Show me the money: exclusive interview with Derek Mackay on Scotland's budget
The annual Scottish budget process has fallen foul of the great British Brexit stand-off
Scotland’s Finance Secretary has got used to the comparisons with fictional characters. From being described as sounding like a “constipated Dalek”, to being dubbed Star Trek’s Mr Spock for his improbable solutions for enterprise, to morphing into Dr Who for his plans to regenerate the economy, the annual budget pantomime has seen Derek Mackay slip into more roles than Mr Benn.
But this year, with the country put on general-election footing at the end of 2019 amid the Brexit impasse and with a UK Government budget postponed, Mackay finds himself less sci-fi and more Jerry McGuire shouting ‘show me the money’.
Mackay had been due to publish his spending plans on 12 December, but when the UK Chancellor of the Exchequer, Sajid Javid, cancelled his own budget in November ahead of the general election, Mackay had little choice but to postpone his.
And while it would have been possible for Mackay to draw up his budget ahead of the UK’s, he would have been doing so blind, running the considerable risk that last-minute changes would need to be made around tax and spend, depending on the Chancellor’s plans.
At the time, the Chartered Institute of Taxation said that the delayed UK budget would hinder Scotland’s spending plans because it would mean Mackay would have had “one hand tied behind his back” and claimed that the possibility of a delay could mean MSPs would not be allowed adequate time to scrutinise any tax changes for the coming year.
But finally, last Tuesday, with no reply forthcoming from his repeated letters to the Chancellor about when he would announce his budget, Mackay learned from the BBC, as he was being driven to his first Cabinet meeting of the year, that Javid would not be setting out his budget plans until 11th March.
Javid said his package would focus on unleashing Britain’s potential after the country’s departure from the EU at the end of this month. It is also understood that he will announce a shake-up of the way the Treasury allocates investment, in an attempt to even up spending between the regions.
The Chancellor said: “People across the country have told us that they want change. We’ve listened and will now deliver.
“With this budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.”
In the meantime, Scotland is left with the very real possibility that its own spending plans will have little time for real parliamentary scrutiny, that councils will be unable to set local tax rates, that public bodies and the third sector will not know their financial allocation, and importantly, that if a tax rate resolution isn’t passed by the start of the new financial year, that under current rules, it will cease to apply.
And while arguably, the UK budget delay might not be a deliberate attempt by this newly empowered Tory government to undermine Scottish devolved power, it will have a severe knock-on effect on both national and local government finances in Scotland. Public finance minister Kate Forbes described it as “reckless, careless and ignorant”.
Mackay tweeted a link to the breaking BBC story and said: “Absolutely no engagement or respect shown to the Scottish Parliament or our budget process. UK Gov have failed to respond to our efforts to get clarity or an orderly process agreed.”
Mackay tells me that in the three years that he has been doing the job as Scotland’s finance secretary, he has become accustomed to the Treasury’s lack of respect.
“I’m now onto my third chancellor and as many chief secretaries to the Treasury and while, like many people, I sometimes have imposter syndrome and I don’t think it’s a bad thing to admit that there are times when I don’t think I’m good enough to do the job, I have to say, having met my so called Imperial Masters, I am feeling perfectly apt and perfectly up to the job.
“I had a recent meeting with the then newly installed chief secretary to the Treasury, Rishi Sunak, and have to say that we did lock horns. I was explaining to him how the fiscal framework – that’s the financial arrangements coming from the Scotland Act – was no longer fit for purpose, how it was unravelling because of the experiences we’ve been through and the decisions that the UK Government has taken, for example, with Brexit, and it is simply no longer fit for purpose. I was also objecting to austerity and I was asking what actions the UK Government was going to take on a range of matters.
“Honestly, I felt that once again, we’ve got a UK minister that is being evasive and not engaging properly with us. My experience with David Gauke, Liz Truss and now Rishi is that they don’t treat us as equal partners. They are awfully gentlemanly in their conduct, or Rishi is, I’ll give him that, but I’ve been in time after time and told that ‘we’re working on it’ and ‘we’ll get back to you’ and it just isn’t good enough. I wouldn’t expect to give those kinds of vague answers and get away with it. So, this time, when I felt that I was getting a little bit of pushback, I got up to leave.
“I left the meeting expressing my displeasure at the attitude of the UK Government towards Scotland. He followed me out the door and said he was new to the job and to give him a chance. He’s someone I would like to be able to work with, but you know, I’ve met amiable UK ministers before and that means nothing if they don’t deliver on what Scotland wants or needs and that’s what I’ll judge as success.
“I’m not just there representing the SNP, I’m there representing the people of Scotland and the Scottish Government, so, yes, poor Rishi Sunak pretty much pleaded with me to give him a chance.
“I have to say I did get on much better with some other UK Tory ministers who I thought I could do business with. It turns out they were so reasonable they are no longer in the Conservative Party.
“Look, I was aiming for the 12th of December to present Scotland’s budget to parliament and then go through the normal process, but when the UK Government called an election, clearly that date didn’t work, and it would be immeasurably risky for Scotland to go ahead with the budget not knowing key material facts.
“Interestingly, though, if the non-domestic rates order isn’t passed or the income tax rate resolution isn’t passed on time, I would raise no income tax in the country whatsoever. Hurrah, you might hear taxpayers say, but imagine taking, you know, £12 billion pounds out of public services, it would be catastrophic. So, I think in this year, there is a real responsibility on all parties in parliament to make this work considering we are now in circumstances not of our own making.”
