"The Fixer": Derek Mackay talks budget
This time last year, Derek Mackay looked as if he was poised to fall victim to the political curse that has come to define being the Scottish transport minister. With just three weeks to go before Christmas, and with families planning their drive home north and last-minute deliveries mounting up in warehouses, cracks were identified in the Forth Road Bridge and Mackay ordered it to be closed down.
The emergency closure to all traffic on 3 December, after a 20mm crack was found in a support truss on the bridge’s northern pier, caused chaos on roads in Fife and central Scotland. Tens of thousands of commuters and travellers were forced onto heavily crowded trains, relief buses and alternative roads. And with a reopening not planned until into the new year, businesses declared the ban in the run-up to the busiest sales period of the year a catastrophe.
The MSP for Renfrewshire North and West was cast as Holyrood’s own Grinch who stole Christmas.
Scottish Labour, then the main opposition at Holyrood, alleged that SNP government funding cuts had led to the delay five years previously of upgrades that would have replaced the affected part.
Analysis: Derek Mackay delivers an historic budget, but his real job is just getting started
The Scottish budget - main points
And MSPs on all sides of the house joined in the clamour to condemn Mackay as transport minister, calling for an inquiry into the bridge’s closure, claiming there was clear documentary evidence that the crisis was due to cost-cutting by the bridge’s previous publicly owned operating company.
So, with opposition politicians baying for his blood amid accusations of lying, of misleading Parliament and of a funding cover-up, Mackay pulled the proverbial political rabbit out of the hat and declared the bridge was to reopen to cars and light vehicles two weeks ahead of schedule and just in time for Christmas.
The subsequent parliamentary inquiry into the bridge’s closure vindicated Mackay and concluded that the structural defects that halted the traffic – with HGVs barred from crossing until February – “could not have been foreseen”.
Opposition parties, predictably, declared the report a whitewash from a heavily weighted SNP committee, but Mackay did appear to walk away from the debacle with his reputation untarnished, if not enhanced. A few months later, the SNP won the Scottish Parliament election and he was promoted to Cabinet Secretary for Finance and the Constitution in Nicola Sturgeon’s new minority government.
And while clearly delighted by the step up, Mackay knew only too well how delicately balanced it all was if he was to avoid becoming just another scalp on the transport ministerial floor.
“I always think the transport brief is one of the most difficult jobs in government,” Mackay tells me in the week that his successor, Humza Yousaf, had found himself under fire for Scotland’s troubled train service. “You’re often dealing with factors that are genuinely outwith your control. So you can have massive investment plans, as we do for the railways, the road infrastructure, for ferries, and we’ve supported aviation as well with things like the air discount scheme to the islands, but it’s still factors outwith your control that can affect how well you are perceived or how well you’re judged to be doing your job.
“Obviously, if a major piece of infrastructure goes then you have to plan but it is incredibly challenging. I learned a lot of lessons from the Forth Road Bridge experience and one is that you have to trust the experts who are doing the job, the engineers and all the specialists, because it was their strong presence that allowed us to deliver a contingency plan within hours of the decision being taken by ministers to close the bridge, but also, that they understand that as the minister I took total political responsibility. It is that leadership that was understood and appreciated.
“The press conference the day after the bridge closure was probably the most challenging public event I’ve ever done, because so much at that point was unknown and, as you know from the experience of others that have held the brief, winter is historically a very difficult period for any transport minister.”
Mackay alludes to a previous SNP transport minister, Stewart Stevenson, who resigned after some ill-judged comments about the traffic chaos that had occurred during the extreme winter weather in December 2010. I ask Mackay if at these times the greatest concern for any minister is simply hanging onto their job.
“No, you’re most concerned about delivering the right outcome and for me, that was a clear plan to have the bridge reopened, have all the traffic contingencies in place and to make sure that Parliament was fully informed.
