Mackay in bother…
SCOTTISH Government Finance Secretary Derek Mackay has found himself in the firing line over the past couple of weeks, though perhaps not for the reasons he might have expected.
Mr Mackay’s budget – his first as responsible minister – sailed through Holyrood without much trouble. A deal with the Greens saw them abstain on the controversial decision to retain the threshold for the upper rate of income tax at £43,000. In the rest of the UK, this will increase to £45,000, meaning those on higher incomes will pay less tax in the coming years.
Opponents have pointed out this leaves Scotland as the highest-taxed part of the UK, though SNP sources counter this by saying that no-one is paying any more – higher earners will simply be foregoing a tax cut.
However, Mr Mackay’s real problems came from a different quarter – business rates. These, of course, are set independently from Government, but that didn’t prevent some business leaders pointing the finger of blame at the Finance Secretary.
In fact, the Scottish Government will actually raise less from business rates, £2.60 billion, compared with £2.77 billion last year. This is because the threshold for paying business rates has increased from £10,000 to £15,000. Mr Mackay claims that 70% of businesses will actually pay no rates at all or less than they did last year.
However, the revaluation has undoubtedly hit particular companies hard, with some reporting that they were faced with a fourfold increase in their bills.
Most of the complaints have come from the north-east of Scotland. The rates assessments were carried out in 2015, when the oil industry was still booming, and Grampian businesses were doing well. Since then, many north-east businesses, such as hotels and retail outlets, have struggled as the oil sector has contracted.
Mr Mackay’s response has been to announce a £155 million scheme to help the worst-hit, bringing the total package of business rate relief to over £600 million. Of course, this has been criticised by his political opponents as a U-turn, a panic measure to offset a problem of his own making.
The problem, though, isn’t confined to Scotland. A similar revaluation is taking place in England and Wales. Chancellor Philip Hammond is facing similar calls for action to offset the worst of the increases – south of the Border, the worst-hit businesses appear to be High Street stores, whose turnovers have been hit by cut-price competitors.
It’s a problem which obviously caught Mr Mackay off guard, as he concentrated on getting his budget through the Scottish Parliament. But as Harold Macmillan perceptively observed when asked how Governments had got themselves into trouble, “Events, dear boy, events.”