Scottish budget: Mr Swinney - what happened to helping economy grow?

An elderly man disclosed, quietly, that his weekly advance fuel bill payments used to be £20. Now, they were £40 and set to rise still further in April.

He closed with a deep, dignified sigh.

That sigh is the audible context for John Swinney’s Scottish budget. It is the context for the Chancellor’s efforts to contain inflation – which may have peaked but is still ruinously high.

It is also why Mr Swinney chose to overturn his party’s manifesto pledge on income tax and, further, to shift focus from his government’s ten-year economic strategy, unveiled only in March.

Read more by Brian Taylor: The ups and the downs of a remarkable week for the SNP

That manifesto pledge first. The headline promise in the SNP manifesto last year was “to freeze income tax rates and bands and increase thresholds by a maximum of inflation.”

That is now broken. Rates are to rise for middle and upper earners while thresholds are frozen or cut.

To be fair, the manifesto also stressed the need “for any government to have flexibility to respond to a change in circumstances.” Such, it is argued, has now arisen.

That is for future voters to weigh. For now, I am more interested in economic strategy.

In March this year, before taking maternity leave, the Finance Secretary Kate Forbes set out a ten-year economic programme with the aim of “ruthlessly and relentlessly” building an entrepreneurial culture in Scotland to boost growth and deliver prosperity.

She said Scotland had suffered prolonged problems, with low productivity and a lack of business growth leading to “persistent poverty”. The solution was “a nation of entrepreneurs and innovators”.

And now? Scarcely a mention of economic growth in Mr Swinney’s statement, as he stood in for Ms Forbes.

Instead, his priorities were eliminating child poverty, transitioning to net zero, protecting public services, and strengthening the “social contract” of benefits such as free prescriptions and tuition fees.

Kate Forbes (Image: PA)

But Kate Forbes was alert to those ambitions in March – and still concluded that Scotland needed a transformational approach to the economy, with an emphasis upon enterprise.

What has happened since? Events, dear boy, events. Since March, we have had two changes of Prime Minister – and Kwasi Kwarteng’s tax-cutting mini-budget, subsequently trashed and over-turned by Jeremy Hunt as the resultant financial angst imperilled the entire UK economy.

Mr Swinney calculated that, in such circumstances, it would be rash and impolitic to prate about economic growth, to laud enterprise. It would mean nothing to the man in the Glasgow post office queue.

This was, he said, “the most turbulent economic and financial context most people can remember.”

Equally, though, he is aware that the tax hikes are scarcely likely to be popular with the families who have to pay up – or with middle earners contemplating a move to Scotland.

Hence, he offered to hypothecate the tax raised for the much-valued NHS. It was a penny on tax for patient care.

Read more by Brian Taylor: So you want to see big changes in the health service? Join the queue

It all reminded me spookily of the very first elections to the Scottish Parliament when the SNP (John Swinney very much included) promised to levy a “penny for Scotland”, with an increase in the basic rate of income tax, the only power available then.

Mr Swinney will not need reminding that the SNP lost that election. His hope is that the modulated “penny for health” will fare better, with most taxpayers still paying less than in England.

Will those higher rates actually raise revenue? Not guaranteed, depends on prevailing circumstances and individual behaviour.

However, the Scottish Fiscal Commission reckons that high inflation will result in “earnings growth” and so “generate a significant increase” in tax take.

It is, if you like, a form of social windfall tax, deriving revenue from inflation – which Ministers otherwise and rightly abhor. Not, one would presume, a sustainable basis for an economy.

And so back to that wider strategy. I have heard John Swinney tell business audiences that he is decidedly thirled to the aim of growth, that he sees no credible way to build prosperity other than by enhancing GDP.

Further, I am told by insiders that Mr Swinney remains firmly of that view. I am advised to look at his financial support for Scottish Enterprise and the Scottish National Investment Bank.

Further, I am directed to his constraint on business rates, the relatively generous Small Business Bonus – and other policies such as the cut in peak rail fares. He gets it, he backs growth.

But what of the Greens, in government? The minute Mr Swinney sat down, they rushed out a series of statements, effectively claiming the credit for what they said was “the greenest budget” in the history of Holyrood.

They are notably less than enthusiastic about the pursuit of GDP growth. I was told, again firmly, that Mr Swinney is not about to “capitulate” to the Greens.

That he works well with them, that he shares their objective of a Net Zero Scotland – but that he also places it in the context of an economic growth opportunity for Scotland. In short, enterprise.

Politically, Mr Swinney has answers. He was warned by the Tories that he risked undermining growth.

The easy response? “That lot” – he meant the principal Opposition party – had wanted him to follow the budget of Kwasi Kwarteng, before it was disowned. Expect much more of the same.

The Liberal Democrats also complained over a lack of growth. A bigger potential challenge for the SNP comes from an apparently buoyant Labour.

However, on the day, Labour’s Daniel Johnson’s appeared somewhat torn. He acknowledged the tax move – but suggested the SNP had a problem with delivery. Mr Swinney inquired solicitously as to whether he found the fence comfortable.

On the day, the budget marked a move towards the collectivist Left. Put it this way, the STUC appeared happier than the Scottish Chambers of Commerce who warned of a “clear disadvantage for business”.

Let us see what develops. Let us see what it means for the man in the Glasgow post office queue.