“My personal view is that I knew I was on top of it and I was doing as much as I could do, but I also knew that there could be a perception that that wasn’t always the case. But the reality is that you are dealing with a changing situation and at some points we didn’t know if it was going to get any worse or not, because basically the bridge was cracked.
“I was informed I was handling it competently, I had the support of the First Minister and at no point did I feel as if I was handling it incompetently, but there was one point within the chamber when I was asked one question and then later a journalist asked me a question, actually a better question, and it looked as if my answer was different and people were then arguing that I might have lied to Parliament. I knew I hadn’t; I knew I was answering both questions 100 per cent accurately, but that the questions were different. I was vindicated and the bridge was fixed, but at the lowest points, I did think I might not survive this, only because so much of it was outwith my control and yet I was responsible for resolving it.”
Similarly, Mackay took over the finance and constitutional brief just as Brexit – ironically all about taking back control – threw the UK into a state of financial and constitutional turmoil and prompted the dire prediction of an economic black hole in the UK’s finances, with Scotland’s looking only worse.
Despite this, Mackay, a passionate independence supporter, believes the case for independence is even stronger.
“I think that the Brexit vote has strengthened our constitutional case, in that the onus is now on the UK Government to show that the UK can work, that they protect Scotland, give us a solution around our constitutional position and show that the UK can be adept. The ball is in their court to do that now, so they have to show how they can deliver for Scotland; if they don’t then we might find that my constitutional role keeps me every bit as busy as my financial one!”
But at a time when it is even more important for all governments across the UK to be working together in common pursuit of a good deal out of Brexit, I ask Mackay how he has found working with the new Tory Chancellor, Philip Hammond.
“When he immediately came into post we had a conversation and I’ll be quite frank, I thought he was quite command and control. I thought he didn’t get the Scottish context at all and I felt, strangely, given my natural predisposition not to like hard-right Tories, that George Osborne, who I had met in my early days in office when he came to Edinburgh, I quite liked and thought maybe we could do business together, but then he was shuffled away and here’s Philip Hammond in his place.
“However, I have a more direct relationship with David Gauke, as the Chief Secretary to the Treasury, and I have to give him some credit, the asks I have made of him so far, he has been reasonably obliging of. For instance, on the Scottish Growth Scheme, that’s half a billion pounds to support private sector growth, he’s given me the Treasury’s support to carry on with that scheme. So, while he’s not given me any new money, he has responded to asks of him like that positively and what he has done is help forge a good relationship – constructive and pragmatic – and I think people would want to hear that despite the huge political differences between the UK Government and the Scottish Government, there is a pragmatic approach. In fact, the Welsh and the Northern Irish finance ministers are just looking a wee bit jealous at the moment, saying, ‘Derek, you seem to get what you are looking for’, although my civil servants advise me that it won’t last!
“I will keep making asks, because apparently it’s not the norm to go into a meeting with the Treasury and come out with things you’ve asked for and the Chief Secretary has gone some of the way there, but, for instance, if you take VAT for police and fire services as an issue, that is one I want to escalate because we are the only part of the UK that is having to pay that back bill for our emergency services. Or look around other areas, for example, in support for the oil and gas sector and for decommissioning, I have many more asks and I will pursue them, but it’s fair to say the relationship has gotten off to a good start in terms of Chief Secretary to Finance Secretary, but in terms of Chancellor to Finance Secretary, I find Hammond a bit command and control and that he didn’t really get Scotland.
“Why do I say that? Well, when we had a discussion about Brexit, he compared the outcome of the vote in his own constituency with the whole of Scotland. We’re not a constituency. We’re not a stakeholder. We are a nation. I would have expected his emotional intelligence to pick up on the fact that this is a big issue for Scotland and we can’t just be dismissed in terms of 62 per cent of those voting, voting to remain within the EU. Folk say that in the style of an accountant, he is a bit of a cold fish. I want him to respect Scotland and respond to our agenda and I am willing to give the relationship, in terms of us both being relatively new to the post, a try, but let’s see.”
