Q&A: Derek Mackay

Written by Staff reporter on 10 September 2019 in Inside Politics

Scottish Secretary for Finance, Economy and Fair Work Derek Mackay reflects on the past 12 months.

Image credit: Holyrood

What has been your personal highlight of this past year in your portfolio?

Coming from the adversity of the announcement that the continued manufacturing of tyres at the Dundee site was no longer viable and that tyre production would therefore cease in summer 2020, to being able to secure a joint commitment with Michelin to create the Michelin Scotland Innovation Parc at the site. The Parc will be a key location for new economic and employment opportunities in low-carbon energy and sustainable mobility. The team approach of Michelin, the Scottish Government, Scottish Enterprise, Dundee City Council and other partners has been great.

Increasing tax is never going to be a vote-winner. Do you think you have disproved this accepted wisdom?

Through our tax policy decisions, we have made income tax fairer and more progressive, and ensured that 55 per cent of taxpayers pay less income tax than they would if they lived elsewhere in the UK. This is symptomatic of the approach we are taking to all of our taxes: ensuring they are fair and proportionate. These reforms have also raised additional, much needed revenue in the face of UK Government Budget cuts, and with this additional revenue we have been able to further invest in our public services and Scotland’s economy. For the majority of people, Scotland is a lower taxed country than elsewhere in the UK, and for everyone in Scotland it remains an attractive place to live, work and do business.

The Scottish Fiscal Commission has revised its figures for income-tax intake down over the next three years. Are you confident that you can cover the budget shortfall and how will you do that?

The latest Scottish Fiscal Commission forecasts from May 2019 show that income tax receipt forecasts are higher in every year (2018-19 to 2024-25) than they were at the December 2018 forecast. The total increase is £490 million of additional forecast revenue over the period. What we do now know is that for 2017-18 both Scottish receipts and revenues foregone by the UK Government were below forecast. This means that the total budget for 2017-18 was £204 million bigger than it should have been, and under the terms of the fiscal framework this will be corrected for in the 2020-21 budget. Our reserves and borrowing capacity are sufficient to manage the 2017-18 reconciliation, and I will make a decision, as part of the budget and spending review process, on how to manage this reconciliation in a fiscally responsible way that supports our vital public services.

This year the Equality and Human Rights Commission warned that UK and Scottish Government tax and spending plans would hit single mothers, ethnic minority families and the severely disabled harder than other groups. Do you think the government has done enough to mitigate this?

The Equality and Human Rights Commission, within their ‘Cumulative impact of tax, social security and public spending decisions in Scotland’ report, indeed show that UK Government reforms since 2010 disproportionately affect those on low incomes – in particular, single parents, ethnic minority families and disabled people.

However, the report highlights that this is not the case for decisions made by the Scottish Government. Our progressive new income tax is raising an additional £500 million this year, against UK Government proposals, which we are investing to protect essential services.

We continue to invest over £125 million each year to mitigate the worst impacts of welfare reform and to protect those on low incomes. Recent analysis estimates that in 2017-18 the Scottish Government made direct investment of over a half a billion pounds to support low income families with children.

Our Tackling Child Poverty Delivery Plan sets out six priority groups who we know are at greater risk of poverty – this includes single mothers, ethnic minority families and the severely disabled – and the actions committed, including a new Parental Employment Support Fund of £12 million and £6 million of investment in employment support for disabled parents, are being taken forward with these groups in mind. We have also committed to introducing the new Scottish child payment to eligible low-income families with children under 16 by the end of 2022, worth £10 per week per child.

The UN Special Rapporteur on Extreme Poverty and Human Rights, Professor Philip Alston, highlighted that the devolved nations cannot mitigate against all UK Government cuts. However, we are committed to doing everything we can to support the people of Scotland.

Scottish businesses are suffering due to the drawn-out Brexit process, what is your message to them?

Preparing your business for Brexit is about developing a flexible planning approach so you can adapt and be resilient across a range of potential Brexit outcomes.

Scotland has an exceptional network of business support and businesses can be confident that they will receive ongoing support to help overcome challenges. Last year we launched Prepare for Brexit, a multi-agency campaign aimed at informing companies on a wide range of potential Brexit impacts and encouraging them to proactively prepare. We have also increased the number of staff dealing with calls from businesses looking for practical advice and launched a Brexit support grant.

However, we won’t be able to mitigate against all the damage of Brexit, which is why the UK Government should immediately rule out a no-deal exit.

Uncertainty around Brexit is intensifying across the economy and weighing heavily on business confidence. That is why the Scottish Government has consistently opposed the UK’s proposed departure from the EU, in line with the clear majority of votes in Scotland in the 2016 referendum. However, during this period of continued uncertainty our message to companies is simple: it is critical that they continue to assess the challenges presented by Brexit and take the necessary action to safeguard their growth.

Scotland’s tech industry is growing year on year, do you think more can be done to promote Scotland as a tech hub?

Scotland’s tech scene is one of the most vibrant areas of our economy, however I am not complacent, there is always more we can do. The opportunities are huge, from AI and robotics, to gaming and fintech, we have expertise across the board. We have globally renowned universities producing a stream of highly skilled graduates and cutting-edge research. Our tech start-up sector has tremendous potential, however we need to concentrate our efforts on creating the right conditions to enable more of these start-ups to scale, in addition to attracting inward investment. 

Tech will play an increasingly important role in the day-to-day of all Scottish businesses, however digital skills are an ongoing challenge, this is why we have invested in programmes like DigitalBoost, to support all our businesses to be tech smart. The Digital Start Fund, launched earlier this year, is a fund to help those facing barriers to move into tech. Driving greater diversity in the industry is a key challenge I am determined to address.

We also want to do more with tech to tackle our big societal challenges, like the climate emergency and to support our health service. In doing so, and via our programmes like CivTech, we will attract new investors and new innovators who in-turn will generate new industries and jobs. Our vision is for Scotland to become even more digitally competitive and attractive and for our businesses and individuals to share and participate fully in the process. Only then will we fully realise our digital potential. 

Has the climate emergency made you rethink the use of tax and spending to reduce climate change, and how do you then appease business?

We are looking across all of our responsibilities to make sure we continue with climate change policies that are working and increase action where necessary. This summer and autumn, our Big Climate Conversation will be engaging with all parts of society, including businesses. During this process, we will be actively seeking views on opportunities, challenges and barriers, generating ideas to feed into our future policies, and climate change will be at the core of our next programme for government and spending review.

It is important that we also see climate change as an economic opportunity. Our ambitious approach will support economic growth by reducing the cost to the Scottish economy of climate change.

The workplace parking levy will provide local authorities with a discretionary power to help address local transport needs and contribute to achieving our wider, ambitious, climate change agenda.  Business interests will be considered as part of consultation and impact assessment requirements. 

On Air Departure Tax, Scotland’s replacement for Air Passenger Duty, we took the difficult decision that our policy was no longer compatible with our new emissions reductions targets and acted accordingly, in line with the First Minister’s declaration of a climate emergency.

Boris Johnson enjoys painting wooden crates. What do you do to unwind?

When I get the time, I enjoy going to the gym or going for a run.

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