Scotland’s finance secretary raided council spending and imposed a new tax on second homes, as he boosted funding for the crisis-hit NHS in his final budget before next year’s Scottish election.
Taking his cue from George Osborne’s budget, the SNP’s John Swinney slashed spending for councils by 3.5% and said most second homes would have a 3% surcharge on their purchase price, on top of the normal property tax, raising up to £29m next year.
In a sign he has been stung by repeated attacks by opponents and economists for allowing health spending to lag and by growing evidence of NHS funding shortfalls, Swinney announced a £500m increase in NHS budgets. That would increase overall health spending to £13bn.
“The nature and scale of the challenges facing our NHS – in particular the challenge of an ageing population – mean that additional money alone will not equip it properly for the future,” he said. “To be blunt, if all we do is fund our NHS to deliver more of the same, it will not cope with the pressures it faces.”
The cuts to councils were alleviated by a transfer of £250m from NHS spending to increase social care services by local authorities, but furious council leaders accused Swinney of decimating their workforce. Excluding that £250m switch in social care funding, council budgets are being cut by more than 7% in real terms across other areas of spending, forcing up fees for services.
Glasgow, with the country’s poorest residents and already preparing to axe 3,000 jobs to save £103m, will lose a further £44m. David O’Neill, the leader of the Convention of Scottish Local Authorities, said the job losses from a £350m cut in overall funding which would follow equalled 50 times the job losses from Tata’s steelworks at Motherwell and Cambuslang.
“A cut of 3.5% is catastrophic for jobs and services within Scottish local government – because the harsh reality is that it actually translates to real job cuts that hit real families, in real communities throughout Scotland. Everyone will be hurt by this.”
As expected, Swinney froze Scotland’s council tax rates for the ninth year running and held income taxes at their current rates despite having new powers to raise or lower income tax from April 2016. Inviting Tory accusations of timidity for failing to use his new powers to fund public services after he complained about a 0.7% cut in his Treasury grant, Swinney said the current income tax reforms were too crude.
They only allowed the Scottish government to raise or lower tax rates by exactly the same amount, he said, and that would disproportionately help the richest. “So the simple fact is, this tax power does not enable me to target help to those on the lowest incomes,” Swinney said. “I do however have the power to ensure that this tax does not inflict an additional burden on those on low incomes.”
In the most far-reaching reforms yet to Holyrood’s tax powers, it will be able to set different income tax rates and bands from April 2017. Swinney said he would set out his plans for those new Scotland-only rates before the Holyrood elections next May.
Swinney repeatedly cut other budgets to fund the health spending, a modest increase in frontline police spending and a 1% real terms increase in social housing spending. Rail spending was cut by £57m or 7% to £751m but capital spending on trunk roads and motorways went up by £126m overall. The arts saw some of the heaviest losses: prominent national companies such as Scottish Ballet, the National Theatre of Scotland and Scottish Opera, had their funds cut by 17%, losing £4.7m. Creative Scotland, the arts funding agency, had its budget cut by £5m or 7%.
There was a £15m or 2.6% real terms cut in environment spending, hitting Scottish Natural Heritage, Marine Scotland, the Forestry Commission, the Scottish Environment Protection Agency and Zero Waste. Overall spending for justice and courts was cut by nearly £100m, or 3.6%. The Scottish Prison Service lost £45m or 11%.
He was ridiculed after giving opposition parties and the media an advance copy of his speech which was heavily censored: 103 lines of text dealing with the council and income tax freeze were redacted by black lines. His only unexpected tax announcement was a £130m rise in business rates for large firms and supermarkets. Swinney said last year’s budget statement had also been redacted in advance to withhold his new property tax rates until he disclosed those in the chamber.
Jackie Baillie, Scottish Labour’s finance spokeswoman, said Swinney’s statement concealed a series of heavy cuts. “This is the most important budget since devolution, delivered by a party who promised to stand up for Scotland against Tory austerity. But it doesn’t deliver fairer taxes, a long term plan for Scotland or an anti-austerity alternative. Local services like our schools, roads and care of the elderly will face massive cuts,” she said.
Murdo Fraser, the Scottish Tory finance spokesman, said he welcomed the income tax freeze but said the new tax power prevented Swinney from repeatedly blaming the Treasury for his budget decisions. “It cannot be forgotten that John Swinney had the choice in the matter, and he chose not to increase the resource available to him by levying additional taxes,” he said.
“For years, the finance secretary has portrayed himself as a prisoner of Westminster austerity, but now that he has been given the key to the door of his cell, he has decided not to use it.”
