Scottish Budget 2026-27 - patch and mend

 The Scottish Government has published its draft budget for the coming year. I wrote a pre-budget briefing for the Jimmy Reid Foundation outlining the challenges facing the Finance Secretary. I also penned an opinion piece in The National, setting out what I, and Tax Justice Scotland, hoped to see in the Budget. The extra cash in the UK budget meant that the Scottish Government could patch and mend the Scottish Budget this year - at least for resource funding. However, the looming deficit means that we need to start putting Scotland’s finances on a sustainable footing. We need a longer-term view, particularly on tax. 

"We’ve patched, postponed, pretended. Now Scotland must choose: keep letting services quietly crumble, or invest properly in the people and places that make this country tick. That requires an open debate on our willingness to pay for the country we want. And the really big question is whether, in an election year, our politicians are willing to have it."

God loves an optimist, but hoping for tough choices in an election year was probably too much to ask for. Not unlike the UK Budget, what we got was patch-and-mend. This is my quick take.

Not that there are no welcome patches. Breakfast clubs, a bit for housing and college funding; not enough, but some relief for a hard-pressed sector that has been discriminated against for years. The Scottish Living Wage for social care workers is always welcome, but it will take more than that to address staff shortages in the sector. Equally important, there is little sign that the government understands the link between social care and hospital capacity, as set out in yesterday's SHA survey and Audit Scotland report. The increase in the Child Payment is welcome, if insufficient, and at least demonstrates a willingness to address child poverty.

The capital budget is struggling, although, in fairness, this largely reflects the Scottish Government's inadequate borrowing powers. Promises to deliver projects long into the future will convince no one. A two per cent 'real-terms' increase in council funding will hardly touch the sides of the demands on local government services, so difficult tax decisions have just been outsourced to councils. This chart from the SFC highlights the problem. 

There are also some positive tax measures. Taxing private jet departures is something many of us have argued for. Raising the thresholds on basic and intermediate income tax rates retains the progressivity of the Scottish approach and allows the government to claim that 55% of Scots will pay less income tax than the rest of the UK, sustainable or not. The Scottish version of the Mansion Tax won't raise much revenue (nothing next year), and it is a long way from the Council Tax reform the SNP promised as far back as 2007. More patch and mend there. 

Instead of a proper review of business rates and the weak Small Business Bonus scheme, we have another patch, unlikely to satisfy many on either side of this debate. And £1.5bn savings from public service reform - that will be right! The Scottish Fiscal Commission's forecasts don't make great reading either, on the economy, tax, or public finances.

SFC, "Overall, the additional funding available to the Scottish Government for both resource and capital relative to June 2025 is small compared to the size of the Budget and the scale of the fiscal challenges identified by the Scottish Government in its MTFS in June 2025." If the wishful thinking reform savings don't materialise, and most are from health and social care, this could get very serious. As the SFC says, "The progress towards achieving these targets for recurring savings to date, and the number of health boards not breaking even, suggest that it could be challenging for the Scottish Government to deliver the efficiency savings it has incorporated into the Health and Social Care portfolio spending plans."

Overall, this is a classic election-year budget. A few eye-catching sweeteners, a little cash spread around to placate as many people as possible, and promises of great things in years to come. The tough decisions are deferred to the next government.

Outdated and Unfair: The Case for Council Tax Reform

 I have been working with the Tax Justice Scotland campaign on the case for Council Tax reform. This week, we have published a briefing that throws down the gauntlet to Scotland’s politicians, demanding they end decades of inaction and commit to replacing the unfair and outdated Council Tax in their 2026 election manifestos.

There is cross-party agreement that Council Tax is unfit for purpose, and a broad consensus amongst the policy community, supported by several reviews, on the solution. It is now a decade since the 2015 cross-party Commission on Local Tax Reform concluded that ‘the present Council Tax system must end.’ The problem is a lack of political will – moving implementation from the ‘too difficult’ tray. We are therefore calling for concrete manifesto commitments to:

• Abolish Council Tax and replace it with a fair, modern property tax.
• Launch a national revaluation of property as a first step in the next Parliament.
• Ensure the new system is local, proportional, and protects those on low or fixed incomes, while ensuring effective transition support is in place.

It is beyond absurd that properties are still valued for tax purposes as if it were 1991. I recall giving evidence to the Scottish Parliament Local Government Committee in the mid-2000s, pointing out that it was then 15 years since a valuation, and asking how much longer? 20, 25, 30 years? Well the answer was even more than that!  The uneven distribution of house price increases has also led to many properties with similar 1991 values having wildly different values in 2025. The Institute for Fiscal Studies says that over half of properties are in the wrong Council Tax band relative to where they would be if valuations were brought up to date. This has further entrenched the regressive nature of Council Tax, with the burden falling most heavily on people in less valuable properties. 

