The 2017 Battle of the Budgets

Much like his predecessors George Osborne, Alistair Darling, and Gordon Brown, the current Chancellor of the Exchequer, Philip Hammond, opted for mineral water rather than anything stronger as his customary ‘Budget tipple’ – the practice that sees the ordinary Westminster rule against alcohol in the Commons ignored for the Chancellor as he delivers the government’s tax and spending plans. His decision could well stand as a metaphor for the entire Autumn 2017 Budget; calm, sober, and, as one newspaper said on its front page, very much “no frills”.

The Budget contained a number of policies aiming for stability – understandable in the context of Britain’s ongoing negotiations over its exit from the European Union. In fact, ‘Spreadsheet Phil’ revealed that one of the biggest cells in his Excel document contained £3billion to act as a fund to help UK Government departments prepare for all possible scenarios for Brexit. Also in the budget was a duty freeze on some kinds of alcohol, a rise in duty on both cigarettes and hand-rolling tobacco, as well as a freeze on fuel duty.

The main headline-grabbing announcement – that of scrapping Stamp Duty Land Tax for first-time buyers purchasing homes valued at less than £300,000 – does not apply in Scotland. However, there is much in the budget that does apply north of the border and there may even be consequences for the Stamp Duty announcement.

The Scottish Conservatives, who saw their number of MPs rise from 1 to 13 at the last UK General Election, have been widely trumpeting the freezes of fuel and alcohol duty, which applies to Scotch whisky, as having benefits for Scotland. David Mundell’s new colleagues have also been keen to draw focus to the announcement that an addition £2billion would be added to the Scottish Government’s budget and that the Scottish police and fire rescue services would no longer have to pay VAT.

However, from SNP Westminster leader Ian Blackford’s response in the chamber, to First Minister’s Questions via various Twitter exchanges, the SNP has tried to paint a different picture. The SNP argue that the Tories are performing something of a cunning accounting trick and are, in real terms, cutting the Scottish Government’s budget under the guise of increasing it. They also claim that the UK Government has been using the issue of VAT paid by the Scottish emergency services as a political tool and that action should have been taken sooner. The Tories, naturally, object to this and have given themselves credit for sorting out a mess they blame on Nicola Sturgeon’s Scottish Government.

These debates over different parts of the Budget will no doubt continue to rumble on between the SNP and the Scottish Tories for the next several weeks and will be resurrected periodically when it is politically expedient for either party to do so. However, there is a broader contextual point to be considered and, in those terms, Chancellor Philip Hammond may well have thrown down the most calm and sober gauntlet in history to the SNP Scottish Government over the issue of Income Tax.

In the Budget, the Chancellor announced a rise in the personal allowance, brining it to £11,850 in line with inflation, as well as a rise in the higher-rate tax threshold. In effect, the Chancellor has cut income tax for some people in the rest of the United Kingdom.

Scots, however, will have to wait until 14 December to know the level of income tax they will be paying in the future. This is because that is the date that Scottish Finance Secretary, Derek Mackay, will stand up in Holyrood to deliver his budget for debate and discussion. Contained within Mr Mackay’s red box, in this case not a literal one, will be a set of Income Tax proposals. These proposals are poised to be the most hotly contended part of the Scottish Budget, with Labour, the Liberal Democrats, and the Greens calling for a rise and the Scottish Conservatives calling for a tax cut for middle class Scots. We will, of course, have to wait until the announcement to find out the SNP’s position.

This is the challenge facing the Scottish Government and Mr Mackay in particular.

The Chancellor has made his move and now the Scottish Government have to make theirs. The timing could be a boon or a curse for them depending on how well-prepared and confident they are in their principles. Regardless of what plans Mr Mackay and his colleagues have for the Scottish economy, especially on the key battleground issues of Income Tax and Stamp Duty/Land and Buildings Transaction Tax, he will have to ensure that Scots do not feel that they are being given less for their buck than their counterparts in other parts of the United Kingdom. The Scottish Government may choose to do this by increasing public spending (at the cost of increasing income tax, potentially) or by claiming to have mitigated a programme of austerity or some other method but what is clear is that the stakes may well be as high as they have ever been for it.

There will undoubtedly be a few sleepless nights in the Mackay and Sturgeon households prior to December 14 2017 and, presumably, a glass of something stronger than mineral water after it, in lieu of being able to quaff it during.