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The Chancellor, George Osborne, unveiled tax breaks for beer drinkers, drivers and first time buyers in today’s Budget; but he admitted the economy is still struggling. He told the House of Commons that growth for the current year had been cut in half to 0.6%, down from the previous forecast of 1.2%. Next year is expected to remain, OBR Logowith the economy expected to grow by 1.8% instead of the 2% predicted just three months ago.

Mr Osborne said that the Office for Budget Responsibility (OBR) now predicts growth of 2.3% for 2015, 2.7% in 2016 and 2.8% in 2017. It confirmed that the Government is on course to meet its fiscal mandate a year early. However, it reported that public sector net debt would rise from 75.9% of GDP this year, peaking at 85.6% in 2016/17 before starting to fall back thereafter.

The OBR’s figures show that the deficit has fallen from 11.2% of GDP in 2009/10 to 7.4% this year and is set to continue dropping until it reaches 2.2% in 2017/18. They also indicate that borrowing should fall from £108bn next year to £97bn in 2014/15, and then £87bn, £61bn and £42bn in the following years.

euro currencyThe Chancellor blamed the down turn in economic growth to the crisis in the eurozone, which has now been gripped by a new crisis in Cyprus over a €17bn bailout. Cyprus, he said, was “further evidence that the crisis is not over and the situation remains very worrying. I will be straight with the country – another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard,” adding that the OBR now expected the eurozone to show no growth this year.

There had been growing calls for the Coalition to change course from the present austerity regime. But Mr Osborne insisted there could be no turning back as he outlined his “Budget for an aspiration nation”. “It is taking longer than anyone hoped,” he told the House, adding that the country had to “hold to the right track.” This Budget, he said, was a package for “people who aspire to work hard and get on” but conceded the climate was still “difficult”.

He introduced measures design to ease the bitter pill. For instance, he announced that no-one will pay income tax on the first £10,000 they earn, a key stated aim of the coalition, with the policy being introduced a year ahead of schedule. Working parents will get help from the new tax-free childcare support; pensioners should benefit from the introduction of the flat rate pension by 2016. And small businesses in particular will benefit from a new employment allowance designed to save employers £2,000 on their National Insurance bills.

He announced plans for cuts of a further £2.5bn in government spending over the next two years, all designed to redirect money into capital spending projects. There will be yet more cuts in Scottish Government HQspending review for 2015/16, which he said would rise from £10bn to £11.5bn. Part of this will come from the extension of the 1% cap in public sector pay through to 2015/16, something which has angered some civil servants enough for them so staged a 24-hour strike.

However, although these cuts are also expected to affect Scotland, the Treasury says that this will be considerably less than that imposed on Whitehall departments. It points out that the Scottish Government will get an extra £176m over the next two years. Although Holyrood will see its day-to-day spending cut by £103m, the changes announced this afternoon will see a £279m increase in capital investment.

Mr Osborne used the Budget speech to set out a new remit for the monetary policy committee of the Bank of England. This is currently focused only on inflation but will now adopt an approach more in line with the Federal Reserve in the US which also takes employment into account when deciding on interest rates. The chancellor said that the new approach had been discussed both with outgoing Bank of England governor, Sir Mervyn King, and his successor, the Canadian Mark Carney who takes over later this year.

He promised to cut corporation tax to 20% in April 2015 to show Britain was “open for business”; and he pledged to crack down on tax avoidance. His plans include the use of the General Anti Avoidance Rule which comes into force later this year and which would be accompanied by a “name and shame” regime targeted at aggressive tax planners. He added that recent tax disclosure deals with Jersey, Guernsey and the Isle of Man would deliver more than £1bn in unpaid taxes; and he argued that further measures would take savings from anti-avoidance measures to more than £3bn.

John SwinneyIn his first comment on the UK Budget, Scottish Finance Secretary John Swinney said that the Chancellor “should have offered a decisive injection of new capital to fuel economic recovery. He has however cut the hard cash the Scottish Government has available to spend and applied a “straight-jacket” of loan and equity facilities over which the Scottish Government will have no discretion and which will have to be repaid at a later date.

“George Osborne has finally had to admit that his fiscal austerity does not work but instead of taking immediate action to support capital spending, the Chancellor’s plans announced today postpone further investment in infrastructure to 2015-2016. There are already concerns that his small beer budget will cost Scotland’s whisky industry,with warnings over future investment.”