The consequences of the failure to reform can be seen in every community, with councils raising charges for services or cutting them entirely, which most negatively impacts those least able to afford them. The regressive and inflexible nature of Council Tax makes it difficult for councils to use it as an effective tool for funding public services. A prolonged period of nationally imposed Council Tax freezes in Scotland further restricted local councils’ already limited financial autonomy relative to comparable countries. Think of taxes like paying into a pot we all draw on: it’s how we keep our schools and libraries open, our care homes running, reduce the cost of public transport, and keep our streets safe. It’s about paying for the  foundations (the social infrastructure) that make our society one that we all want to live in.

The briefing explains why successive studies have agreed that a reformed property tax is the best solution. A reformed tax on property recognises that property is a major source of wealth in Scotland, but one that is glaringly unequal. That is particularly true on a generational basis, with rates of property ownership among younger generations much lower than among older ones, even at comparable points in their lives. Taxes on property are also more difficult to avoid or evade. A reformed property tax must be set locally and be based on a percentage of property value. It must be periodically reviewed and flexible to household circumstances. While it remains the most important local tax, action is also needed on business rates and other levies that could also make a significant contribution to funding essential local services.

We’ve had consultations, commissions and countless commitments, but little has changed. Decades of delay on Council Tax reform have deepened the crisis facing local services and locked in inequality. The 2026 election is the moment for Scotland’s leaders to move beyond words and commit to the fair, modern and proportionate tax system our communities deserve.

Autumn Budget 2024

 I am sadly old enough to remember when budget purdah was a thing. Clearly, no more, with relatively few surprises in today's budget, which hadn't either been formally announced or at least briefed in advance. That doesn't mean it wasn't a massive shift in direction, arguably transformational. I would highlight three in particular.

The first is the distributional analysis. After 14 years of the Tories rewarding the rich, this looks like a proper socialist budget. This point is reinforced by specific measures such as changes in Capital Gains Tax, Inheritance Tax, and, the one I particularly enjoyed, private jet passenger duty.

Second, there will be a big increase in spending for devolved administrations. An extra £1.5bn for the Scottish Parliament this year and an increase of £3.4bn next year. As Stephen Boyd points out, this doesn't end all the Scottish Government's long-term challenges, but if I were Shona Robison, I would sleep better tonight. 

Third are the fiscal rule changes, which many of us have been shouting about for weeks. This means more significant public investment in rebuilding our public services. As the OBR highlights, this alone won't boost GDP in the medium term, but it does start to fix the foundations of the economy after many years of neglect. Some of us would argue it could have been more significant and, as the OBR also highlights, must be sustained. The historical record shows (below) that it is not the 1960s and 70s, but greater than the manifesto implied and a move in the right direction. The OBR assessment of the impact on inflation, debt, and the bank rate is marginal. 

Other excellent announcements include the above-inflation increase in the minimum wage and reserved spending on defence, although this is still below where we need to be as a proportion of GDP. Hopefully, the Defence Review will address the huge threats to our national security. Confirming the ending of VAT exemptions for private schools thankfully showed the absurd lobbying failed. I was also pleased to see action on the mineworkers' pension scheme. 

If there is one big disappointment, it is the failure to increase fuel duty. I filled up my car on the way home yesterday, and when I left the petrol station, I thought it would not likely be that low for some time. However, Fuel Duty was frozen, and the 'temporary' 5p cut was kept. For a government that cares about climate change, this is bonkers, particularly when increasing the cap on bus fares. Some economic downsides around household incomes and employment have to be acknowledged. Increasing Employer NICs is not a free lunch.

Overall, I was very impressed with this budget. Of course, there are actions I would have liked to see that are missing, and she could have gone further with others. Serious tax reform is still needed, particularly on wealth. However, this was a step change in direction, and you can't do everything at once. There is still some headroom against fiscal rules, so there is scope for further structural changes.

Scottish Budget 2024-25

 There were no big surprises in the draft Scottish Budget published today. I set out the background to the Budget in a briefing for the Jimmy Reid Foundation, and it was always going to be challenging given the economic environment and the appalling UK Autumn Statement. 

There was little cash to spread very thinly. The NHS and social care budget predictably got the lion's share, although even that is well below what it needs. Within that budget section, social care did best, which is the right priority given the impact of delayed discharge on our hospitals. However, welcome though £12 per hour is for workers, it is unlikely to bring significant numbers of new staff into the sector. We need £15 per hour, and we need it quickly, along with funding for sick pay. Mental health, drug, and alcohol services are going to have a difficult year.

NHS staffing will remain a big problem in the coming year, as growth in staff numbers is likely to continue falling behind the rest of the UK. 

The Scottish Child Payment is at least being uprated but short of where many organisations felt it should be to maintain progress on tackling child poverty. As the Scottish Fiscal Commission's (SFC) report shows, Social Security payments with no equivalent in the Block Grant are the biggest additional cost to the Scottish Budget.

On income, changes to Income Tax are a welcome progressive change to the banding structure. Again, the Deputy First Minister was urged to go further on tax reform by a coalition of over 60 organisations in a letter I signed on behalf of the Reid Foundation. Tackling Scotland's key challenges requires long-term thinking rather than more sticking plasters. 

