Scots suffer SNP's fiscal failings

By Darwin Friend, researcher at the TaxPayers’ Alliance 

The calamitous backdrop of Derek Mackay, the Scottish finance minister resigning hours before he was due to deliver his budget last week was a fairly poignant analogy for the SNP’s financial record. It illustrated the terrible judgement and farcical ineptitude with which they are leading Scotland into the future, and hope to one day lead it into independence. The budget itself was proof of the pudding of their problems, offering many of the same short-term solutions which have failed to deliver previously.

As public finance minister, Kate Forbes got to her feet and began by declaring that she offered “vision and leadership”. If only. The budget was a bumper book of lost opportunities. It seems the Scottish Nationalists are incapable of offering a future for Scotland that doesn’t leave it dependent on the English taxpayer.

The SNP lauded their “progressive taxation”, which sees taxpayers in Scotland pay £307 less per head than the rest of the UK. At the TaxPayers’ Alliance, that should be music to our ears. But sadly the tune rings hollow. While moves to freeze the lower income tax thresholds were welcome, middle earners still face the threat of being dragged into higher taxes. If there’s one lesson we’ve learned from those great Scots, Adam Smith and Sean Connery, it’s that high taxes will dampen ambition and drive away Scotland’s best and brightest. On this, the Scottish Government should be taking the lead, running rings round the English with bold tax cutting pledges. 

But the SNP’s approach to tax has sent them charging off in the wrong direction. Nowhere has that been more obvious than their obsession with an economically illiterate tourist tax. The budget revealed that the public consultation on the proposed tax is finished, with legislation to be developed and potentially introduced in 2020. This will give local authorities the power to introduce such a tax. This is pure opportunism from the SNP, with it being a too-clever-by-half way for the government to raise quick and easy money. It either fails to appreciate or actively ignores that by visiting an area and spending money, tourists are making a significant contribution to the local economy. And it’s those economies which Scottish ministers should be trying to nurture and grow. 

It is clear that Scotland’s economy needs enterprise-boosting tax cuts, not stifling, targeted new charges. For all that the SNP heap praise on their European counterparts and point to successful small nations as inspirations, they are failing to follow the example of the likes of Estonia, who have had consistently rapid growth in part thanks to their ultra competitive tax system - ranked  number one by the Tax Foundation. It encourages businesses to invest with low corporation tax and income tax rates. As a admired and fiercely independent nation, they ought to be an inspiration for the SNP. But this naive commitment to ever higher taxes seems to run deep in SNP DNA. 

The other major element of SNP fiscal policy has been spending as much taxpayer cash as possible. That’s why Scotland spends £1,661 more per head than the UK as a whole. This is far from going exclusively on frontline services - for example, the Scottish government’s spend on advertising has trebled, with £6.5 million wasted on advertising since 2017.  Little surprise, therefore, that they are running a budget deficit of 7 per cent, more than six times greater than the UK government’s, which stands at 1.1 per cent. If they wanted to show proper leadership, the Scottish government would have used this budget to start sorting out the public finances. Alas, it did nothing of the sort. 

Even with an extra £1.1 billion Murdo Fraser, Shadow Scottish finance minister pointed out that the grants the Scottish government receives from Westminster will rise by £1.1 billion in 2020-21 meaning the situation is likely to get worse. Scottish ministers cannot help themselves but fritter away taxpayers’ cash on yet more spending pledges, desperate to offset the damage of their punishing tax rates.

Yet the SNP continue refusing to reign in public spending. The budget promised record spending on the NHS revealed a record level of spending on the NHS, with more than £15 billion pledged for 2020-21. But the health service has repeatedly missed six out of eight healthcare targets, with the cancer treatment target not met since 2013. Two thirds of Scotland’s NHS health boards are in special measures. The ‘more money’ approach clearly isn’t working. 

The same goes for education, with its own massive £3.5 billion of spending, despite which Scottish pupil’s performance in maths and science have declined, according to the Programme for International Student Assessment. 

Problems in Scotland’s public sector run much deeper than what another bucket load of taxpayers’ cash can wash away. Genuine reform is far tougher than simply throwing money at a problem and hoping it improves. If Scotland is going to improve its economic position, then the SNP needs to focus on outcomes for Scottish taxpayers, not measuring itself purely on how high it can get public spending. The way to improve those outcomes is to ensure that spending is efficient and taxes are as low as possible. Why not use the Scottish Parliament’s devolved powers to cut some tax rates and compete with the rest of the UK?

If the Scottish Government were doing that, it would be leading the pack, not trailing it.