Analysis: The last year has seen Derek Mackay become part Robin Hood reformer, part austere King John
Derek Mackay was finally handed the chance to create a Scottish income tax last year, and his solution was met with a mixed response
Image credit: John Linton/PA
Managing Scotland’s money and money-makers was supposed to be a job that was too big for one mere mortal.
When John Swinney, long-suffering cabinet secretary for finance, constitution and economy, was shuffled off to education in 2016, his finance and constitution responsibilities were handed to former transport minister Derek Mackay and his economy brief was given to Keith Brown in a new economic power duo.
First Minister Nicola Sturgeon insisted it wasn’t a criticism of the way the monster ministerial portfolio had been run in the past, but a “reflection of the challenges and opportunities we face in the future”.
The challenges have not diminished, with Scottish growth expected to bump along the bottom at less than one per cent over the next five years, but the elephantine task of managing finance and the economy has once again been deemed manageable enough for a single minister.
Brown was elected SNP depute leader in June and kept up the pretence that he could keep his hand on the economic tiller while also shepherding over 100,000 increasingly irritable nationalists through a prolonged period of constitutional uncertainty.
But he finally jumped, some say he was pushed, back to the cheap seats two weeks later to become a “standing campaign director of the party” to mobilise the troops for another general election or referendum on Brexit or independence — whenever that may be.
True to form, Sturgeon said his practical demotion was not a criticism of his job as a minister, but a recognition of the big job he faces “delivering a strong SNP government, but also a party operation that is from top to bottom, fit and ready for the opportunities that lie ahead”.
Mackay was handed the recombined role of cabinet secretary for finance, economy and fair work, but it’s not like he’s been lying around idle for the last two years looking for extra work. He was finally handed the opportunity to create a Scottish income tax last year, and his solution was met with a mixed response.
His sweeping reforms to income tax created a new ‘intermediate’ tax band of 21p for those earning more than £24,000, the higher rate was raised from 40p to 41p and the top rate from 45p to 46p. To help the low paid, a new starter rate of 19p was also introduced. Scots earning more than £26,000 now pay more than those in the same bracket in England, but those earning less have seen a small saving of 38p a week, at best.
The SNP was accused of reneging on its manifesto pledge to freeze taxes and raiding middle-class pockets by the Conservatives, but Mackay insisted his changes would make Scotland “not just the fairest taxed part of the UK but, for the majority of taxpayers, the lowest taxed part of the UK”.
Mackay was forced to dig a little deeper into taxpayers’ pockets to appease the Greens when the final budget deal was done, by bringing more people into the highest tax band to fund a more generous public sector pay rise.
The spectacle of the SNP being outflanked on the left by the Greens has further exposed the Nationalists as more fiscally conservative than their progressive bumper stickers make out.
Some of the most vocal nationalists would like to see Scotland transformed into a Nordic-style utopia of first class public services paid for by high taxes, but the SNP has demonstrated an almost Conservative zeal for keeping taxes low in some areas.
Mackay does occasionally play Robin Hood, particularly with his high income tax bands and his decision to scrap charitable rates relief for private schools. However, the latter policy landed the Finance Secretary and his predecessor in hot water recently, when Swinney was exposed lobbying Mackay for advice on how to dodge the rates rise on behalf of Kilgraston private school for girls in his constituency.
Mackay appeared to make matters worse by suggesting private schools should approach local authorities, which set the rates, for exemptions – prompting a predictable outcry from councils who insist they’re not exactly swimming in cash to hand to toffs in blazers.
COSLA, the council umbrella group, welcomed the extra cash delivered by the Green deal but said it still won’t be enough to fully fund the rising public sector pay bill, insisting councils will have to cut services or raise council tax.
The SNP was forced to build an unedifying alliance with the Tories earlier this year to head off another Green ambush, this time to scrap council tax and establish a cross-party consultation to find a fairer system. Debates on local government taxation are like kryptonite for the Nationalists, who pledged to scrap council tax when they took power in 2007, but have so far failed to find an edifying alternative.
Mackay has also been pilloried by opponents for doubling down on the SNP’s plan to reduce and then scrap Air Passenger Duty, with travellers on the left accusing him of putting the jet set above the poor and needy. The Scottish Government counters that it’s not just rich businessmen who take to the skies, but families in need of a much needed break in an increasingly expensive world where the pound in their pocket is worth considerably less than it was before Brexit.
Mackay has been spared a final reckoning on APD for the moment as Brussels has told him he cannot create his cut-rate devolved Air Departure Tax without removing vital exemptions for Highland airports. Ironically, the Brexit bogeyman could actually help Mackay fulfil his air tax dream by freeing Britain from European state aid rules — but it’s anyone’s guess what state Scotland’s finances will be in when it is taken out of the European Union. Mackay may need every tax at his disposal to balance the books.
The Scottish Government has also so far refused to bow to demands from City of Edinburgh Council and others to permit them to levy a tourist tax to shore up council budgets and manage the extra demand on services created by Scotland’s burgeoning tourist industry. Scottish ministers insist Britain already has one of the highest taxed tourist sectors in the world, and it is in no mood to cripple its thriving cash cow.
Part Robin Hood reformer, part austere King John, Derek Mackay has continued to demonstrate that managing Scotland’s precarious budget without incensing the SNP’s liberal grassroots is like walking a tightrope while balancing an ever increasing weight on his head.
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