This Week

Budget issues have been the focus of political attention in the Parliament as Finance Secretary, John Swinney, set out his stall for the 2014-15 budget.

The budget is significant on a number of levels. Firstly, because it is the first post-referendum budget, where there was a clear message from the electorate that social justice was a major concern. Secondly, this is the first time that Swinney has had tax raising powers to use, including a replacement for the stamp duty and a tax on landfill sites. Finally, with next year being a General Election and the following May being Scottish Parliament elections, Swinney will be keen to make as much political capital as possible and has positioned his party firmly on the Left.

Swinney’s key announcements were:

  • The introduction of a new tax to replace Stamp Duty, with a new higher threshold
  • Details of the new tax on landfill
  • New spending on infrastructure projects

While the Scotland Act 2012 gives more financial powers to Scotland, (up to 22% of total tax raising powers compared to the 7% we had before) with more on the way, today’s draft Budget was a fascinating insight into how the Scottish Parliament will debate such decisions in the future. This is the responsibility many within Scotland have demanded.

The two taxes, namely a replacement of Stamp Duty called the Land and Building Transaction Tax (LBTT) and a Landfill Duty Tax, are expected to bring in between £500m and £600m each year, with Scotland’s block grant from the UK Treasury adjusted to reflect the transfer of tax receipts to Holyrood.

LBTT was always going to be a ‘progressive’ tax on the basis that it removed the ‘slab tax’ rates of it predecessor. John Swinney has applied the following:

  • Nobody will pay tax on the first £135,000 of their house purchase;
  • 5,000 more transactions will be taken out of tax, supporting first time buyers and those buying properties in the affordable market; and
  • Tax will be reduced for a further 44,000 house sales up to the value – not of £250,000 as has been speculated – but to £325,000

He said: “We will do this whilst ensuring that 90 per cent of taxpayers will be better or no worse off than under SDLT.”

“And, as a final rate, we will set a top tax rate of 12 per cent for properties above £1m ensuring the most well-off in our society make a fair contribution to the public purse.”

A progressive tax it is though. It will be interesting to see how this sits with Scotland’s middle classes, particularly in affluent areas of Edinburgh, Glasgow and Aberdeen who will feel the pinch on houses over £325,000. It also coincidentally cements the SNP to the left of the political spectrum on the eve of Nicola Sturgeon’s anointment as First Minister and gives glimpses into what fiscal policy an SNP Government with new tax powers will follow.

A clear positive development is that this should ignite debate in the Parliament. For the first time a Scottish finance secretary has set a tax that will polarize opinion. While John Swinney was defiant today that his rates are justifiable (it will be welcomed by first time buyers and those paying below £135K), it could send votes to parties wishing to campaign on a low tax ticket. This opportunity is not lost on Ruth Davidson.

Devolution

Devolution has also remained centre-stage this week. All of the main political parties had until the end of this week to submit their proposals to the Smith Commission. The Scottish Parliament’s Finance Committee has announced an inquiry into the Smith Commission and the principles that should govern the devolution of further financial powers to the Parliament. Looking ahead, the Smith Commission will once again be in the limelight in a Scottish Parliament debate on 28th October, while representative organisations have until the end of the month to submit their proposals.

Liberal Democrat Conference

The Liberal Democrats met for their UK annual conference in Glasgow this week. The party seemed in good cheer, despite their low polling. Scottish Secretary of State, Alistair Carmichael MP, and Malcolm Bruce MP, focused their attention on the SNP and called on Sturgeon to rule out another referendum.

Childcare Plans Laid Out by Lamont

Labour Leader, Johann Lamont, this week laid out plans to cap the cost of childcare. She set goals of capping the cost of childcare at 10% of median income and the provision of a childcare place for every single mum and dad who wants to go to college. This was seen as a response to challenges for the Labour leadership at Holyrood. The SNP branded the costs of the policy as “fantasy figures plucked out of thin air by Lamont”.

Energy Generation Charges

Energy has also been one of the biggest talking points of the week. First came the news that Scottish Power questioned the sustainability of its huge Longannet coal-fired power station, which, they claimed, was being penalised due to the charging regime, which favours generation in the South of England. Fergus Ewing was quick to take up the cudgels, not least because he is also currently fighting for lower charges for Scotland’s island generators. Gaz de France has recently announced it is pulling out of a wind farm project on the Isle of Lewis, citing charges as one of the issues.

Electoral Law Breaking?

Following claims that pro-Union supporters took tallies of votes at sample openings of ballot boxes, police spoke with Conservative Leader, Ruth Davidson, after she commented that unionists had been “encouraged” by them on the evening of the 18th September. Tallying votes is against the Scottish Independence Referendum Act 2013 passed in the Scottish Parliament which states that the counting officer’s staff “must keep the ballot papers face downwards and must take proper precautions for preventing any person from seeing the votes made on the ballot papers”.

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