The Scotch Whisky Association had called for the duty “escalator” on alcohol to be scrapped. They will be disappointed that the Chancellor has only done this for beer — the increases for wines and spirits will carry on. However, his decision for further cut beer duty by 1p will be welcome news to many breweries in Scotland, given the rising number of independent micro-breweries here.

In the first Scottish business reaction to the Budget, the Scottish Building Federation welcomed plans to target additional funding towards shovel-ready construction projects. Its Executive Director, Michael Levack, said that the “commitment to prioritise an additional £300 million towards capital investment in Scotland is welcome. But considering that Scottish construction output fell by more than £1.1 billion last year alone, it is clear that more could and should be done to support the industry.” He added that the Chancellor had “missed a golden opportunity to stimulate investment in initiatives to make our built environment greener and more energy efficient.”

However, Ed Monaghan, chief executive of the Scottish construction company Mactaggart & Mickel Group, thought that the English housebuilding industry would be “somewhat buoyed by the Chancellor’s measures to boost new home sales and we would call on the Scottish Government to take heed and replicate these measures north of the border. The possible extension of the Funding for Lending Scheme is good news for the sector, having already driven down mortgage rates to record lows it should further stimulate demand.”

In a preliminary response to the Budget, CBI Scotland’s assistant director, David Lonsdale (left), said that the Chancellor was “right to continue the path towards balancing the government’s books and David Lonsdale CBIbeginning to pay down the ballooning national debt, which is expected to swell by a further £290 billion over the next three years. The Budget contains a number of solid growth-enhancing measures, particularly the shift of monies from current to capital expenditure.”

Colin Borland, the Federation of Small Businesses’ (FSB) head of external affairs in Scotland, thought that many of the measures the Chancellor outlined “show that he understands the potential of the UK’s smallest businesses. The Chancellor’s decision to help the smallest employers, and prospective employers, should not only benefit these businesses but will give a welcome boost to the Scottish job market in 2014. Scottish firms will also be thankful that the fuel duty increase proposed for September has been cancelled. We hope that the movement on Corporation Tax results in some supply chain benefits for the country’s smaller firms. Similarly, Scottish infrastructure spending must result in work going to Scottish small businesses.”

By contrast, Grahame Smith, STUC General Secretary, believed that the extent of the Coalition’s failure is “laid bare by today’s statement. While the STUC had called for a major programme of infrastructure investment to get the economy moving, the measures announced today by the Chancellor are wholly insufficient. Funding this investment through additional spending cuts dilutes any stimulatory effect and the programme is in any case much too small.

Graeme_Brown Shelter“There was nothing of value in this Budget to address the living standards crisis. Consistently focusing on raising the tax threshold is not a credible way of addressing inequality and falling real incomes. This expensive measure ignores the very poorest who don’t pay tax and benefits most those in the upper half of the income distribution.”

Graeme Brown (right), the Director of Shelter Scotland, expressed his disappointment that “the Chancellor did not take this opportunity to scrap the ill-conceived Bedroom Tax and whilst any new investment in social housing is welcome, today’s Budget falls well short of the 100,000 homes proposed by the CBI and British Chambers of Commerce. Scotland should see some additional investment following today’s Budget and we now call on the Scottish Government to use all of this extra money to invest in a major housing programme and build at least 10,000 new social homes a year to end Scotland’s housing crisis for good.”

With tomorrow’s Budget looming, the Chancellor is not short of advice on what to include. George Osborne has been under pressure, in part from his own backbenches, to look again at the strategy he’s been determined to pursue despite the longest period of economic stagnation for a hundred years.

Many organisations would like him to pull back on plans for yet more cuts in public spending and instead to come up with measures that would create jobs. Graham Smith STUCTake the STUC for example. In its latest Labour Market Report, it points out that the economic strategy adopted by the Coalition Government has condemned the UK economy to a prolonged period of economic stagnation and mass unemployment. With youth unemployment stubbornly high, it adds, and long-term unemployment and economic inactivity rising, it is clear that the mistakes of recessions past have already been repeated.