Despite this, I suggest Mackay’s reaction to the Chancellor’s first Autumn Statement in October was fairly SNP predictable in its Westminster-bad critique.
“Well, I did anticipate a capital stimulus, I knew there had to be capital investment, but it’s only given us back some of what was taken away,” he says. “It was described as resetting fiscal policy; well, it’s reset borrowing rules and it’s reset some of the approach by essentially saying the Autumn Statement will now be the budget and that the spring budget will now be the statement which I think vindicates my decision to embark with the Finance Committee on resetting how we do the budget approach in Scotland, actually, so that whole shift has surprised me, but some would argue that it was an uneventful budget in terms of financial adjustments.
“But of course, there was the Brexit bombshell – the revelation and real hard data for the first time that this would impact on revenues, that it means higher borrowing, it means higher inflation and it means higher levels of borrowing, not just to fund infrastructure and investment, but partly now to fund economic failure at the hands of the UK Government.
“The Brexit reality is now biting and hitting home. A number of Tories told the Chancellor to cheer up, it can’t be that bad, but the Chancellor wouldn’t be making it up, it must be that bad and indeed, it could be a lot worse.
“There is now economic consensus that Brexit will have a hugely negative impact. That a hard Brexit will have a profound impact on revenues, and therefore spending, and the fiscal stimulus is only repairing some of that damage.
“The £350 million pounds a week for the NHS promised during the referendum hasn’t materialised, in fact, not a penny more for the NHS as a consequence of the Chancellor’s announcement, but here in Scotland, we clearly have got manifesto commitments around NHS expenditure.
“There was also no real reversal of the welfare cuts that have been so harmful and while me and the other devolved administrations, the Welsh finance minister, the Northern Ireland finance minister had pushed very, very hard not to have our budget settlement reopened by the UK Government, and that has been avoided, it is still the case that we are managing really difficult finances and with no new resources for frontline services.”
And just three days out from publishing his own draft budget, there could have been little cheer for Mackay in the Fraser of Allander Institute report that frontline services in Scotland could be facing cuts of £700m by the end of the parliament. The report, commissioned by the Scottish Local Government Partnership, said that council budgets had fallen by over £1bn in the past five years and painted a very grim picture for the years ahead as Holyrood faces the prospect of swingeing cuts to its budget from Westminster, which, it says, SNP ministers will struggle to offset. It also claimed that the prospect of using the new tax-raising powers to tackle austerity would prove “difficult”.
Given such dire forecasts, I ask Mackay how he began preparing his budget. “So, the first things I focused on in terms of drafting my budget were: what are the numbers, what are the manifesto commitments, what’s the Programme for Government, what does the First Minister and Cabinet want to achieve, and so I then have a clear set of priorities and parameters of what we want to do and what we need to do, which, of course, is driven by the numbers which I have been working on since the day and hour that I came into office.
“I also want to help reset the relationship with local government and the last round of negotiations were quite tough between Scottish Government and local government but having a local government background as I do, I want a new relationship. I think there is a degree of trust between me and the council leadership and therefore I want to use that background I have in local government to arrive at a better deal.
“Now some of the analysis is very plausible around the financial position that we take, our manifesto set out protection for the NHS, frontline policing and more around education, attainment and inequality, so it’s clear that in that context, local government will have a tough budget settlement, but within that I want a genuine partnership approach and we’re looking at a number of issues where, yes, the Government might have to give ground on an earlier position, but that will be about negotiation.”
Mackay knows that as part of a minority government, his budget will require the support of other parties and he has written to all the political parties to arrange meetings with the finance spokespeople and some of the party leaders to start the initial horse-trading.
He says he will show that he is listening and will give them reasons to vote for the budget but he says “they’ll have to be mature and responsible”.
He says there have been signs in the last few weeks of opportunism going on and points to the area of local taxation, where he says the opposition leaders can “gang up in their critique of the Scottish Government, but I know there’s not a snowball’s chance in hell of them in actually agreeing what an alternative system would look like.”
