Budget Day in Scotland

Will George Osborne help the Scots economy?

It’s Budget Day and while elsewhere in the UK there’s fevered speculation on what will happen – if anything – to the top rate of taxation, here in Scotland, the SNP administration is looking for funding for capital projects.

Let us be clear, the economic strategy of the Coalition at Westminster has left George Osborne with no wiggle room.  This will not be a giveaway budget.  For every concession offered to taxpayers, a service elsewhere will have to be cut.  This is just as true for the devolved administrations.

First Minister Alex Salmond is looking for £300m to fund capital projects in Scotland.  In a letter to Prime Minister David Cameron, the First Minister reminded him that when they met, there was sympathy for capital projects but that the Prime Minister would have to see a list of ‘shovel-ready’ projects .ie. projects that could start within the time-frame of one Budget year.

In his letter, the First Minister argued that: “The clear understanding was that if we could demonstrate that such projects could be taken forward in an appropriate timescale then they would be given proper consideration.

“This we have done and there is now no argument that some £300m of capital projects could be deployed in the coming financial year giving a vital boost to local economies around Scotland.”

The capital projects that the First Minister has in mind are infrastructure projects such as the renovation of the Kincardine Bridge and the Clyde Gateway developments.  Other projects include the development of the Centre for Virology research at Glasgow University.

During a time of austerity, people in Scotland may be wondering why the SNP are focusing on capital projects but in the same letter, the First Minister insists that additional investment would support more than 1,000 jobs.

By making public this request to prioritise investment in infrastructure, the First Minister is challenging the Conservative philosophy prevalent at Westminster of dealing with the public deficit first.

The First Minister has the numbers to make his argument work as Scotland continues to be in a stronger budget position than the UK as a whole according to the Government Expenditure and Revenue Scotland (GERS) 2010-2011 report published on 7th March this year.  These figures show that including a geographical share of UK North Sea oil and gas revenues, Scotland contributed 9.6 per cent of UK public sector revenue and received 9.3 per cent of total UK public sector expenditure, including a per capita share of UK debt interest payments.  Scotland’s population is 8.4 per cent of the UK total.

Quoting Jon Meeten, head of tax at KPMG in Scotland on the BBC News website, there appears to be support for First Minister Alex Salmond’s position: “The CBI has called for some limited, targeted tax breaks for business. We agree that focused assistance for business, especially in the area of capital allowances for infrastructure investment, would be extremely helpful in the current climate.”