There is also a shocking lack of consistency. Progressive Income Tax changes must be contrasted with the regressive Council Tax freeze. If fully funded, the resources could be better targeted to support public services and the cost of living crisis. This chart from the recent FoA budget report is a reminder of falling real terms local government spending, particularly on non-statutory services, over the last decade.

As with the UK Budget, I am more interested in the Scottish Fiscal Commission report, which gives a longer-term perspective. Their fiscal forecast is summarised in this chart. Revenue will be up 8% by 2028/9, but capital will be down by 20%. Our crumbling infrastructure is about to crumble some more! The Scottish Government is heading towards the capital borrowing cap, strengthening the case for the same prudential borrowing powers as local government.

The SFC also highlights the drop in living standards between 2021-22 and 2023-24 as the largest reduction since Scottish records began in 1998. They are unlikely to recover to 2021 levels until 2026. 

The SFC also assumes average devolved public sector pay growth of 4.5% in 2024-25. This includes an average basic pay award of 3.0% and pay progression and churn. They also forecast a fall in Scotland’s public sector employment from 2023-24 onwards. Overall, the SFC indicated slightly higher wage growth in Scotland than in the UK, plugging the current gap. Some sectors are doing better than others this year. 

In conclusion, the report card would have to say, could do better. Some steps in the right direction with progressive income tax changes and spending priorities. However, that has to be balanced by only modest tax reform and limited support for alleviating child poverty, coupled with the absurd council tax freeze.

Public service reform is not a quick fix in a crisis

 The forthcoming Autumn Statement and Scottish Government Budget has inspired another round of calls for public service reform. Primarily wishful thinking as a substitute for public spending cuts, but the principle has merit.

The Chancellor appears to have some leeway in the Autumn Statement, although he wants to splash some of it on an Inheritance Tax cut that would benefit the wealthiest in society. This may shore up support for his boss on the back benches, but the politics are awful, particularly if it comes with benefits cuts for the most disadvantaged.

Audit Scotland has given a stark warning to the Scottish Government  in its annual audit of their accounts;

“The delivery of public services in their current form is not affordable, with inflationary pressures and public sector pay settlements having a significant impact. The Scottish Government must work with partners to develop a programme of public service reform, including workforce redesign, which balances the short-term financial pressures with the need for longer-term change, recognising that this may require financial investment.”

The Auditor was not alone in highlighting poor spending decisions. The ferry fiasco inevitably tops the list, with the latest final cost estimate approaching £600m. Then there is more than £50m on the BiFab fabrication yard, £52m on Prestwick Airport, £135m on the Lochaber smelter, up to £80m on the Rangers prosecution, and several IT projects. A less well-known example is the Shared Services Project. Many of us have been sceptical about the benefits of this approach in principle, but as predicted, costs have steadily risen. I'll believe the projected savings when they have been delivered!

While Tory MSPs regularly raise these issues in the Scottish parliament, they are less comfortable facing up to their own party’s record at Westminster. Nearly £100billion of taxpayers’ cash has been wasted, an average of £25billion every year since the 2019 election. The Best for Britain group’s chief executive, Naomi Smith, said: "The notion the Tories are safe with money has been blown out of the water. It's disgraceful the Government continues to squander public money while so many struggle to feed their families and heat their homes.”

The Scottish Government frequently references the National Performance Framework. However, as the Auditor also highlighted in his report, “I am concerned by the number of indicators not being reported five years after the first National Outcomes were agreed and it remains difficult to monitor the impact of policy and spending decisions on performance.” This is common, with initiatives launched under a blaze of publicity, only to quietly be lost as ministers move on to the next shiny announcement. I highlighted some of this in my recent report on Fair Work, and the Scottish Business Pledge is another good example of this process.

And before anyone tells me that the solution is private sector expertise. Let us remember that many of these projects involved private sector management consultants and big accountancy firms. Elon Musk has lost $41billion in just the last two weeks!

If we want to get serious about public service reform, let’s not forget that the template was set down by the Christie Commission 12 years ago. I was an expert advisor to that Commission, which showed how Scotland's public services require comprehensive reform by empowering communities, integrating service provision, preventing adverse social outcomes and becoming more efficient. The analysis in the report turned out to be pretty accurate. Sadly, too few of the recommendations have been implemented. 

Five years after Christie, I wrote a paper for the Reid Foundation on public service reform. This built on the Christie principles with a call to build integrated public services around recognisable communities, based on the principle of subsidiarity with service delivery at the lowest practical level. Proposals like shared services, the National Care Service and others show that the cult of centralisation still pervades government thinking. Preventative spending that could cut the demand costs on public services by up to 40% remains largely ignored. That report and Christie highlighted the importance of proper workforce planning and a staffing framework. This is a point again highlighted recently by Audit Scotland. 

Sadly, time and time again, these fundamental lessons are not learned. Public service reform is wheeled out as a solution during a financial crisis, just when the necessary investment is unavailable. There are only three years to go before I write my regular five-year blog on implementing the Christie Commission report. I suspect cut and paste will do the job yet again!

