21/03/2012 Newsnight Scotland

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'