21/03/2012 Newsnight Scotland


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unemployment or on borrowing. Good evening. You've heard the view


from Westminster. In a moment we'll hear from the UK and Scottish


governments. First let's find out what our economics editor makes of


the Budget. Douglas? Tomorrow's headlines are going to be about tax,


just as this morning's were. But who wins and who loses? The winners,


all of us to a limited extent, a lot of us to a limited extent. The


losers I think grannies will be the tabloid shorthand for that. What


about the high earners? That's open to dispute. One test is how much


people complain. We're not hearing a great deal of complaint from high


earners about this just yet. It's worth mentioning what's not playing


a vital role in the debate. Yes, there's targeted help for business


and specific sectors. There's little talk about confidence. What


the office of budget responsibility is saying, they expect business


investment to remain very, very flat. Also very little talk about


spending. That's the big story about public finance over this next


five years or. So many of the cuts yet to bite. We did get mentioned


briefly about �10 billion more out of welfare. We don't know where.


But that's almost certain to hurt. That's the kind of place we're not


seeing a great deal of detail just yet. We'll be back with you in a


minute. First we told David Allison to get on his bike and look for


growth. A year ago George Osborne announced


that he wanted to make Britain a land of manufacturing once again, a


place that he dubbed the march the makers. 12 months on he's back, in


a period of very low growth still. He says he still wants to see


Britain get on its collective bike. Thfrpblgts Budget rewards work.


Britain is going to earn its way in the world. There is no other road


to recovery. Mr Osborne aims to incentivise both ends of the income


scale. For ordinary mortals the amount you can earn before paying


tax goes up to �9,205. Child benefit will be available for those


earning up to �60,000. The top rate of tax will be cut to 45p.


According to the Chancellor, to raise more tax. No Chancellor can


justify a tax rate that damages our economy and raises next to nothing.


It is as simple as that. And thanks to the other new taxes on the rich,


I've announced today we'll be getting five times more money each


and every year from the wealthiest in our society. But what about


Scotland? What was there in the Chancellor's statement for us? Well


there was some help for the life sciences and games industries. But


a rather sceptical financial eye on renewables. He also said Civil


Service pay would be agreed locally and suggested that principle might


extend inifyure to benefits. Specific proposal for Scotland


include tax relief to help with the cost of decommissioning North Sea


oil and gas facilities, a new field allowance for exploration to the


west of Shetland, as well as superfast Broadband for Edinburgh.


And special enterprise area status for Nigg, Dundee and irvin.


Chief Secetary can confirm today we will offer enhanced capital


aloupblss for businesses starting in the new Scottish enterprise


areas. Budget speeches are rarely welcome by the Opposition not least


because they're one of the toughest jobs for the leader of the


Opposition who has to reply. Ed Miliband insisted the Chancellor


had failed. Growth down last year. Growth down this year. Growth down


next year. Every time he comes to the House he offers a different


excuse, but the reality is his plan has failed.


Last year Mr Deputy Speaker, he told us unemployment would peak in


2011. And what has he delivered? We're into 2012 and unemployment is


rising month upon month upon month. His plan has failed. Let's have


transparency. Hands up in the Cabinet if you're going to benefit


from the income tax cut? Come on. Come on. Come on. What of the SNP?


They're been making mup of their �300 million worth of shovel ready


construction projects ready to go if they just had the cash. There


was no announcement on that. There were things on Broadband


communications in Edinburgh and the special enterprise zones at Nigg,


Dundee and Irvin. The Chancellor talked about backing the media


sector. That could be helpful for the games industry in Dundee. We


will look at the fine print to find out what it does. Here the Scottish


government announced a climb down ot time table for introducing


Curriculum for Excellence exams. A good day to bury bad news? Where


did we hear that one before? Douglas is still with me. Now this


stuff about oil and gas in this? you're looking at it from a


Scottish point of view, energy is interesting. For the UK the


Chancellor is talking about another dash for gas to deal with the gap


for electricity generation. He sounds not for the first time,


quite sceptical about the green agenda, which is perhaps surprising


for a Government who wanted to be the greenest ever. You did hear in


terms of energy investment tax breaks for Nigg and Dundee where a


lot of jobs are hoped for in terms of oil and gs and renewable energy


as well. After last year's big tax raid on offshore oil and gas, we


are getting today tax breaks, at least modest tax breaks. They're


targeted as exploration and at the cost of decommissioning North Sea


equipment. A big consequence of this change is that the tax take,


the revenue from off-shore oil and gas, reduces sharply over the next


few years, according to the figures published today. This has been


spotted by eeconomists at Glasgow university. We have a whizzo graph.


A very fine graph. This was last year what they were projecting.