Why another Council Tax freeze is wrong

 Yesterday, the First Minister announced that the Scottish Government would freeze the Council Tax next year. While many will welcome any help with the cost of living crisis, this is the least effective way to provide that support. I thought my days of explaining why had ended, leading me to agree with Andy Wightman’s response, “Dearie me. I thought we had finished with this nonsense." This refers to the 'stop-gap' freeze that lasted nine years until 2017.

I get the politics of this. The SNP has just been hammered in a by-election in which the voters made it clear that the cost of living was their number one priority, not independence. Yet the conference coverage has been dominated by the debate on independence strategy. In that context, the focus of the First Minister's speech needed to be on the people's priorities, hence the big announcements on the Council Tax and NHS waiting times. Not consulting the Scottish Greens was also a helpful nod to the SNP's 'tail wagging the dog' faction.

So, what’s wrong with another Council Tax freeze?

The Scottish Green's had a few hours to respond, and Ross Greer correctly says, “As we have repeatedly highlighted, council tax is a ludicrously broken system. It hasn’t been accurate since before I was born, with most people now paying the wrong rate as a result of those 1991 valuations." Since the excellent 2006 Burt Report analysed the options, the story of Council Tax reform has been one sticking plaster after another. I have lost count of how many consultation submissions I have written since then. I am also old enough to remember when the SNP leadership agreed! Another sticking plaster when the Scottish Government is consulting on new proposals, however inadequate, appears to demonstrate policy-making on the hoof.

The Greens were not the only ones caught out by the announcement. COSLA was also not consulted, which disrespects the new start promised in the Verity House Agreement. This is, after all, a local government tax, and the rate is a matter for individual councils, not the central government. It will also further reduce the proportion of funding raised locally. By dictating almost all council finance from the centre, councils become local administrators rather than local government – unable to respond to local needs and be accountable to their electorate.

Then there is the cost, at least £100m, to compensate councils. Only this week, the IFS highlighted the dire state of the UK finances. This means Barnett consequentials are unlikely to save the Scottish budget as they have in the past. Coming from a Scottish Government that has just told UNISON that there is no more cash for council workers pay, this is not clever industrial relations either. In fact, the only group to welcome the freeze was the tax dodgers alliance. As the STUC put it, "Local services are crying out for investment, and today's announcement combined with a decade of inaction will only make the situation worse." Let us not forget that the last freeze was not fully funded, and councils were forced to increase service charges.

The Scottish Government were consulting over a modestly progressive increase in the Council tax bands - proposing bills for Band E to Band H homes go up by 7.5%, 12.5%, 17.5% and 22.5%, respectively, in April. In contrast, a Council Tax freeze is regressive, disproportionally benefiting better-off households. This is a graphic I did in 2017, which shows just how much the last freeze benefited the wealthy.

If the Scottish Government has the cash to support families through the cost of living crisis, they should focus on progressive measures like the Scottish Child Payment and strengthening the public services we all rely on. A tax handout for the rich is a regressive policy.

UK Budget 2021 - Schizophrenic or maybe not

 Depending on who you read in today's UK budget analysis, the Chancellor has either gone full-blown John McDonnell or is returning to austerity. You would think both cannot be right, and in my view, they are not. This is a Tory Chancellor reverting to form.

Let's start with Scotland. There is £1.2bn in Barnett consequentials, which gives some flexibility in the Scottish Government budget for this year, even if it adds to long-term financial planning challenges. An important issue, particularly for those organisations that need greater funding certainty, and will make the traditional arguments over manifesto costing pretty irrelevant. 

The Budget also confirms a trend we have seen in recent years of the UK government funding projects in the devolved administrations directly, to the tune this year of £1.4bn. Union Jacks are to replace the Saltire on a wide range of projects. His speech was replete with UK rhetoric, which implies the Union Directorate in No.10 has been working overtime despite its regular leadership changes! Martin Kettle explores some of the politics behind this in the Guardian this morning. Brian Wilson did an interesting piece concerning the incompetent management of EU funds by the Scottish Government and makes the valid point that; "We need more of a power grab – so that powers reside with the level of government best placed to implement them efficiently and for the purposes intended. Scotland is not all one localism and our politics need to reflect that."

The more serious medium-term concern is the consequences for public services. The short-term spending looks huge, but it hides a plan to return to austerity pretty quickly. For example, nothing was said about the NHS and social care, which will have consequences for restarting the NHS and the pandemic backlog. It also means that the Scottish Government can no longer duck the issue of how they will fund the Feeley Review recommendations. 

Ending the Universal Credit uplift in six months will throw half a million people across the UK into poverty, including 200,000 children. It was also silent on helping 700,000 households who have fallen behind on rent and are now at risk of eviction. Freezing personal allowances will add to this concern. Having said that, personal allowances generally help the better off, so they are not the best way to help the lowest paid. The SNP's Council Tax freeze is regressive for similar reasons. We should instead be looking at other aspects of personal taxation to make it more progressive.