It has led Grahame Smith (above), STUC General Secretary, to stress that he thought it “essential that in his Budget announcement tomorrow, the Chancellor introduces measures to boost jobs and growth. The STUC’s latest labour market report shows that the median wage in Scotland has fallen in real terms by £27 a week or £1410 a year. Therefore measures which boost disposable income such as a VAT cut together with a programme of deficit funded capital investment is the minimum required to get the economy moving.”

“Our labour market report also highlights the UK’s appallingly low level of investment in active labour market measures. If unemployed people are not to suffer the erosion of skills and confidence associated with prolonged periods of unemployment then investment in credible, work based programmes must be enhanced.

The trouble is that the government in London has shown little sign of wanting to change its economic course. Scots PoundsLike it or not, Mr Osborne has little “wriggle room” so there will be little in the kitty for any headline-grabbing measures. Indeed, some publications point out that there is so little cash in the Chancellor’s coffers that they’re warning of dire future consequences of Greek or Cypriot proportions.

Money Week, for instance, has been warning for some time about the escalating size of the UK’s deficit. It’s pointed out that, far from being a slash and burn administration, the present Coalition could actually be on course to increase borrowing in its five year term by more than the previous Labour Government did in its ten years in office.

Institute for Fiscal Studies logoIt’s also worth recalling that the recent Green Budget from the Institute for Fiscal Studies (IFS) indicated that public spending in the UK will be £64bn higher by the end of this Parliament than previously hoped. Much of the increase will come from a massive rise in the cost of social security – up by 4% of all public spending – and that despite all the constant talk of benefit cuts.

Tomorrow however, we’ll have a different set of calculations to work with – those from the independent Office for Budget Responsibility (OBR) which will publish its estimates of how much the government borrowed in the current financial and how much it expects to borrow in the future. In the past, the government was able to state that, from 2009 to 2012, it succeeded in cutting borrowing by nearly 25%. But many forecasters, not just the IFS, believe that trend will be reversed.

The problem is that parts of the economy have not performed well in the past year – much worse than the Chancellor had expected. Growth has been persistently weak; the country has only managed to grow by 0.7% since George Osborne took over as chancellor – much less that either he or the OBR had forecast. There are even questions being asked about whether the UK’s about to dip back into recession. To add to the chancellor’s woes, he also received less money from the auction of the 4G mobile phone services than he hoped. As a result, he may be forced to confirm the analysts’ fears about rising borrowing and risk damage to the government’s political credibility.

Publications like Money Week have also been warning about the outbreak over what they call ‘currency wars’ – euro currencyin other words, governments vying with each other to devalue. While it may help the government to pay off some of its international debt, the cost will be rising inflation and the pound in your pocket steadily losing its purchasing power.

That said, those business owners who tread the networking circuit may well have heard calls from speakers to “turn of the TV news and stop buying newspapers”. They point out that, while there are undoubtedly some firms struggling to cope in the current market conditions, there are many more that are thriving. As the Caledonian Mercury has reported, there are Scots companies in the Top 100 which are producing double-digit growth and healthy profits.

In an article on the BBC’s webite, Business Editor Robert Peston argued that, if you took financial services and oil out of the economic Bank of Scotland Statueequation – both of which are in serious decline, “the rest of the economy is in better shape than many might believe, if not in the rudest of health.” He drew on the Treasury’s own figures for this conclusion.

Scotland of course has been heavily dependent on both financial services and energy and suffered as a result. However, some news from the North Sea is positive enough. The Bank of Scotland’s Business Monitor and the CBI’s industrial trends surveys have both shown signs of optimism.

As usual, there have been some leaks about what the Chancellor may say. For instance, he’s expected to announce more spending cuts worth about £2.5bn – the Scottish Government will have find 1% savings a year over the next two years in its own spending plans as a result. However, against this Mr Osborne wants to use any money saved in this way to pay for large-scale infrastructure projects which should help boost economic growth.

There is now no doubt that Scotland will win the next World Cup. Such is the euphoria which has swept the Tartan Army after the appointment of Gordon Strachan as our new national coach and our victory against mighty Estonia at my old football ground Pittodrie in Aberdeen on Wednesday night.

Never mind that we are currently bottom of our qualifying group, that we only scored one goal, that it took Charlie Mulgrew 39 minutes to find the net and that it was only a friendly. The games against Wales and Serbia next month will be the real tests. But, by all accounts, we played attractive, attacking football and morale couldn’t be higher.