But then with Boris Johnson hinting at a Brexit bonus and a spending spree with an obvious need to woo the North, perhaps he will love bomb Scotland and Mackay could end up with more money than expected?
“It won’t undo austerity properly, it won’t undo the damage of the last 10 years or so of Tory government, and in fact, a lot of what he says is smoke and mirrors and when you go into the fine detail of what Boris has been promising, it will not be the land of milk and honey, and even in the possible Barnett consequential, there may be an uplift on capital, but other than some health uplift, which is unavoidable of course because of pressures on the system, for other services in the UK, I’m not so sure they’ll be as gleeful as some commentators would suggest.
“Ultimately, I want a fair deal for Scotland from the Chancellor, because let’s not forget that the DUP had a bung of a billion pounds, and so if we were treated fairly, in terms of the already existing funding arrangements, we would be at least three billion pounds better off and I can tell you it’s not three billion pounds that Boris is guaranteeing to Scotland.
“It might not sound the sexiest demand in the world, but I basically want fiscal fairness for Scotland. That would be good and, as you say, I could list a number of financial disputes I have had with the Treasury, and that’s where the gentlemanly chats don’t lead to much change, in my experience. That’s why I’m frustrated. But simply being fair would be significant to Scotland.
“But I don’t think Boris will love-bomb Scotland. I think the Tory party of Boris Johnson and his rather bullish advisers, have written-off Scotland. Bear in mind, Boris has just done more damage to the Tory party in Scotland than anyone could have thought – they had 13 seats and they’ve lost more than they now hold. So, he has a choice and one is to engage with the Scottish Government and to respect Scotland and how it’s voted and work constructively with us, but I fear he’s going to go the other way.
"I think he’s going to try and work around devolution and the established arrangements. I think he’ll try and undermine our respected devolution arrangements. I think he’ll probably try and claw back power or bypass existing mechanisms to undermine the Scottish Government. I don’t think they’re coming to work with us. I think they’re coming to fight with us.”
So why not just grant a Section 30 order, allow a second independence referendum and let Scotland decide?
“Because I think they fear that they’ll lose it. I think Scotland matters to them because despite the fact of writing us off, despite the fact they don’t get Scotland and they never have, I think that no UK Prime Minister wants to give up the Union. But if there was a choice, and I think polls of the Conservative Party membership have shown that they would choose Brexit over even the Union. That’s probably a shift in Tory attitudes and if Boris Johnson can do nothing else, he can certainly read the Tory membership.
“We may be expendable to the Tories, but the question is, how much are the people of Scotland willing to take from this right-wing bunch of Tories in government?
“I didn’t see us winning the election as an endorsement of independence, but I do see it as an endorsement of Scotland having a choice. You can’t say that every person that voted SNP in the general election supports independence, but you can say that every person that voted for us knew that that could lead to Scotland having a choice through a referendum. I know from going around the doors during the campaign that it was very complex, that the movement that was going on in voting patterns in that election was for a variety of reasons, but what is beyond doubt is that the SNP won, we achieved 45 per cent of the vote, 80 per cent of the seats, and that was an outstanding electoral victory.
“All I’m pointing out is that the most accurate basis we have to assess support for independence right now is the polls, which suggest support for independence and the status quo is neck and neck. But in the context of Scotland being forced into Brexit against our will, support for independence is in the majority and for the first time, the belief that independence would make Scotland and Scots economically better off is also on the ascendancy.
“I think that we are winning the case on the economics of independence. We have been outperforming the UK in many respects, in growth, in exports, on productivity gains, and on many occasions, unemployment has been lower than in the rest of the United Kingdom. Stats released just this morning show that unemployment is once again lower in Scotland than in the rest of the United Kingdom.
“I believe with the levers of independence, we can deliver greater prosperity and even more importantly, greater fairness and equality, within our country as well. I was on the Growth Commission and I believe that we made that case and showed how we could do much better. The perceived position of Scotland right now is as part of the Union, i.e. the estimated notional deficit is a consequence, not of independence, but of the Union and the constitutional circumstances that we find ourselves in right now. The more tools we have, the greater the sustainable growth we can deliver.
“Personally, I’m going to help build a stronger economy. I’m really driven by an economic plan that works for today and is preparing us for the opportunities of tomorrow and I’m thoroughly enjoying that element of the job."
“I think I conceded at an event that you held at the party conference back in October, that I get frustrated when the GERS figures are published every year. They are published by statisticians who are impartial, but it is notional estimates of Scotland in the current constitutional position, and I think the concession that you saw me give to my own members is that we should publish an equivalent analysis of what we could do with independence as we published the GERS figures, so that I can say, ‘OK, here’s the analysis of where people think we are right now as part of this system and here’s an even better picture of what we think we can do with the powers of independence’.
“I will publish that assessment next time we publish the GERS figures because I’m so convinced with the economic argument of Scotland. I think it needs the exposure it deserves, rather than the usual knockabout that Scotland’s too poor, too wee to be independent, we’ve absolutely got what it takes.
“We’ll start it off on the basis of what we have right now and then say what the opportunities would be if we were to, say, grow particular sectors or make particular decisions, but I could already say to you right now that if we weren’t to invest in nuclear weapons that’s £200 billion that we could use to do other things.
“Whatever people think of the Growth Commission, it was a substantial piece of work, and I’m committing to the equivalent level of intensity in our economic argument every year that we publish GERS, to make the point that here’s the position we’re in right now but here’s what we could have.
“That will be my annual economic case for independence and hopefully, I won’t have to make them for too much longer because we will be independent.”