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Last Updated: Thursday, 15 November 2007, 11:19 GMT
Balancing out the budget demands
By Professor Richard Kerley
Queen Margaret University, Edinburgh

Any political party that aspires to government office for the first time - as the SNP clearly did this time round in the May elections to the Holyrood Parliament - faces two major barriers.

The first is the absolute lack of experience of the potential "government" - none has done this before and they face a new world where real actions and not just attention grabbing headlines in the media are the outcome of their promises and discussions.

Richard Kerley
Prof Richard Kerley: "The big ticket was the council tax freeze"

The second problem is what economists call "asymmetrical information" - if you are on the inside you know a lot more than the people on the outside.

So, people who are in government, and those who advise them, are aware of just how complex a single line manifesto promise might prove to be, and opposition will have poorer quality information.

Consequently any new government can find itself - as the SNP government did and does - arriving with commitments and promises that sound appealing but may be difficult to put into effect.

The third factor that all governments learn - often to considerable cost and ministerial chagrin - is that all new projects, whether buildings or policies, usually cost more than you at first thought they did.

If we examine the budget presented by the Finance Secretary, John Swinney, we can perhaps see all these factors at work.


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This is particularly the case when we examine the "freeze" in council tax announced in the budget statement and to be implemented by local authorities from next March.

We should recognise that Swinney has made the best of what might otherwise have been a weak hand. No matter what the settlement agreed with the Treasury in London, accommodating a lengthy shopping list of plans and ambitions from fellow ministers was always going to be difficult.

He appears - on the face of it - to have done a good job of balancing out those demands.

Fewer police officers than promised, no debt remission for students, and class size reductions still vaguely in sight and there are headline grabbing items such as prescription charges and that council tax freeze.

The big ticket item was of course the council tax "freeze", announced with great panache as the centre piece of the budget and probably welcomed by many people in Scotland, even if - as in Glasgow - we had a local version of this last year.

Additional discretion

But what is the reality of the freeze, both this year and in future years.

What the minister said was actually very carefully worded: "I have put in place the resources for if councils chose to do that [freeze tax]."

Actually he is making the best of the circumstances and context.

The assumption we should work to is that even if councils do hold a freeze in Year 1, then Year 2 will be even tougher and Year 3 will breach the dyke

The minister cannot require all 32 councils to not increase their council tax levels at all, he can only act on those individual councils that increase taxes by an "excessive and unreasonable" degree.

And a judgement on that is literally a matter for the courts, where any judge is unlikely to hold that a tax increase of, say 1% against inflation of 2/3% is "excessive...etc".

What the Finance Secretary has simultaneously done is to give councils additional discretion on how they spend central government support.

In effect the minister has given them promises of more money and simultaneously more discretion to spend that money in ways they chose, not in ways he and Fiona Hyslop and Nicola Sturgeon might prefer.

The reality of central government support to councils has always been one big bag of money to each council, which - at the margins - they can allocate in the directions they chose rather than as a minister might exhort or attempt to direct.

Room for manoeuvre

He has just agreed with them more freedom and more discretion.

By announcing allocations - or plans - for budgets over the three years 2008-2011, John Swinney has been very optimistic in assuming councils will be able to hold the line in a period when we do not know how cost drivers will increase.

The assumption we should work to is that even if councils do hold a freeze in Year 1, then Year 2 will be even tougher and Year 3 will breach the dyke.

However, and allowing himself more room for manoeuvre that Year 3 is the point at which the government has made provision for expenditure to introduce a "local income tax" .

So, actually we will all have to wait three-and-a-half years before we see if there really has been a "freeze" in local council tax levels in 32 different areas in Scotland.

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