Gordon Strachan comes to the job with a very impressive CV – a fine player for Aberdeen, Manchester United and Leeds, capped 50 times for Scotland, including playing in two World Cup final tournaments and, as a manager, he’s taken Celtic to three league cup wins. Despite all that, he claimed he’s never been so nervous before a game as he was at Pittodrie on Wednesday. So Scotland is full of great expectations and aiming for the sky.

Indeed, one member of the Tartan Army, Alex Salmond, was so carried away he was aiming for outer space. Dressed in a white overall, he stood in a lab at Clyde Space in Glasgow, which has just built a nano-satellite to be launched by the Russians in June, and declared: One small satellite for Clyde and a giant leap for (Scotland’s) extra-terrestrial export business.”

The Labour leader Johann Lamont gently teased him about his high flying ambitions at first minister’s question time. “When is he going to join us in the real world ? ” she asked. She had in mind the SNP’s £30b budget -pushed through parliament on Wednesday with the party’s overall majority. It included only £10m extra next year for Scotland’s further education colleges, when what was needed, said Ms Lamont, was an extra £30m, just to make up for the cuts previously announced by the finance minister John Swinney. It all turned out to be a game of hokey pokey however because the budget promises an extra £50m for colleges the following year.

But Ms Lamond also had in mind the SNP’s interesting plans for 2016 if there is a Yes vote in the independence referendum in the autumn of 2014. Independence day would be in March 2016, followed by the first elections to an independent parliament in May. The SNP’s Nicola Sturgeon also announced plans for a written constitution and this has set the political eggheads rolling in the aisles. What fun. To write a constitution, to try to set down in words what Scotland is all about. Let’s begin with “We the people……..”

Meanwhile, the storm without was raring and rustling. Everywhere was pretty blowy on Monday but the North West was battered by blizzards, waves 20 metres high and winds reaching 120mph on top of Cairn Gorm. The weather forecasters are predicting the coldest February for 30 years.

Spare a thought then for our fishermen at sea. At lest they got some good news this week – the hated Common Fisheries Policy is to be reformed, thanks to a vote in the European Parliament. There is to be a new system of regional control over fishing grounds and an end to the practice of “discards”, the dumping of un-quota fish at sea (about a quarter of the total catch !) Exactly how all this is going to work has not been spelt out and I suspect it is going to be difficult in practice, given the national rivalries among the fishing nations and the untrustworthyness of skippers (14 Scottish skippers have been found guilty in recent years of landing so-called “black fish” on an industrial scale.)

Fishing is not the only industry with its naughty boys of course. We learnt this week that 21 people in the investment department of the Royal Bank of Scotland were caught fiddling interest rates. The bank has to pay fines totally £391m and the Chancellor ( who in effect owns the bank) has insisted that the money should come out of bankers’ bonuses, both in the future and – if possible – raked back from bonuses already paid.

Farmers meanwhile will be relived to hear that they are not facing another wave of rural crime, namely sheep rustling. A flock of 35 sheep was thought to have been stolen from a field in Galloway but they were later found safe and well, sheltering from the bad weather in a remote gully on the edge of the same farm.

And while on the farming theme, I could not help noticing this week that the bull sales at Stirling are not what they used to be. The number of bulls being sold was well down and the average price of an Aberdeen Angus was only up £100 on last year at £5,182. The highest price was only 18,000 guineas and that was for a sturdy looking “Morven Kyle” from Aberdeenshire who apparently had a “terminal sire index of +49 and a self replacement index of +59.” It’s all a long way from the 60,000 guineas paid by an American buyer 50 years ago for an Aberdeen Angus bull which turned out to be infertile !

'Be upfront' about money issues in the NHS, warns Theresa Fyffe

By Theresa Fyffe

We all know that money is one of the main causes of relationship breakdown and I’m sure the same level of disagreement happens in the Scottish Cabinet each year when the draft budget is discussed.

Yet funding for health has emerged relatively unscathed, while the overall budget for Scotland has shrunk. This is partly thanks to Nicola Sturgeon and partly realpolitik. What politician, after all, would wish to go against the public which holds our NHS so dear?

But as this week’s report by the Scottish Parliament’s Health and Sport Committee makes clear, there are concerns as to how the health budget of £11bn is actually spent.

