Scotland’s new budget shows it’s finally escaping the curse of centralisation

The biggest empowerment of councils since devolution shows Holyrood is accepting it doesn’t always know best. 

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Sometimes the right thing can be done for the wrong reasons. Derek Mackay, Scotland’s Finance Secretary, is a reluctant localist – 12 years as a councillor in Renfrewshire, a typically brutal West of Scotland political environment, can do that to a man. It’s fair to say he has been wary of passing too many economic levers to the local level, given the uneven quality of those who would then wield them, and the extra opportunity for the SNP’s political opponents to make mischief.

Yet this week Mackay went against type. His budget was voted through the Scottish parliament yesterday with the support of the Green Party – together, the Nats and the Greens have a majority. Its contents were most notable for a raft of new revenue-raising powers that will be made available to councils. There was a five per cent rise in the cap on council tax increases, which if implemented would take the annual bill for an average Band D home up by £58 to £1,266, and an average Band H home up by £142 a year to £3,102.

Perhaps more significantly for the evolving shape of Scotland’s governance, legislation will be passed to allow councils to charge a “tourism tax”, and they will be given powers to levy a workplace parking fee. The minimum plastic bag tax will double from 5p to 10p, with councils receiving a portion of the revenue. Mackay described this as “the most significant empowerment of local authorities since devolution”.

It seems unlikely the Finance Secretary has had a massive change of heart about localism. Rather, he has come under significant pressure to loosen the reins a little. Scottish councils have been subjected to a punishing funding settlement across recent years, and have been pushing for a bit of leeway. And if anyone’s going to take the blame for further tax rises, Mackay would rather it was them, not him.

It became clear that all was not well last year when Adam McVey, the SNP leader of Edinburgh Council, got into a social media spat with a senior cabinet minister. McVey tweeted that “in the next 12 months, our plans for a ‘tourist tax’ will be ready for implementation. While it may take longer to deliver the powers necessary to start collection, our timeline is robust and we will be ready to go.”

He found himself embarrassingly slapped down by the Tourism Secretary Fiona Hyslop, who tweeted back “? ? ? So let’s be clear – you have no shared plans, no tourist business consultation and no agreement with Scottish Gov.” The SNP rarely airs its dirty laundry so publicly, suggesting a major internal scrap was looming.

McVey has clearly won. Edinburgh now seems likely to become the first UK city to introduce the European-style tax, which it calls the Transient Visitor Levy. It’s thought it would add £1 to £2 per night to hotel guests’ bills, bringing in £11m extra a year.

For localists, the decision is a victory of principle as well as practice. Since the Scottish parliament opened its doors 20 years ago there has been a noted centralisation of power in Edinburgh. The SNP, which has held office for the past 12 years, has been the biggest hoarder and centraliser of all.

A 2014 report by Cosla, which represents Scotland’s councils, found that “Scotland is one of the most centralised countries in Europe.” It went on: “Securing all the benefits of localism means enhancing the powers and flexibilities of local government. It cannot mean that Scottish government uses its public sector funding, legislation or powers to regulate in ways which coerce local government into working only in ways in which national government wants.” It was no coincidence that more localist European countries were more successful at improving outcomes, and had higher turnout at local elections, Cosla said.

Councils have had little control over how much money they can raise – just the single blunt tool of council tax. And yet Scotland is wildly diverse, suggesting different areas should have the freedom to implement different measures to stimulate local, and to be held accountable by their electors. For example, between 2011 and 2016 Edinburgh’s mean population growth was 1.2 per cent while Greenock’s was -0.5 per cent; the three-year survival rate for businesses in Aberdeenshire was 71 per cent but only 57 per cent in Renfrewshire; the unemployment rate for adults over 16 in 2016 was 6.5 per cent in Kilmarnock and Irvine and 3.4 per cent in Dunfermline and Kirkcaldy. There differences do not lend themselves to a one-club solution.

The ongoing devolution of power to the English regions, and the high-profile impact of directly elected mayors such as Andy Street and Andy Burnham, has also forced Nicola Sturgeon’s government to act.

The danger, of course, is that many councils take the opportunity to whack up charges and taxes to the max. Mackay has already changed Scotland’s income tax system to ensure higher earners pay more than they do in the rest of the UK. At what point does the nation risk becoming uncompetitive, with obvious consequences for investment, jobs and state revenues?

But it’s hard to argue against the principled stance of allowing communities greater control of their own affairs. It’s long overdue, and a welcome indication, at last, that Holyrood has accepted it doesn’t always know best.

Chris Deerin is the New Statesman's contributing editor (Scotland).