For the economy, the short term boost of pent up spending may get us through to next year, but as the OBR report makes clear, growth is likely to be pretty anaemic after that. The Chancellor seems to think that private investment will provide a boost, supported by his 'super deduction' to Corporation Tax. There is a good reason while this has not been tried before. This type of allowance generally rewards investment decisions that would have happened anyway. The big increase in Corporation Tax looks very Corbynesk, but it is still lower than when the Tories came into power. Corporation Tax is aimed at company profits, so should recoup a share of the profits from firms who have had a 'good' pandemic. However, these are often the very firms that are most adept at dodging tax.

One big health warning over the Budget plans. The real budget lines only apply to the coming financial year. Anything after that is just planned. Experience shows that these are likely to change, even more so in the uncertain times we live in. 

Overall, it seems clear that John McDonnell has not managed to sneak into No.11 and shift shape himself into the Chancellor. This is an austerity budget that will hit the poor hardest. Sunak has returned to form.

Building Stronger Communities

The COVID-19 Pandemic has highlighted the importance of strong communities, supporting and looking out for each other. However, strong communities do not happen by accident; they need to be nurtured and supported. In a paper published today by the Reid Foundation, I set out nine ways we can build stronger communities through a comprehensive programme of action.

Austerity has undermined many of the local institutions that bind our communities together. Cuts to our libraries, community learning, youth work, day centres and grants to voluntary organisations have all contributed to a weakening of local communities. These cuts impact adversely and more acutely on the most disadvantaged individuals, communities and groups.

That is why social infrastructure is vitally important to strong communities. Social infrastructure relates to the physical conditions that determine whether personal relationships can flourish. When social infrastructure is robust, it fosters contact, mutual support, and collaboration among friends and neighbours. When degraded, it inhibits social activity, leaving families and individuals to fend for themselves. The paper looks at a wide range of initiatives that can strengthen social infrastructure including, good housing, libraries, leisure facilities, voluntary organisations, community ownership and the role of planning. Social media can be part of social infrastructure but it depends on connectivity which can be limited and unequal in many communities.

A strong local economy is an important element of strong communities. Scotland’s high streets and town centres were struggling even before the pandemic with five stores a week closing. We need to rethink our town centres as places where people live and work, not just shop, although that will remain important. Community Wealth Building should be at the core of the measures needed to rebuild local economies, based on wellbeing and inclusion.

Stronger communities also have to be sustainable communities, based on more local (particularly food) production, community energy, developing a sharing economy, better public transport and support for active travel. Place also impacts on health and wellbeing and contributes to creating or reducing inequalities. Sufficient social infrastructure helps tackle isolation and improves physical and mental health. This includes how we design communities and create integrated local health and care services.

Providing better services is not enough to create stronger communities - citizens also have to be actively engaged. So, local democracy should sit alongside measures to decentralise powers and democratise the economy. A fairer Scotland where we care about each other, where people can pool their resources, demand accountability, build institutions and influence the decisions that affect them. This must include the decentralisation of power with national government to focus on setting frameworks, leaving the delivery of services to local democratic control. Local integrated services should be based around community hubs in recognisable communities of place. The pandemic has highlighted the importance of local services and the workers who deliver them - we should ‘Build Back Better’ based on the principle of subsidiarity.

It isn’t that nothing has been done about these issues in Scotland. There are many good initiatives highlighted in the paper that individually address many of the key issues. The problem is that many are small scale and process-oriented. What we need is a real focus on communities as the building block of society and a comprehensive programme of integrated support.

Plunder of the Commons

Public wealth takes precedence over private riches. This is a policy prescription from what became known as the Lauderdale paradox. The Earl of Lauderdale in 1804 argued that there was an inverse correlation between public wealth and private riches such that an increase in the latter often served to diminish the former.

This is one of many classical ideas that underpin a new book by Guy Standing, 'Plunder of the Commons: A Manifesto for Sharing Public Wealth'. While most people are familiar with Magna Carta, there was a second document, scarcely known today, but at the time of its sealing was regarded as equally fundamental. This was the Charter of the Forest, which was about the rights of commoners to use and manage common resources. The Charter was also among the first environmental law statues as it placed implicit limits on the exploitation of natural resources.

Standing takes the principles of this Charter and looks at how they have been abused over the years, and then applies them in a modern context. He starts with how common land has been captured by private interests from the enclosures to the Highland clearances and modern-day encroachments - leaving most land in the hands of the very few, not the many. Common land today makes up only 7% of Scotland and 5% of the UK as a whole. The tenth Duke of Buccleuch is Britain's largest private landowner. As the descendant of an illegitimate son of Charles II, he inherited 277,000 acres, for which he did not do a day's work.

Land ownership continues to be concentrated in a few hands. For example, over 33,000 small-to-medium-sized farms have closed down since the mid-2000s. Forests, public parks, National Parks and even village greens have been whittled away into private ownership. This has a wider impact. For example, parks save the NHS £113 million a year as a result of fewer visits to the doctor. They also reduce heat in built-up areas and help manage run-off from heavy storms.

The book gives many other examples of how 'The Natural Commons' have been destroyed or privatised. Urban trees, water, seashores, air, sky, wind, and the minerals beneath our feet. Fracking without the landowner's permission is a recent example. Put simply; privatisation has paved the way for a pervasive colonisation of what had been commons.