“I will engage with the other parties to try and find the area of consensus to keep the progressive reform going and, you know, maybe the Tories will rule themselves out of that, but there is a huge responsibility on the opposition parties to not just play politics, but to play serious. This parliament will be more fiscally responsible and so too should all the parliamentarians and not just play games with the budget, but have genuine negotiations that can arrive at actual delivery.
“The Tories have pitched their tent as being the opposition to the SNP, so it’s difficult for them to support our budget on their own terms, but I think they’ll also have to be realistic. I don’t think the public would thank you for an opposition just being opportunistic and trying to undermine the Government’s economic goals, especially if it is about stability and investment in priority areas that I’ve listened to the parliament on.”
One area he clearly has not listened to Labour’s Kezia Dugdale on is income tax. All the signs are that despite the new powers of the Scottish Parliament, the new finance secretary is unlikely to do anything particularly bold in terms of income tax, although he does say this will be the first time there is divergence from the UK Government’s position on the threshold for the higher payers of income tax, which he says will generate a substantial amount for public services in Scotland. But that will have been achieved by basically doing nothing – i.e. not implementing the threshold change from down south.
“And on council tax, after nine years of a council tax freeze, I think everyone accepts that’s not sustainable anymore, so we are changing the bandings for folk on bands E and above, and that generates extra income as well,” he says. “Councils will also be free to raise council tax by up to three per cent. One local authority has already said that it is not proposing to put the council tax up, and I think that tells its own story in terms of local government finances, but I genuinely want to reach a partnership approach with local government on local taxation, and they’re interested in other areas of local taxation as well and I’m open minded to talk to them about that.
“All in all, I think you’ll find that I stick very close to what was in the manifesto and our tax proposition without actually previewing what’s in the budget.”
In terms of the approach of universality of benefits, he says that it is the right one, although points to some areas of targeted investment and says it’s not about universal provision versus targeted, it’s actually a mixture of both, and points to his own upbringing as feeding into his approach as finance secretary.
Born into one of Scotland’s most deprived sink estates, Mackay’s early years were scarred by memories of violence, alcohol and domestic abuse. He and his brother lived for a time with their mother in a homeless unit after fleeing the family home and many of his classmates ended up in prison, on drugs or out of work.
But regardless of the hardship, he talks about a sense of community and the strong characters – mainly women – that delivered change, who looked after each other, and went out of their way to assist other families when the times were tough.This background is what he says drives him.
Mackay was elected as an SNP councillor at just 21, having walked out of the University of Glasgow without completing his degree in social work. He was already involved in the local community council and vice-chair of his crime prevention panel in Renfrew, the town where he was brought up and still lives, and says he simply came to the conclusion that he wanted to be ‘doing politics’ rather than just studying it.
His interest in politics began as a pre-pubescent 12-year-old, and he remembers two seminal events: the by-elections in Paisley North and South in 1990 and at the same time, a locally orchestrated campaign against a proposed waste incinerator.
He says that firstly, media from all over the UK descended on Renfrew for the by-elections which made him realise how powerful a tool politics could be and secondly, almost every house in Renfrew had a poster in its window protesting about the plans for the incinerator.
“I think that politics had a very immediate impact on my life with both those events and I recognised quite early that politics at all levels made a difference and you should know about it and be involved in it.”
His own family weren’t particularly political, although he says there were a couple of Labour councillors ‘somewhere in the background’. He grew up in a council scheme, Kirklandneuk, where people tended to vote Labour but while he did recognise some sharing of political values, Labour didn’t offer him all he was looking for.
“My home community would have traditionally said ‘this is a Labour area’ and back then it would have been normal to have been Labour but I think I looked at my own community and how it voted and asked myself that if Labour was that party of caring and sharing, why was the community I came from still powerless and still living in houses that weren’t of a good enough quality.