And when politicians use phrases such as “may conceal underlying financial problems”, “glacially slow” and “the committee reserves the right to be sceptical”, then you know there are issues which need to be addressed. In relationship terms, it would be time for counselling; some thorough check-ups are needed for our health budget – and that’s just what the health committee will be delivering in a year’s time as it builds on this week’s report.

Among the biggest issues identified by the committee in its current report, problem number one is how do we take account of the impact of financial decisions on the quality of patient care? When demand is growing and the budget is at a standstill, this is something that must be tackled. Targets may be met by health boards, but that doesn’t mean patient needs are being met.

What happened with waiting times in NHS Lothian is one – albeit extreme – example, but how can we be assured that the health budget is delivering high-quality services that meet the needs of patients and our wider society? One answer is the government’s quality strategy, but with almost a third of the total Scottish budget being spent on our health services, the members of the health committee need to find meaningful ways of reassuring themselves – and the public – that the government and health boards have got the right balance between money and quality services.

Problem number two identified by the health committee concerns every politician’s favourite subject – preventative spend.  While universally acknowledged as good for patients and the public, preventative spend might not actually save money for the public purse. And even if there are savings to be made, these may well appear in another budget, not the one which funded them in the first place. So claims for savings from preventative spend programmes certainly need to be looked at more widely to make sure that plans to invest now to prevent health or social issues arising in the future is money well spent.

Next up, problem number three. While much of the rest of the public sector can only dream of the “protection” of its budget in these tough economic times, the committee asks the question “are the levels of health spending adequate?”. Or, to put it another way, is it enough to pay for the services that people need? This may raise some eyebrows, but given increasing demand, due to Scotland’s growing – and ageing – population, it is a very legitimate point. And as new services – for example, the Scotland-wide abdominal aortic aneurism programme – are introduced, which boards are expected to fund, how can the wider financial implications be assessed?

And so to problem four. Are efficiency savings, for example, just cuts by another name? Indeed, are non-recurring savings actually concealing “underlying financial problems”? This is something we have consistently highlighted, so we’re pleased the health committee is going to look into this in more detail the next time the budget is in its in-tray. We are concerned that health boards have been cutting their workforce to make short-term savings, badged as efficiencies, but which may impact patient care. Is this really what the public wants of its NHS?

The fifth problem raises questions about successive Scottish governments’ attempts to treat people at, or as close to, home as possible. Progress on this long-standing priority to shift funds and services from hospitals to communities has been, in the words of the committee “glacially slow”.

In our own work on NHS funding, we have found that getting up-to-date financial information from health boards can be challenging and have been arguing for greater transparency for some time. As demand grows and budgets, at best, stand still, it is clear some difficult decisions about the future provision of services will have to be made if financial and political harmony are to be maintained.

In any relationship, choices have to be made. And the only way that the NHS can avoid a breakdown and have a long and successful future is by bringing the public, patients, staff and indeed, politicians, with it when it makes those tough choices.

So three cheers for the parliament’s health committee for starting the debate on these crucial issues now about what the future holds for Scotland’s NHS. For as we all know, it’s much better to discuss money issues up front, rather than put it off until later.

Theresa Fyffe is director of RCN Scotland.

A charity box
A charity box

George Osborne awaits (not pictured). Picture: Steven Depolo

By Martin Sime

In these straitened times no one really expected good news from the budget but one announcement in particular was met by disbelief among charities. Charities in Scotland could lose out on tens of millions of pounds a year owing to a new cap on tax relief for major donations announced by George Osborne in his latest budget.

From a charity perspective, the new 25% cap on income tax relief is not good news and the sector did not waste any time in calling for the decision to be reversed. Within days hundreds of organisations, including SCVO, and more than 1,000 individuals had signed up to a campaign called Give It Back, George which is seeking a rethink of the cap. There has also been a deluge of representations to ministers, MSPs and MPs.

Organisations in Scotland which will be most affected by the cap have joined with SCVO to write to Michael Moore MP, Secretary of State for Scotland, asking him to intervene to protect charitable giving in Scotland. Signatories included the principals of The University of Edinburgh, University of Aberdeen, Heriot-Watt University, University of Glasgow and Glasgow Caledonian University, as well as the Directors of the National Museums Scotland and National Galleries of Scotland.

