Meeting of the Parliament 04 February 2015
I think that there was a little more than factual reporting that there had not been an outcome: there was real politicisation of education. I am very happy to listen to COSLA’s side of the story before rushing to judgment.
In terms of the changes that we have seen since the draft budget announcement, the three most significant have been made thanks to the Chancellor of the Exchequer and the Scottish Conservatives. We see money—£127 million—flowing to health from the Barnett consequentials through the autumn statement. We see the business rates increase being capped again at 2 per cent thanks to George Osborne, and despite the Scottish Government’s saying that it had no plans to do that when it was asked about it in November. We have also seen changes to land and buildings transaction tax, although in our view they go nowhere near far enough. However, we see a 5 per cent band, which is a significant improvement.
However, we have two big concerns about the budget. The first is the impact on the housing market from land and buildings transaction tax, which is a tax on aspiration and an extra obstacle that will make it harder for families to own their own home. The eye-watering 10 per cent rate still kicks in at £325,000, compared with the £925,000 at which it kicked in under stamp duty. We are concerned that that will have a negative impact on the housing market.
Movement and activity are needed on all rungs of the ladder. If one section of the housing market is hit and punished, that can have an effect on all its other parts. If the Scottish housing market performs badly relative to that of the rest of the UK—stripping out London, of course—will the Scottish Government take responsibility for that or will it blame somebody else, whether that be the UK Government or COSLA?
Our preference was for a tax cut, but we certainly expected the Scottish Government to deliver on its own principle, which it said was revenue neutrality. However, the definition of revenue neutrality appears to have changed over time. Initially, back in October, revenue neutrality meant raising no more or less than the replaced taxes. According to the Scottish Government, that is £198 million for residential LBTT. The second definition of revenue neutrality meant the money being enough to cover the block grant adjustment. The third definition, which appeared more recently, meant the money being enough to cover the block grant adjustment and to put money into a cash reserve. We heard today that that will be £15 million. However, the third definition is not revenue neutral. In the real world, it is known as a tax increase.
That is one of the reasons why it will be impossible for us to support the budget at stage 3. For the Scottish Government, revenue neutrality means exactly what it chooses it to mean at any given time: nothing more, nothing less. However, we can give some numbers. The Scottish Government says that it needs to collect £231 million. When the Scottish Parliament information centre runs the numbers, drawing from the same data source, it says that £242 million will be collected. However, that is based on just 84,000 estimated transactions. We know from a Scottish Government department that 100,000 transactions are predicted over the next financial year. If 84,000 transactions will give £242 million, I wonder what 100,000 transactions will give over the course of the financial year. Is that really just a designed tax increase that the Government can put into its cash reserve or war chest, but which could impact negatively on the housing market and the economy as a whole?