Over the next few years the revenue from off shore oil and gas. It


comes over the next three years to a healthy �11 billion at the end of


that. If you look at what's happened a year on, three things


happen, one is oil price stays quite high. Also you get the tax


effect, that there's more money that the Treasury's give ago way or


not taking in from the industry and you have falling production. It's


lower than half that level, if you look over the next four years. That


has considerable significance for the political debate around


independence. Of course these numbers matter very much to


figuring out whether Scotland is better off or not. One of the


reasons you get the fall is for something that the Scottish


Government was very keen on, which was these incentives to invest more,


particularly off Shetland. Because the companies get 100% write-offs


against tax on the first year of investments. Yes, the companies


have been in negotiation with the Treasury all year to repair this


damage. West of Shetland is a difficult place. It's very deep


water. These are targeted tax breaks which have been announced


today. They are supported by the SNP government. They've wanted to


get more investment in Scottish waters. The implications for the


independence debate are that these figures make it more difficult to


show Scotland would be at least manageable deficit territory over


the next four, five years if ref enough falls away that fast. Thank


you very much. Now the Scottish office minister


David Mundell is in our Westminster studios. First of all, can you


explain why it should be important to people in Scotland that the 50p


tax rate is cut? I think it's very important in Scotland and across


the United Kingdom that we do encourage wealthy people to stay in


our country. These people generally have a choice as to where they live.


If our tax rate isn't competitive, they'll go elsewhere. A lot of


statistics have shown these are people... If they were evading tax?


According to your own documents, evaiding tax. What our document's


shown is that the tax at 50p wasn't effective. We want to bring forward


a rate for higher earners that will be effective, along with a range of


other tax Medsures which will ensure that those people who are


wealthy will pay their fair share. It's an extraordinary argument that


because people who are very rich found ways of paying accountants to


evade paying the 50p tax rate, they should get a tax cut. If we all


start not paying income tax, can we all get a tax cut? It doesn't work


that way. I'm sorry that's exactly the logic of George Osborne's


argument. It doesn't. What you have to have is a tax system that is


credible and effective. If people have the opportunity not to pay the


taxes, then they'll do that. That's what's been happening. What we want


to make sure that we tighten up a lot of the loopholes in terms of


use for example of overseas companies to avoid Stamp Duty and


capital gains tax. We want a credible tax rate, which is at the


midpoint of European and international tax roits to


encourage people to be in the United Kingdom. As a matter of


interest, how many people in Scotland will benefit from cutting


the 50p tax rate? I'm sure there are people in Scotland who will


benefit. I'm sure there are too. I'm asking you as a Government


minister to tell me how many. want to see more people in


Scotland... So you don't know. will be paying the heir rate tax.


You don't know, do you? What we do know is if we have the 50p tax rate


we are not bringing in the levels of income that were projected for


that rate. We're discouraging high earners to be located in Scotland


and elsewhere in the UK. You don't know that. The first thing the


Treasury press released about Scotland today was that 73,000


people would be taken out of income tax because of the change in the


tax thresholds. Can you tell me how many pensioners in Scotland will


lose out as a result of the change in the tax thresholds for


pensioners. I can tell you that every pensioner in Scotland will


benefit from the highest increase in pensions in recent times that


the Government is bringing forward. And the change that we're making is


putting more emphasis on the pension and less emphasis on the


tax rate. You don't know how many people are affected by the change


in the top tax rate and you don't know how many pensioners are


affected. Let me try you with another one. Given that you made so


much fuss about searching out the statistic of the 73,000 people who


would benefit from the changes in tax thresholds, as you know, at the


other end of the scale, some extra people will be brought into higher


rate tax as a result of the changes there. How many people in Scotland


will be brought into higher rate tax because of the changes made in


the Budget today? What the Budget is about, Gordon, is about an


overall package which is seeking to achieve fairness, in relation to


pensioners, who pay tax, it's seeking to bring a fairness to have


a uniform rate of tax, personal allowance. We think that is a fair


thing to do. In relation to higher earning taxpayers, we believe that


it is right that we have a tax rate which is actually credible and


payable. That is what we are about. We're about achieving fairness.


you don't know how many people are affected by the 50p tax rate. You


don't know how many pensioners are affected by the change in tax


thresholds. And you don't know how many people will be brought into


higher rate tax as a result of the changes made in the Budget today.


As a Government minister, you're sitting there seriously trying to


tell me this is a thought out Budget for Scotland? Yes, we are.


It is a Budget based on delivering a fair package in relation to the


personal tax system. It's a Budget which is based on delivering a


package of measures to encourage business in Scotland, such as those


in the oil and gas industry, which you've just been speaking about, in


terms of cutting corporation tax and in terms of bringing forward


yesterday the plans to encourage the loan scheme for new businesses.