The new arrangements will mean less tax efficiency – part of the motivation of wealthier people to give to charities. This change will effectively increase the cost of donating to charities for large donors, almost certainly reducing the income of charitable organisations in the process. Although it will only affect a relatively small number of donors, it will affect the largest and most significant donations. With around 50% of the £11bn donated to charities in the UK each year coming from just 8% of donors, the new rules will have a disproportionate effect.

The new rule flies in the face of the UK Government’s pledge to build a “Big Society” and encourage philanthropy. At a time when public funding of charities is reducing and demand is rising, this becomes even more important but the cap will have the opposite effect.

The fact that it is being ushered in as part of a range of other initiatives aimed at tackling tax avoidance insinuates that charitable giving is akin to avoiding taxes. This is an astonishingly unhelpful message. The reality is that move is a partial withdrawal of the Government’s tax support for charitable giving.

A survey of wealthy philanthropists by the Charities Aid Foundation has indicated that eight out of 10 of those surveyed will rethink their charitable donations because of the changes, with some saying that it will force them to cut their donations by as much as 40%.

Only time will tell what impact the new measures will really have on philanthropic behaviour but what is clear is that, unless charity giving is excluded from this cap, the UK Government will effectively be taking a slice of the largest donations to charities for the Treasury.

To risk reducing donations to charity or making giving more complicated is a very dangerous move. These changes could stifle donations from wealthier people whose generosity is helping charities to continue supporting the most vulnerable members of society at a time when their budgets are being squeezed like never before.

It could seriously affect larger organisations which depend on major gifts from philanthropists. But smaller organisations won’t be immune. A ripple effect could also see smaller, local organisations lose out as charitable foundations will have fewer funds to distribute.

The UK Government must reverse its decision and exempt charitable donations from the cap on tax relief before it can do any damage to the essential work of charities across Scotland and the rest of the UK.

Martin Sime is director of the Scottish Council for Voluntary Organisations, and writes a monthly column for The Caledonian Mercury.

It is almost five years since the credit crunch began to hit the world’s economies. As it developed, the crunch quickly proved that no country was immune, with banks having to be bailed out by their national governments. Economic activity was severely hit in the UK, the US, the eurozone and in other major centres as firms found it hard – if not impossible – to get finance. The effects of the crunch can still be felt today.

The latest Lloyds TSB Scotland Business Monitor shows the recovery in the Scottish economy has yet to pick up pace. In fact, it even shows a slight deterioration in the rate of recovery in the last quarter. But looking forward, the 400 firms in the survey say their “expectations are showing a significant uplift, reducing the likelihood of a return to recession”.

The Business Monitor says that firms’ assessments of their immediate prospects in the next six months have improved dramatically – and the bank believes there are signs of optimism for the Scottish and UK economies. The Caledonian Mercury spoke to the bank’s chief economist, Professor Donald Macrae, for his estimate on how Scotland plc is performing.

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<em>Picture: Images_of_Money</em>

Picture: Images_of_Money

By Ruchir Shah

This is a very tax neutral Budget. What it gives with one hand it takes with the other. But it is certainly not tax redistributive, as increases for lower- and middle-income groups appear to come from other lower- and middle-income groups.

It is not clear if the richest will really be forced take their share of austerity. In the absence of redistributive tax measures, encouraging philanthropy becomes even more important.

From a charity perspective, the new 25 per cent cap on income tax relief is not good news. It means less tax efficiency which partly motivates wealthier people to give to charities. Much has been made about the impact this will have on philanthropic behaviour, but you can look at it another way: unless charity giving is excluded from this cap, the government will effectively be taking a slice of the largest donations to charities for the Treasury.

Most of the specific tax measures for charities are simply tweaks to existing tax concessions – a tidying-up job. For example, red tape for charity shops and community sports clubs will be streamlined, while VAT burdens will be eased for charities sharing costs and transporting goods for emergency relief.

The small donations scheme is more significant. It is designed to make it easier for charities fundraising through smaller collections to benefit from a Gift Aid-like return on donations under £20. This is not really a tax measure but a funding scheme. Scotland could push for using this new allocation differently in future if the system doesn’t work. Could Scotland create a more open funding scheme to support smaller charities and community groups?

What is even more interesting for charities is what they didn’t get. Many of us were expecting significant announcements to improve payroll giving, an introduction of living legacies and a move to tackle the £1 billion subsidy that charities give to the government through VAT lost on services. There has been a real missed opportunity here.

