The first SNP budget

A work in progress. Perhaps that best describes the SNP's historic first budget. Finance Secretary John Swinney believes he will be able to deliver, as promised, a national freeze on council tax and a phasing out of prescription charges, but nearly every other measure appears to be a compromise on manifesto commitments. Such is the reality of minority government.

Already bruised over the failure to deliver the 1000 extra police officers promised by the SNP, Mr Swinney had to deliver credibility. That meant gathering support from other parties and, for the first time, relying on a new working relationship with local authorities. Freezing council tax, as a first step towards a local income tax, was always going to be a tough call, but the SNP made it its priority by reaching an 11th-hour concordat with the Convention of Scottish Local Authorities. It may become the most popular measure from Mr Swinney's first budget, since all households will benefit, but the test will be how the 32 councils achieve it.

In exchange for freezing council tax levels (although the final decision rests with each local authority, few are likely to risk an increase), the councils gain more control over allocating their resources. The quid pro quo is that the discretion will not extend to the police grant and the councils will also have to increase nursery entitlement and provide free school meals to all primary one to three pupils from August 2010.

Given the rising cost of statutory obligations such as free personal care for the elderly, there is a limit to how much leeway councils will actually have. However, there is another carrot: for the first time councils will be able to keep all their efficiency savings. That could be an incentive to smarter budgeting, but its scope is inevitably limited when councils must pay the majority of staff according to national scales. The freeze on council tax is designed to pave the way towards replacing it with a local income tax, but there remain serious questions about how the 3p in the pound on income tax proposed by the SNP can raise the equivalent sum to council tax. In May, the Institute for Fiscal Studies calculated the shortfall would be £880m.

There is no indication yet how that figure will be reconciled in time for the next election, but there is already a reckoning: the lack of a timetable for major capital projects previously agreed suggests that one might be postponed. That must not be the M74 extension. Although Glasgow's hosting of the Commonwealth Games in 2014 demands that it must be completed by then, delaying the motorway link now would be economic folly and, as time constraints increase, so would the cost. Meanwhile, phasing out prescription charges is more likely to ensure a popular headline than significantly improve the nation's health at a time when NHS resources are already severely stretched. With the vulnerable, those least able to pay and people with chronic illnesses already entitled to free prescriptions, the £97m might be better spent in solving more pressing health issues.

As a vital part of Scotland's knowledge economy, the universities were seriously disappointed: their bid for an extra £168m resulted in a paltry £30m. Combined with a commitment to a phased transition from loans to grants (although no writing off current student debt), it raises serious long-term questions over the funding of these vital institutions in a competitive global market.

The cut in business rates is a positive move for 150,000 small businesses across Scotland and will gain Mr Swinney some support from the Tories, vital if the measures are to reach the statute book, but it also gives the SNP a reputation for being fiscally conservative which should help to spike claims that it is a "tax and spend" party. Will this spending review make Scotland a "wealthier and fairer, smarter, healthier, safer, stronger and greener" place? Weeks of committee scrutiny and horse-trading will decide that. But, for now, the jury is out.