MSPs miss the bigger picture

A series of SNP members lined up to lob the Cabinet Secretary gentle underarms for him to whack towards the opposition. Our problems would all be solved if only the UK Government would smash open the piggy bank…

The annual Scottish Budget contains lots of detail on spending priorities for the coming year.

But with a single year budget it is often difficult to step back and see the bigger picture: what are the longer term pressures on revenues and spending, how is the shape of government spending changing in response, and what are the major risks and fiscal policy challenges?

As part of new processes for budget scrutiny agreed jointly by the government and parliament in 2017, the government agreed to publish an annual ‘Medium Term Financial Strategy’ (MTFS).

Its purpose is to ‘provide a means of focussing on the longer term sustainability of Scotland’s public finances’.

It was envisaged that the MTFS would include broad financial plans for the next five years, setting out the financial implications of existing commitments, and providing some commentary and analysis about the forecasts for the Scottish economy relative to the rUK economy.

The Budget Process Review Group, which agreed the terms of reference for the MTFS, recognised explicitly that it was not to be a multi-year budget. But there was an expectation that there would be at least enough broad information in the document for it to be of interest to a number of subject committees at parliament.

Last year’s MTFS was far from perfect but, for the first year of the new process, made a decent attempt to respect the ethos of what the Budget Process Review Group had intended.

Going backwards

This year’s MTFS contained some useful new information, notably around the government’s principles for the use of its capital borrowing powers.

But more generally it felt like a significant backwards step. It contained no information at all on current spending priorities or their implications. So, whilst it helpfully pointed out that the government’s resource budget would rise by just over one per cent per annum in real terms over the next few years, there was no analysis of what this level of budgetary increase would mean for public spending on different priorities.

Nor was there any serious attempt at scenario analysis. How much would that one per cent per annum growth change if the UK Government relaxed its fiscal stance, or if Scottish income tax revenues continue to underperform forecasts? And what would those different scenarios imply for spending plans and pressures?

So the MTFS document itself left many questions unanswered. All eyes therefore were on parliament’s finance committee last week to see what pressure it could place on government to bring greater transparency to these issues.

Rising to the occasion – not

Things got off to a reasonable start, with the inevitable questions about how the government would manage the income tax reconciliations that are coming down the line. Finance Secretary Derek Mackay’s response was to argue that there is too much uncertainty for him to be able to say anything about the budgetary implications. This is a weak argument – uncertainty strengthens the case for robust scenario analysis about choices. To shut the door on this conversation so abruptly clearly doesn’t respect the ethos of what the MTFS was supposed to be about.

Patrick Harvie (Greens co-leader) then tried a different tack, reminding Mackay that his minority government would at least need a political strategy for seeking buy-in to what are likely to be two very challenging forthcoming budgets. The Cabinet Secretary for Finance agreed that this was a fair question, but argued that it wasn’t particularly his problem, saying ‘it is not a question for just the finance secretary—I am one of 129 MSPs, and all MSPs will have to behave responsibly and carefully consider our collective priorities’.

Unfortunately that brief call to his parliamentary colleagues to behave ‘responsibly and carefully’ fell on deaf ears, and the session rapidly went downhill.

A series of SNP members lined up to lob the Cabinet Secretary gentle underarms for him to whack towards the opposition. Our problems would all be solved if only the UK Government would smash open the piggy bank, said one. We need new powers to combat the UK Government’s hostile environment, said another. Another MSP asked about the £183bn reduction in spending that had been imposed on the Scottish Government through austerity, forcing Mackay to concede his colleague had misplaced a decimal point and was supposed to have asked him about an £18.3bn gap.

This line of questioning clearly incensed the opposition, and you could almost see the red mist descending in the committee room.

Murdo Fraser (Conservative finance spokesman) re-hashed a tiresome argument about whether the Scottish block grant really is down by £2bn since 2010 as the government claims, or by some other amount. (A quick glance at Table 1.03 of the 2019/20 Budget shows that the fiscal resource plus capital element of the block grant is down by £2bn since 2010/11 – you can have an argument if you want about whether various accounting adjustments and new resources to loan the private sector should also be included, but it’s not clear how that argument helps address forthcoming fiscal challenges).

For good measure, he then decided to put the boot in with an old-school question from the ‘world according to GERS’ line of questioning. In themselves these were unhelpful questions, but in the context of the earlier political posturing they could perhaps be argued to be fair game.

So what should we take from this?

This year’s MTFS just doesn’t have enough information to enhance parliamentary budget scrutiny in a meaningful way. But politicians have missed an opportunity to demand more and better information.

There is an important set of fiscal issues here. And many of the issues are not (or need not be) overtly political. But given a chance to bring some mature reflection to these debates and highlight weaknesses in the government’s approach, parliament lapsed into playground politics. Coming in the midst of the parliament’s 20^th anniversary celebrations, this was not a good advert for parliamentary effectiveness in holding the government to account.