Standing takes a similar approach to other, less obvious 'commons'. These include the 'social commons', public services that are provided outwith the private market and have been built up over generations. The 'civil commons' shows how access to justice (charges, legal aid, etc.) has been whittled away, and even criminal justice has been privatised. 

The arts, sport, the mass media, public libraries, art galleries, museums, concert halls and public places for performances are all part of our 'cultural commons'. He shows how the depletion of the cultural commons in the twenty-first century has been extensive and devastating, accelerated by the prolonged period of austerity. Concerns over the use of big data are covered in his' knowledge commons'. He argues that everyone should have access to adequate information and shows how corporate interests have captured information through enclosure, commodification, privatisation and ideological capture.

What I like about this book is that while providing excellent analysis, it also provides solutions - 44 of them. The final chapters offer a modern Charter of the Commons, to promote an ecologically sustainable society in which security, freedom and equality can flourish. There are too many to list in a blog post. However, a key recommendation is the establishment of a Commons Fund, sourced by levies on the commercial use or exploitation of the commons. These levies would also give all citizens a sense of collective ownership, even if some cost them personally.

Private wealth should be the starting point for the fund as it has increased at the expense of public wealth. Only 4% of tax revenues in the UK come from wealth. Standing proposes a progressive tax on inherited wealth or a general wealth tax, which already exists in a number of countries. Other sources of income include a Land Value Tax, Carbon Levy, Frequent Flyer Levy, Cruise Liner Levy, water use and others. These all have the advantage of encouraging less environmentally damaging activity. 

A Digital Data Levy addresses the use of our personal data by companies that are adept at tax avoidance, putting little back into our economy and public services. A similar approach is suggested to intellectual property rights, including an end to subsidies for Patents.

A number of us are sceptical that Basic Income will work without it being funded at a meaningful level. Standing argues that the Commons Fund could be one route to such a Basic Income. He also argues that a Basic Income also comes with an obligation to be an active citizen.

Overall, this is a very welcome, and concise, contribution to the debate about ownership, public services and inequality. I'll finish with this paragraph from the concluding chapter:

"The commons are our collective heritage. They cannot be alienated legitimately unless we, as citizens, decide that is what we wish, recognising that we are custodians for future generations as well as ours. Privatising and commercialising the commons, and most particularly colonising them, amounts to theft. It is a form of corruption intended to generate rental income for a few, from newly created 'property rights'. And it is regressive. The loss of the commons most affects those who rely on it the most."

Rethinking how to deliver budgets

Instead of just tinkering around the edges of the Scottish and UK budgets, we should radically rethink how to deliver them.

A couple of months ago I blogged about a new book by Katherine Trebeck and Jeremy Williams, 'The Economics of Arrival', which invites us to consider a future where economic progress might not mean endless growth. This involves not just changes in economic strategy but setting different budget priorities. 

The authors are not naive about the political challenges such an approach entails, and so they recommend an evolutionary approach. Having a bright idea is one thing, getting a government to do it is another. However, it would appear that at least one government is prepared to make some steps in this direction.

New Zealand's Labour coalition government has unveiled its "world-first" wellbeing budget. Straight out of the 'Economics of Arrival' play sheet, the Finance Minister said many New Zealanders were not benefiting from a growing economy in their daily lives, and this year's budget had been designed to address the increasing disparity between the haves and have-nots. Budget spending is focused on long-standing problems like mental health, child poverty and sexual violence.

Another interesting international development is Portugal, even if not strictly in the wellbeing sense. In return for a bailout, the European Union imposed privatisations and cuts in salaries, social security and services on Portugal – what we would call 'austerity', through a centre-right Portuguese government. 

A left-wing coalition government decided to take a different approach by scrapping austerity. Recently privatised companies were re-nationalised, the minimum wage rose by 20%, four national holidays were re-established, and pensions were unfrozen. There were some targeted tax cuts, although taxes went up on some luxury items. 

A new report on the economic effect of these policies says it achieved a return of economic growth. This was 4.3% in 2016/2017 after falling 7.9% during the austerity measures. Unemployment fell from 17.5% in 2013 to 7.4% now and the public deficit reduced from 3.1% of GDP in 2015 to virtually zero now – the UK’s deficit is 1.9% of GDP. Prime Minister Costa told the Financial Times “We have shown that it is possible to raise incomes, lift private investment, cut unemployment and still have sound public finances.”

Of course, this is what many of us argued when austerity was implemented in the UK, but Costa has shown there really is a better way. With 14 million people in the UK locked into poverty, we could have adopted different policies. As the UN Special Rapporteur recently put it; “The imposition of austerity was an ideological project designed to radically reshape the relationship between the Government and the citizenry. UK standards of wellbeing have descended precipitately in a remarkably short period of time, as a result of deliberate policy choices made when many other options were available.”