The other key announcement on Wednesday was that the Scotland Bill now has the backing of the SNP administration. The impact of this on Gift Aid for charities will now need to be reviewed in light of the cap on tax relief for the wealthy. Will Scotland have a say over how the cap interacts with the new tax powers? Will Scotland be even more radical in its approach to stamp duty land tax once the Bill comes into force? Will a Scottish approach be different?

Welfare reform remains the biggest concern for many charities. The Chancellor has made it clear that he will be seeking a further £10bn in welfare cuts. This will hit some of the most vulnerable people and groups hard. Yet it remains a small contribution to the overall deficit of over £100bn per year. Something tells me there will be even more pain in future budgets once the public nerve has been tested with this. Expect more anti-benefits rhetoric over the course of the year.

Another important issue for the third sector is making the tax system easier for people to use. There has been a lot of rhetoric on simplifying the benefits and tax system. Yet the Budget has been marked by more means testing and increasing complexity for personal tax. Taking the pensioner allowance changes as an example, is the approach to simplification here about making it easier for the tax office or for the taxpayer? The varying allowances for different pensioners will undoubtedly create confusion, as will the rules for child benefit tapers and eligibility for benefits that depend in take-home income. Expect calls to charity helplines to increase.

Most intriguingly, there has been a rumour that the move to regional variation of public sector salaries might in the future be extended to benefits. If this was to happen, then the case for devolution of welfare and benefits in Scotland would become virtually undeniable.

I was fascinated to hear an interview with a woman who was set to achieve a net gain from the tax proposals but was unhappy because of the net loss that would be suffered by her neighbours. It suggested a real sense of solidarity, something more akin to the real big society sentiment that David Cameron has found so elusive. This doesn’t fit neatly into the theory of self-interested individualism that now seems to drive the government’s approach to taxation.

This has been a very constrained Budget, but marked by a philosophy which sees the poor and vulnerable as a burden to the economy. From a charity perspective, the UK’s position as one of the most unequal countries in Europe seems secure.

Ruchir Shah is policy manager with the Scottish Council for Voluntary Organisations.

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Amid all the budgetary bluster, here is the latest song from the Sensational Alex Salmond Band, concerning the Rt Hon George Gideon Oliver Osborne: Gideon Ding Dong.

Despite all the fiscal changes and recalculations, the band’s Best Of 2011 album remains available, and The Caledonian Mercury is proud to be able to showcase a video taster with extracts from all the tracks.

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<em>Picture: wsimmons</em>

Picture: wsimmons

It is amazing how sometimes politicians can say one thing and mean something completely different.

Take this, from the Chancellor’s Budget statement to the House of Commons yesterday: “Let me start with alcohol duty. The Government will shortly by publishing its alcohol strategy to address the growing problem of alcohol abuse and the many billions of pounds it costs our NHS and criminal justice system. But today I have no further changes to make to the duty rates set out by my predecessor.”

I wasn’t the only one to be fooled. Some of our leading broadcasters also took the Chancellor at his word and reported no extra rise on whisky in the Budget.

But that wasn’t quite what Mr Osborne had in mind. By sticking to the plans announced by previous chancellors, Mr Osborne was merely continuing with the tax escalator which drives whisky duty up each year.

He could have reduced it, as the whisky industry asked, but instead he kept on with the rise – but hid it away in the small print that accompanied the Budget, merely glossing over it in his speech and blaming others for it.

The 5 per cent rise will put 41p on a bottle of Scotch and, according to the Scotch whisky industry, will leave the UK with the highest rates of whisky duty in the EU outside Finland and Sweden, where whisky duties are punitive.

Gavin Hewitt, chief executive of the Scotch Whisky Association, said: “The reduction in corporation tax is a welcome boost to business, but by maintaining the duty escalator the Chancellor has undermined the government’s objectives of encouraging economic growth and curbing inflation.

“The government needs to review the duty escalator which is harming the Scotch whisky sector. The industry is vital to economic growth and supports about 35,000 jobs across the UK. It suffers at home due to the discriminatory tax regime applied by our own government.”

