Hope and fear – the emotions on display as we stand by for the Budget

Of course, in itself, this will not increase wealth. Rather, it will generate additional state borrowing, already high according to new figures. But Rachel Reeves hopes it will stimulate the UK’s sluggish economy.

The Tories say it’s a mistaken move which might spook markets. Labour says primly that they should know. Scotland’s First Minister had urged just such a move – and now hopes for further flexibility.

He may be disappointed. This is still looking like a tough budget, with spending cuts and tax hikes. Justified, says the Chancellor, by the predicament she inherited.

Never forget, however, that for Scotland, the UK Budget is still round one. Crucial and defining – but round one. The decisions on Scottish expenditure and income tax will come later, in the Holyrood financial package.

Alongside that second round is another bout, another battle. The necessity for Scottish ministers to find chums in the Scottish Parliament, sufficiently amicable to allow that budget to carry, despite the SNP minority.

However, let us start with the UK Budget. We might perhaps note that the rhetoric has warmed somewhat from the earlier declaration by the Prime Minister that things would get worse before they got better.

So, we are now directed to gaze upon sunlit uplands. But still relatively distant. Still in the future.

In Washington, at the IMF annual meeting, the Chancellor was upbeat, with caveats. Her budget, she declared, would be “built on the rock of economic stability”, in order to fix the foundations and deliver change. Translation? Do not expect an overnight transformation.

Scarcely likely to engender public – and voter – delight. Which matters relatively little for MPs contemplating an election in four or five years.

However, consider the Scottish context – where MSPs are due to face the voters in 18 months’ time. Scottish Labour will be hoping for some early signs that the promised change emerges in measurable form.

As to strategy, Rachel Reeves insists her driving motivation is economic growth. One can understand why.

The IMF now forecasts UK economic growth of 1.1% in the immediate future. Up from its previous forecast, but still less than stellar.

So how might the UK budget impact upon Scotland? Holyrood ministers expect to be given a seemingly substantial sum for day-to-day expenditure. But they reckon that most of that is already swallowed up by UK commitments on public sector pay which Scotland felt obliged to replicate.

Stand by for more shadow boxing over that topic. Despite the Chancellor’s announcement on debt rules, Scottish ministers still fear further immediate constraint on capital projects such as new hospitals and schools.

Then there is tax. The Chancellor indicates that she needs to liberate some £40bn, comprising spending cuts and tax hikes.

There have been sundry hints. That income tax thresholds might be frozen without, it is claimed, breaking the manifesto pledge to shelter working people from increases in income tax.

OK, strictly, it could be said that Westminster-set income tax rates would remain the same. But many might think it breaks the spirit of the promise, if not the full letter, as some aver.

Then there is national insurance. Again, the promise was to protect working families. But that might leave open the question of an increase in employers’ NI contributions.

Again, that is a source of concern for Scotland. National insurance is reserved to Westminster.

That means, firstly, that firms in Scotland would have to stump up, just as in England. It means, secondly, that there would be a direct cost for the public sector, including the NHS, Scotland’s largest employer.

It means, thirdly, that there would be no prospect of any recompense through the fiscal framework which balances Westminster and Holyrood budgets – because NI is in UK hands.

The SNP’s Stephen Flynn has demanded additional cash for Scotland in mitigation, should this plan go ahead. What do you reckon the Treasury response might be? Thought you would say that.

Read more

Brian Taylor: Is it time to scrap the Lords – or to cherish its contribution?

Brian Taylor: I knew Alex Salmond for decades. He was flawed but almost unstoppable

Which brings me back to stages two and three of this prolonged budget process. The announcement of Scottish Government plans – and negotiations to secure support from other parties at Holyrood.

Scottish ministers and officials are not entirely in the dark. They can work within outline parameters. One hope is that the evident discontent within the UK Cabinet over earlier hints may result in concessions from the Treasury which drive the headline spending figure a little higher.

There is always movement. But the Prime Minister and Chancellor are in a strong position, with a comfortable Westminster majority. They seem determined to prove their fiscal probity. We shall see.

After the Chancellor’s statement, there will be around four weeks for Scottish ministers to finalise their own plans. John Swinney has urged “an end to austerity”. Depending on Treasury plans, it is possible that tax thresholds could also be frozen in Scotland.

But will Holyrood ministers get their budget through? Talks have already begun with other parties. Leading for the government at this stage is Ivan McKee, the Minister for Public Finance who has a reputation for tough but friendly persuasion.

Those negotiations will obviously become more sharply focused after the Chancellor publishes her figures, including the consequences for Scotland.

(Image: Stephen Flynn)

Early talk by Holyrood insiders is that the Greens might demand too big a price, after their expulsion from government.

But talks will continue with them, as with the others. Could the new Tory leader, Russell Findlay, find merit in claiming credit for a deal? Will Labour be motivated by co-operative spirit – or by countering their SNP rivals? Could the Liberal Democrats be brought on board? Abstentions?

According to the Chancellor, her budget will be “a reset for our economy as we invest in the foundations of future growth”.

Which prompts key final questions. How painful will that short-term reset be? And, longer term, just when might we expect that future growth?

Brian Taylor is a former political editor for BBC Scotland and a columnist for The Herald. He cherishes his family, the theatre, and Dundee United FC.