Tax is an essential element of any budget, and there has been a debate about the impact of tax on reducing inequality.  A new report by the IFS says it does have an effect in conjunction with benefits. They said: “The tax and benefit system significantly reduce the gap between rich and poor, with benefits playing a particularly big role. However, contrary to the ONS’s claim, taxes do also reduce inequality. But the bigger picture is that what matters for income inequality is the progressivity of the tax and benefit system as a whole, and not a specific part of it. The Government should achieve its desired amount of redistribution using those parts of the tax and benefit system best suited to that particular job."

So, as we start the discussion about the next UK and Scottish budgets, let's have a look at the above evidence and think about a wellbeing budget that scraps austerity and reduces inequality. All we need is a bit of political will.

Councils are not getting a 'good deal'

The Cabinet Secretary for Finance Derek Mackay says he has delivered a “good deal” for Scottish councils in the local government budget settlement. Well that’s a relief! Or it would be if it was true.

Lots of numbers are bandied about in relation to the local government budget. I dealt with the most common confusion over a ‘real terms’ increase in a previous blog post. So, let’s try and decipher what’s going on in local government.

Let’s start with the trends over recent years. Looking at the comparable, post police and fire transfer, years between 2013-14 and 2017-18, the local government revenue budget fell by 6.9%, whereas the Scottish government Revenue Budget fell by only 1.6%. This chart shows the trend in detail:

The most damming statistic relates to jobs. If local government has had such a ‘good deal’ then why are nine out of ten austerity job losses in councils?

For the coming year the allocation of £9.63 billion is a “flat cash” settlement, but it isn’t a like for like comparison with the previous year. Next year’s funding includes new Scottish Government policy commitments such as starting to implement the expansion of Early Years and Childcare and ring fencing teachers’ pay and classroom ratios. These add up to a total of £153 million and once they are deducted from the “flat cash” settlement, there is a cut of £153 million for core local government services. 

This table shows how this is calculated. 

Even if every council raised the Council Tax by 3%, it only raises £77m. Certainly not enough to plug this gap. The finance minister’s claim that this would deliver a real terms increase, does not stack up.

We focus on revenue because that’s what pays for core services and of course pay. SPICe has estimated that, if local authorities were to match the Scottish Government's pay policy, this would cost around £150m (gross) in 2018-19. I think this is a little on the low side, but it’s difficult to be precise because of poor workforce data. In fairness, in real terms councils have 1% factored in for pay, so the gap is around £90m. 

We should also remember that because of the allocation formula the pain is not equally spread across councils. This chart shows the variations.

The bottom line is that the finance minister has been told to protect half the budget. That means that the other half takes a disproportionate hit. Most of that is local government, so however you try and spin it, councils are not getting a ‘good deal’.

Budget hangover

To use a seasonal analogy, some of us may be feeling the after effects of the office party. Well, the Scottish budget could have a similar effect on public finances later next year.

I have outlined the main impact of the budget on UNISON members in my budget briefing. One of the queries I often get from members is why there are different figures for the same budget or service. Public finance is confusing enough, even for budget geeks like me, without the added confusion.

The first reason is political spin. Politicians will conflate budgets to make their point, and sometimes, even count the same cash twice. The ring-fenced education budgets are an example of the former and social care the latter.

Another reason, and a legitimate one, is the presentation of a budget in 'cash' and 'real' terms. Cash is fairly straightforward. It's usually the amount on the cheque the public body will get from the Scottish Government - a bit like our own household budgets.

Presenting a budget in 'real' terms is an attempt to reflect the impact of inflation. To show if a budget is being increased or reduced to reflect policy priorities or a change in service level. Inflation is the increase in the cost of living, usually measured by an index. The main ones are the Consumer Price Index (CPI) which excludes housing costs, and the Retail Price Index (RPI) which includes them. Wage negotiations tend to focus on the RPI because most workers have housing costs of some sort.

The next complication is that when setting a budget the government is not looking at today's inflation rate, they are looking at forecasts for the next financial year (April 2018 to April 2019). This is done by the Office of Budget Responsibility (OBR) at UK level and the Scottish Fiscal Commission (SFC) in Scotland. The OBR has forecast that the CPI will be 2.4% next year and the RPI 3.3%.

However, there is another inflation rate called the 'GDP deflator' which government's use to present budgets in 'real' terms. This uses a different basket of goods and services from the better known CPI and RPI measures. The OBR forecasts that this will be 1.4% next year. So, when a budget line is described by Scottish ministers as a 'real term' increase, they mean only if inflation keeps at or below 1.4%.

Now, I personally think the OBR forecasts for CPI are optimistic, but I am pretty certain that 1.4% is not going to cover public service inflation in Scotland next year. For a starter, the Scottish Government pay policy is going to cost just short of 3% and that's 55% of the Scottish Budget. The NHS makes up a third of the budget and health inflation is always much higher than the standard measures. Then we have demographic change, which for social care requires a 2% increase just to standstill. I could go on, but you get the point. 

And let's not forget that local government isn't getting even this kid on real terms increase - they are getting a flat cash revenue settlement. In real terms the local government budget is cut by £135m, COSLA thinks it is closer to £154m. If you apply the points I make above, it's probably even bigger than that. To give some context, a 1% pay rise costs councils around £70m.

