Johnstone’s View - ‘I could not support it’

Last week in the Scottish Parliament, I came close to voting for the Government’s Budget.

Gone are the days of the 2007 to 2011 minority government, when in each of the four years, I voted with John Swinney and Nicola Sturgeon and Alex Salmond for budgets which delivered tangible value to the Scottish economy.

Plenty of evidence, however, for the nationalist obsession with breaking promises.

They said they would act in a majority government as they did when they were a minority. The new First Minister claims to believe in consensus, then redefines consensus as everyone agreeing with her.

So, to the budget itself. In terms of the changes, since the publication of the draft budget announcement, the three most significant were entirely down to the Chancellor of the Exchequer George Osborne. We saw £127 million flowing to health, all from the Barnett consequentials announced in the autumn statement.

We saw the business rates increase being capped again at two per cent thanks to George Osborne, and despite the Scottish Government’s saying that it had no plans to do that when it was asked about it in November.

We also saw changes to land and buildings transaction tax, although in my view they go nowhere near far enough. However, we see a five per cent band, which is a significant improvement.

However, I have two big concerns about the budget. The first is the impact on the housing market from land and buildings transaction tax, which is a tax on aspiration and an extra obstacle which will, especially here in the North-east, make it harder for families to own their own home.

The eye-watering 10 per cent rate still kicks in at £325,000, compared with the £925,000 at which it applied in under stamp duty. I am concerned that this may have an impact on the housing market.

Movement and activity are needed on all rungs of the housing ladder. If one section of the housing market is hit and punished, that can have an effect on all its other parts. If the Scottish housing market performs badly relative to that of the rest of the UK, will the Scottish Government accept responsibility for that or will they simply blame somebody else, perhaps the UK Government or maybe COSLA?

My preference would have been for a tax cut, but I certainly expected the Scottish Government to deliver on its own principle, which it said was revenue neutrality. However, the definition of revenue neutrality appears to have changed over time. Initially, back in October, revenue neutrality meant raising no more or less than the replaced taxes. According to the Scottish Government, that is £198 million for residential LBTT.

The second definition of revenue neutrality meant the money being enough to cover the block grant adjustment. The third definition, which appeared more recently, meant the money being enough to cover the block grant adjustment and to put money into a cash reserve. We heard last week that this will be £15 million. However, the third definition is not revenue neutral. In the real world, that is called a tax increase.

This is one of the reasons why it was not possible for me to support the budget at its final stage. For the Scottish Government, revenue neutrality means exactly what it chooses it to mean at any given time: nothing more, nothing less.

They say that they need to collect £231 million. When the Scottish Parliament information centre runs the numbers, drawing from the same data source, it says that £242 million will be collected. However, that is based on just 84,000 estimated transactions.

We know from a Scottish Government department that 100,000 transactions are predicted over the next financial year. If 84,000 transactions will give £242 million, I wonder what 100,000 transactions will give over the course of the financial year.

That is really just a designed tax increase which the Government can put into its cash reserve or war chest, but which could also impact on the housing market and the economy as a whole.

I have serious concerns about how this may influence economic growth here in Scotland relative to the rest of the United Kingdom. Along with the retail levy and the empty property tax which have already come into force, disproportionate levels of taxation on the housing market and a growing burden of business rates can only serve to isolate Scotland from the economic growth being enjoyed by the UK market.

Slowly but surely, the advantage that we had is being eroded away. As we rely increasingly on taxes generated in Scotland to pay for Scottish public services, the Scottish government have chosen to start the process of killing the goose which lays the golden eggs.

For that reason, I could not support the budget.