I think those are all important measures and a package that will


benefit people in Scotland. Unfortunately for you this idea


that it's a budget for growth is flatly contradicted by your office


of budget responsibility. The first sentence of their document today


says "our overall assessment of the outlook and risk fofrt UK economy


is broadly unchanged from our November economic and fiscal


output." I don't accept that will be the case. Hang on, so Government


minister now think the OBR forecasts are wrong? No, I think


the measures we're bringing forward in reducing corporation tax. The


measures bringing forward in terms of easing bank lending for small


and medium sized businesses, the measures we're bringing forward to


create these development areas in Irvin, Nigg and Dundee will have a


significant effect. It's just that the OBR didn't understand that. We


have to leave it there. David Mundell thank you. I'm joined by


John Swinney, the Scottish Finance Secretary. He's in Dundee. First of


all, you welcomed these measures to try to encourage investment in the


North Sea, it's more the Atlantic off Shetland. But presumably you're


not so happy about the effect that some of this is happening on the


projected revenues from North Sea oil, which seem to have fallen


dramatically. I certainly welcome the incentives put in place,


because I think what they do is begin to repair some of the damage


that's been done to the investment climate in the North Sea oil and


gas sector as a consequence of the budget last March. The consequence


of that is demonstrated in smflt data that's set out in the Treasury


documents today where clearly the investment climate has been


undermined by the approach the Chancellor took with the impact on


production and development of fields that have taken their course.


That has to be built up against. That's why the incentives and the


decommissioning assistance will make that challenge a great deal


more practical. To give one figure, a year ago, the OBR was forecasting


oil revenues of �11 billion in 2015/1, which is the first year you


could realistically have an independent Scotland. -- 2015/16.


They're forecasting �5 in 2016/17, something like a 50% cut. That has


severe consequences for your claim that somehow an independent


Scotland would be more viable than the UK budget. In recent yearsing -


- years, the data set out about the difference in the financial


performance of Scotland versus the United Kingdom has reflected the


fact that North Sea oil revenues have changed dramatically. In one


year there was a 50% reduction in North Sea oil revenue. Scotland


still ended up in a stronger financial position than the rest of


the United Kingdom. The analysis I've done so far with the


implications of decommissioning incentives, the net effect of


benefit by 2016/17 will be net growth of �1.1 billion. So you're


saying the OBR just has this wrong? There's got to be an effect of some


of the measures set out today to encourage and incentivise


production in the North Sea. That's also got to be taken against the


back drop of the severe knocked confidence that was delivered and


investment that was delivered by the Chancellor in his budget last


March. That's got to take some time to work back through the system to


see revenues recover. My point is that there is a sustained asset we


have to develop in a sustained way. That's what the Chancellor hasn't


done. He started to repair the damage today, but we need to see


more steps to encourage that in years to come. One of the reasons


that revenues, the OBR's forecast is going down is precisely because


I think you welcome. These companies can write off all the


investment they make in the first year against corporation tax and I


think petroleum revenue tax as well. What you haven't addressed is the


fact that this severely would affect, I mean we're talking about,


if you won your independence revenue -- referendum, which will


now be looking forward to tax revenues from North Sea oil which


are 50% of what you were expecting this morning. The point I'm making


is that there has to be stability in the North Sea oil and gas


taxation regime, which encourages company to invest in some of the


more challenging opportunities that have to be per sued. That has been


undermined by what the Chancellor did last year. There has been some


recovery in that certainly and confidence by the actions that have


been taken today. That needs to be intensified in the years to come to


make sure that we can deliver a strong and sustainable return from


the North Sea oil and gas investment that companies make.


but I come back to this, doesn't it underline the idea that relying so


heavily on a very volatile price of a natural resource is not a very


sensible way to run a country. If you could have a 50% fall in the


forecast of North Sea oil revenues, based actually not really on


different projections of oil prices, but simply on a few tax changes, I


mean that is not very encouraging, is it? The point I've made to you


is that in recent financial years there has been a 50% reduction in


the tax take of North Sea oil. Scotland has still ended up in a


stronger financial position than the rest of the United Kingdom. The


point that people in Scotland have got to consider is whether they


want to see the remainder of the North Sea oil and gas reserves and


resources squandered by a United Kingdom gfrt that cannot manage


them effectively for the long-term interests of our people. John


Swinney thank you very much. Now I'm joined from Westminster by


the Liberal Democrat John Thurso who sits on the Treasury Select


Committee and Cathy Jamieson, a member of Labour's Treasury team.


