” means fewer jobs and pay restraint in the future.

Redundancies are all but inevitable with the Government hoping that it can “reform” without making job cuts compulsory and inviting a backlash from public sector unions.

I expect that councils will take the burden of “difficult spending choices”, as minsters always euphemistically call them. They are almost inevitably in the firing line, and I expect tomorrow will be no different.

Next year is general election year for Westminster but tuesday’s decisions at Holyrood could impact on the SNP performance next year.

For that reason, Humza Yousaf will be determined to put off any pain for as long as possible.

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