He added: “The SWA is calling for an overhaul of the entire duty regime through a move towards a system where all drinks were taxed at about the same rate. Scotch Whisky currently carries some 37 per cent more duty per unit than beer and is 30 per cent higher than wine. Duty approximation would deliver an additional £1 billion a year to the Government to help reduce the national deficit.”

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<em>Picture: 401K</em>

Picture: 401K

By John Knox

To my utter astonishment, the Budget was not as bad as I expected. George Osborne says he is taking five times as much from the rich as the 50p tax rate would have yielded. This is indeed a noble ambition, if it can be achieved. But I still think the 50p rate should remain, as an important symbol that half of what you earn, as a rich man or woman, should go to the state in which you are earning that comfortable living.

The Chancellor thinks the 50p rate deters hard work and enterprise. I doubt it. Top doctors, professors, lawyers, civil servants and company managers are not mainly motivated by money. Most have a driving force we used to call “a vocation”. And they are, after all, enjoying an income of £150,000 or more a year, riches most people can only dream of.

Mr Osborne thinks a 50p rate gives Britain a bad name abroad, discouraging entrepreneurs from coming here and forcing some to leave. I doubt this too. Most people, even high-fliers, do not migrate like birds chasing the last few berries of the season. They have families rooted in this country and have what we used to call “patriotism”.

At the other end of the scale, the Chancellor is raising the personal tax allowance to £9,205, which will take 800,000 more people out of paying income tax altogether and benefit the average family by £220 a year. This is, no doubt, a good thing for ordinary families and for the economy as a whole – particularly at a time of austerity. But I would still have preferred him to have introduced a lower tax band instead, on the principle that every worker should pay at least part of his or her income in tax, so that the state does not become a handout institution but is a co-operative venture to which we all contribute something.

Already some older people have complained that freezing the tax allowance for pensioners is unfair and will reduce their real income by an average of £63 a year. “We’ve contributed all our lives and we deserve better,” I heard one pensioner say on television. But the hard truth is that those contributions are not enough to cover the rising costs of the older population. And the less noticed truth is that pensioners’ monthly expenses are far less than for a working couple bringing up a family and paying off a mortgage.

Stamp duty going up to 7 per cent on houses over £2 million is a right-and-proper tax on the rich. It goes some way – as the Chancellor explained – towards paying for the cut in the top rate of income tax. The loophole of using offshore companies to buy expensive houses, thus avoiding stamp duty, will rightly be closed. This should have been done years ago. So too should a clampdown on top earners avoiding the 50p rate. Mr Osborne’s admission that the top tax rate yields “next to nothing” is shameful.

The extension of regional pay for civil servants is another controversial issue. It already happens in London, of course, but the idea that each council or health board or regional authority across the country should negotiate its own pay rates is a novel suggestion. I see little wrong in it, since the cost of living varies throughout the country. There are hints of further regionalisation in the announcement of three new enterprise zones in Scotland – in Dundee, Irvine and Nigg – where companies will be given special treatment on tax and grants.

The cut in corporation tax to 24 per cent is worrying. Is this the beginning of a race to the bottom across Europe? Surely, if a firm makes a profit, it should hand over some of that money to the state to pay for the roads its uses, the fire brigade which protects its property, the schools and colleges which educate its workers, the whole system of commerce which the state makes possible. Again the Chancellor has caved in to pressure from big business with his £3 billion concession to the oil and gas industry over decommissioning.

The ending of child benefit for those earning over £60,000 a year is still controversial – since it ends the era, as Ed Miliband said in the Commons, of us “all being in this together”. But at least the cutoff will not be as sudden as had been planned. And, more worrying, it is accompanied by cuts in welfare benefits that will hit the “squeezed middle” class the hardest.

Overall, though, the Budget has not been as generous to the rich and powerful as I expected. On the other hand it does little to change to lamentable state of our economy. There were some hints of a growth strategy – spending on railways, broadband, the energy and science industries, as well as a regrettable tax break for the computer games industry – one of Britain’s craziest exports. But the official prediction (from the OBR, the Orwellian-sounding Office for Budget Responsibility) is still stuck at low growth this year (0.8 per cent) and 2 per cent next year, with only one million jobs being created over the next five years.

This at a time when there are 2.6 million unemployed and one in five young people cannot find work. Paying down the national debt is all very well, but one has got to ask how the debt can be paid off when the unemployment bill is rising and so many people are not in a position to pay tax at all.

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