“In truth, I just got caught up in the SNP and that’s where I wanted to be,” he says. “I became involved in the university’s Scottish Nationalists’ Association and the focus on politics just took over and I got to the stage where I wanted to do it not study it, so I dropped out and stood for election.
So, in that politically historic year of 1999 as the first MSPs were being elected, Mackay won his first council election and became a councillor for Renfrew.
At the time he was Scotland’s youngest ever councillor although that title has since been taken by even younger SNP members in other council areas. Eight years later, having won three successive ward elections, he was leader of Renfrew having taken the SNP from opposition to control for the very first time in the area. He has been credited with transforming Renfrew into a professional, well-run and efficient local authority and was the SNP group leader within COSLA and a respected figure within local government. He was elected to the Scottish Parliament in 2011 and was quickly appointed as minister for local government and tipped as a rising star. Five years on, and as the man with his hands on the country’s purse strings, he can still give the impression of not quite believing how far he has come.
“I think from going from absolutely nothing in life to feeling very fortunate indeed, I feel very lucky, and of course you make some of your own luck by working hard and being diligent and pursuing what you believe in, but I suppose it was that degree of poverty, domestic turbulence, being homeless, having to start all over again and also seeing the impact on others and wanting to support my mother and my brother, that of course shapes you.
“Your life experiences shape you and when it comes to personal wealth, that doesn’t bother me so much, it’s more about your integrity and how you make others feel that is important.
“I was once told by a very good friend when I was council leader and I thought we were doing fantastic projects, whether it was building houses, refurbishing schools, delivering infrastructure policies and so on, that you won’t be remembered for what you’ve built, but you will always be remembered for how you made people feel, and that’s not about wealth or physical infrastructure, that’s about culture and attitudes and leadership and how you make people feel about themselves and their society.
“It’s quite funny, but when I became a councillor, folk would come and say to me, ‘how would you like it if we put a homeless person’s unit’ – which was basically a furnished flat – ‘beside you?’ and I made the point that if it wasn’t for that kind of facility, I may still be on the street with my mother and my brothers. I just think people should show a bit more compassion and not judge folk for how they’ve ended up in that circumstance.”
When Mackay was a council leader, he said he paid his community back by refining policy to local need; he redefined eligibility of multiple deprivation, introduced free school meals, encouraged smaller class sizes, and pioneered family nurse partnerships and positive parenting before they became mainstream.
And if anyone understands the need to close the gap between political rhetoric and social reality about opportunity for all, then it is Scotland’s new finance secretary.
Shortly after he was appointed in that role, he was asked in a committee meeting about the Laffer curve – a basic economic theory that describes how revenues can go up if taxes are cut – and was pilloried, particularly by the Tory MSP Murdo Fraser, for not knowing what it was.
“People might ask what qualifies you to do this job, what’s your track record in managing things? Well, I ran a difficult transport brief, led a local authority for four years in challenging financial circumstances, was minister for local government and planning and been the longest running business convener, or chair of the party, ever. That’s my proven track record. I got elected at 21 and I’ve been re-elected ever since. So what, I didn’t complete my degree, but I’ve been able to deliver and write government policy, and I might not always be able to define economic theory as explained by a lecturer, but it doesn’t mean I’m not delivering it and it doesn’t mean I don’t know what I am doing. I feel that I’ve got a good grasp of my brief and I know there’s a bit of fun had by the Scottish Tories, but I think some of the Tories in the Scottish Parliament just need to watch out that they don’t appear to be a bit snobby in their approach and how they then become characterised as a political group.”
Mackay’s predecessor, John Swinney, held the finance role for nine years and was dubbed ‘The Bank Manager’ for being a safe pair of hands. I ask Mackay what he thinks he would be described as. He laughs: “I guess, some would argue that the Forth Road Bridge was a defining incident, it was make or break, do or die, for me, politically, so maybe some folk would say that’s what I am – I’m The Fixer.”