The concept of a 'real terms' pay increase also comes in here , given the Scottish Government pay policy. Even if RPI falls to 3.3% next year that still leaves those earning below £30k, who are promised 3%, out of pocket. Much more of a loss for those above £30k, who are only promised 2%.

In summary, I fear that if we swallow this draft Scottish Budget we will be left with something of a delayed hangover later next year. 

Government programme and a chinese meal

While the Scottish Government's programme for 2017-18 has some very welcome elements, it also feels a bit like a chinese meal. Satisfying as it goes down, but leaves you wanting more later.

The most satisfying early morsel was the lifting of the 1% pay cap. This doesn't mean job done by any means, as there is no indication of what the new pay policy will be. The line on affordability indicates that this will be driven by the budget process. That in turn depends on the Autumn Statement and the Scottish Government's use of its tax powers. That is to be covered in a later discussion paper.

It's funding which is needed to make this a truly satisfying meal. The pay increase has to be significant if we are to stand any chance of plugging the growing number of staffing vacancies, particularly in health and social care. The pressures on the NHS won't be resolved by a Safe Staffing Bill, welcome though it is. 

The same goes for closing the attainment gap in our schools. Despite the current consultation, the programme gives a clear indication that the government wants to plough ahead with reforms that just about everyone who responded to the initial consultation criticised. Dumping more administration on schools and centralising powers isn't going to deliver better schools. There is funding for early years expansion, but not enough to deliver a quality service. So the government is adopting the English voucher scheme, which is already in trouble.

The climate change measures are very welcome. Targets on ending fossil fuel vehicles, developing deposit schemes, low carbon infrastructure and active travel are all very tasty mouthfuls. To make a proper meal they will need to be seen through. I'll be more appreciative when they scrap plans to abolish the Air Departure Tax and rule out fracking. The same is true of the Warm Homes Bill, the Just Transition Commission and the Scottish National Investment Bank. All good processes that could deliver real change. 

I do get a bit irritated when politicians talk about 'U-Turns', even if I did smile when a minister on the BBC described them as 'policy developments'! One of the strengths of this programme is that they have adopted proposals from other parties, in fact no less than ten from the Scottish Labour manifesto. Government's that listen and respond positively should be praised, not condemned.

Politically, this programme is about showing the government is focused on the day job. I think it does that, with matters constitutional, even Brexit, relegated to the back pages. It also pitches a positive vision of the sort of Scotland most progressives would support. Particularly on social policy, with measures like pardons for same sex activity that should never have been illegal in the first place.

Real change in Scotland also needs some tough decisions. There are still 30,000 millionaires in Scotland, but even they won't generate enough income to tackle the really big challenges, most of which are rooted in our grossly unequal society. There are plenty of measures in this programme that will make an incremental difference. But many will still feel hungry after they have been consumed.

Time to tackle expensive PPP borrowing

The Scottish Government’s spending plans for 2017/18 is unlikely to be a cheery read when it's published on Thursday. However, when budgets are being cut, it is all the more important that government ensures that resources are not being wasted.


A good example of this is set out today in a joint Guardian/Ferret investigation into the Scottish government’s NPD model of PPP schemes in Scotland.


The report covers errors over interpreting EU rules which is expected to cost the Scottish government the equivalent of £932m in lost expenditure because it must now match the private finance spending under the NPD (PPP) programme with money borrowed from the Treasury. The scramble for matching funds is also expected to have knock-on effects on budgets.


The investigation also found that the private consortium building Scotland’s largest NPD hospital in Dumfries is expected to generate £160m in interest and finance fees on loans totalling £242m, including the £212m spent on building the hospital.

The consortium is charging an interest rate of 5.1% on borrowings of £218m. This results in the consortium earning more than £100m in interest payments from the public sector. It is also charging 11.3% on a further £24.2m in “subordinate debt”, which will earn financiers £37.5m in interest.


If Scottish ministers had instead used public borrowing they would expect interest rates from the state-run national loans fund of about 1.6%. If government argues that their borrowing consent was insufficient, then a deal could have been done with the local council who can also borrow at this rate.
 
A similar deal has been done by Northumbria Healthcare Foundation NHS Trust for its PPP contract at Hexham General Hospital, saving £67 million. This was funded by a loan from Northumberland County Council, which borrowed from the loans board.

This is precisely what UNISON Scotland suggested over a year ago in our ‘Combating Austerity’ report. We calculated that the austerity cuts in Scotland could be wiped out by refinancing PPP schemes in this way. Sadly, progress has been at a snail’s pace with a handful of projects being examined. Ironically, we believe Dumfries hospital may be one of those.


When jobs and services are being lost, it is absolutely vital that we chase every available saving. Effective monitoring, restructuring and refinancing PPP schemes are just some of the range of proposals we set out - and some authorities, to their credit, have acted on these. On PPP refinancing, it requires the Scottish government and their arms length agency the Scottish Futures Trust to take action.