First of all, John Thurso, we have just heard David Mundell enthusing


about the cut in the 50p tax rate, I guess that's not what you would


argue for. No. What I'm really concerned about is the �3.5 billion


that we are putting directly back into the pockets of working people


by the increase in the personal tax allowance. That's many, many people,


millions throughout the UK, 160,000 in Scotland, who will benefit from


cash in their pocket. That was important to me. For those who get


confused by the technology of the coalition. Danny Alexander was


enthusing about the cut to the 50p tax rate. He's presumably not


really a Liberal Democrat now or just kind of got it wrong.


splendid fellow Treasury Minister. I'm just not terribly worried about


it. The cost is �50 million as against �3.5 billion that we're


giving to people who really need it. Frankly, �50 million is a small


amount of money. I am happy to accept that �45 -- 45p is what the


Tories required for that. I see the �3.5 billion going to the millions


of working families that need the money as the important game. If you


look at the HMRC document which outlines the case, what it shows


actually is you lose �3 billion by cutting tax rates and you might


gain �2.9 billion if the people who are avoiding the tax or evading it


stop evading it, so it's a bit of a �100 million is the difference


between the two and it's a guess. One of the points that HMRC


document makes clear is that it is some 20 plus years since we had any


evidence of behavioural change in the UK. We now have, for the first


time, that evidence. It's clear that evidence shows there is


behavioural change which means that the estimates originally set down


for that tax collect were wildly out. Therefore the amount of money


that sk collected and is likely to be collected is much less. I'd


rather have 45p collected than a 50p that wasn't. It seems to me a


no brainer. Cathy Jamieson, beyond the knock about, it's fair enough


to say if a tax isn't collecting anything like the money that


Alistair Darling thought it would, get rid of it. Of course we have to


remember that this was the first year and you know, if they had been


given perhaps more time, over the second and third years perhaps we


would have seen perhaps more money coming through. This budget was


about choices for the Chancellor. What he's chosen to do is give huge


tax cuts to millionaires and people earning over �150,000 a year, at


the same time as making the choice to take away around �4,000 from


lower paid, parttime... You're making the knock-about point again.


If it is the case that this tax was not raising the money it was


supposed to raise, then it's not the case that by cutting it, he's


giving huge tax cuts to the rich at the expense of the poor. You said


yourself that HMRC's figures and some of the work that's been done


by the office of budget responsibility show that actually


the Government are taking a pretty big gamble on where the money is


going to come from. On top of that, we have the raid on the pensioners'


incomes, the so-called granny tax, which is perhaps the only thing


which was kept secret in the past few weeks, about what was going to


happen with the budget. Comment on the, we might as well call it the


granny tax The biggest tax on most grannies in the taxable band in


Scotland was the collapse of RBS shares. That's what my mother had


her money in and many others. What we have... I think you'll find


that's not the main source of income for most pensioners. What we


have done here today is simply to say with the massive uplift in the


tax allowance, it is right that be equalised with what pensioners were


getting. So nobody loses a penny in cash terms. 50% of pensioners


aren't in the tax bracket any way. And it will be equalised over a


couple of years. That's pretty fair. It's not a granny tax. Thank you


both very much. With me now is the Economist Jo


Armstrong from the Centre for Public Policy for the region's at


Glasgow University. Do you think it's reasonable, I know the


economy's Martin Woofl is writing the financial Times tomorrow. Here


it is "A budget without economic significance". Is it really just


mirrors an smoke? Well, the very beginning the OBR say the chance is


it's a fiscally neutral budget, the OBR confirm that is the case. The


impact on growth is virtually nil and we're talking about 56


different measures at the end of the day generated a change in


income of less than �2 billion in any one year. So relatively small


changes at the Marge gin. To be clear this is because the big


decisions were all taken last year. Once you set that idea that we will


have a period of austerity and cuts in public spending and you say


which is almost the first thing George Osborne said today, I'm not


going to change that, you haven't got much room to manoeuvre. There


was no room to manoeuvre when the Chancellor's target was to make


sure that the markets are not spooked by anything he does. He


doesn't look like he's giving away large amounts of money that would


endanger his meeting targets in 2016/17. He had limited room to


manoeuvre when that was the target. What do you make of this oil and


gas business? The measures are extremely useful. I think it's


important to separate between measures that will increase tax


take and measures that will increase activity in the North Sea.


The measures announced today will go a long way to increase the life


of the North Sea... That's the point John Swinney was making. The


problem for him, if he wants to run an independent Scotland, is that


yes, of course, he's in favour of measures that increase protduction


in the North Sea offer the long- term. But in the short to medium


term you could have a bigger revenue hit on revenue you are


relying on. Yes we're relying on continually high oil prices at a


time when production is falling and measures that will help reduce the


decline in production. Experts are indicating that's still the case.


He's forecasting �5 billion to �10 billion maximum in terms of North


Sea revenues. It's an important place for jobs. It is an important


place for growth. These measures will maintain that sector for some


considerable time. It would affect the debate over the figures.


JERS figures were taking account of lower rates of tax revenues.


this low. Not as low as that. Relatively close to that. Thank you


Relatively close to that. Thank you very much. Now the front pages:


They are all takes on the Budget. Osborne raids the aged to aid the


waged. The Daily Mail, Osborne picks the


pockets of pensioners. Four million elderly to pay bill for Chancellor'


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