FM calls for modernisation of budget process
Following Scottish example could open up system and lead to better decisions.
First Minister Nicola Sturgeon has called for a modernisation of the UK budgetary process, with reforms that learn from the Scottish system, to make the process more transparent and open and improve decision making by governments.
In a major speech at the London School of Economics ahead of the Chancellor’s final budget of this UK parliament, the First Minister said a better process – where parties had time to scrutinise the budget before it is passed and negotiate improvements - would see politicians focus on the long-term impact of their decisions and be more honest about the results of spending choices.
The First Minister pointed to the process in Scotland, highlighting the increased scrutiny of the budget bill and the consultation required to set out the budget for the year ahead.
Ms Sturgeon said the Scottish system, which made coalition governments or minority administrations more likely, improved budgetary decision making as ministers sought to build consensus and compromise over spending priorities, increasing debate on complex issues and ensuring the budget’s impact was fully thought through.
In her speech the First Minister highlighted recent UK budget decisions that could have been improved through greater consultation:
- Budget day tax rises on oil and gas that “damage the confidence of the industry and harm our long term interests”, as she called for a rethink on the supplementary charge.
- The problems facing defence spending as a result of the “financially unjustifiable” decisions to continue with Trident nuclear weapons.
- The simplistic approach to taxation that often leaves those on the lowest incomes receiving the least benefit.
She also called for a significant increase in the Universal Credit (UC) work allowance to help those on the lowest incomes - pointing out that while a £600 increase in the personal tax allowance will benefit someone receiving UC and paying tax to the tune of £42, a similar increase in the work allowance would deliver a benefit of £390.
Speaking at the LSE, the First Minister said:
“The process UK governments follow now allows virtually no time for proper deliberation or consultation. That problem is made worse by the way in which successive governments have approached the budget. Chancellors take pride in pulling rabbits out of the hat. Surprises are seen as a virtue. They help to create headlines and wrong-foot the opposition.
"It’s much more difficult for that to happen in Scotland. The Scottish Government has to publish a detailed draft budget each September, four months before the budget bill is laid before Parliament.
“Indeed, I want to reflect on a particular aspect of the Scottish process which might be of particular interest just now, given the possibility of minority government following the election. I was the deputy leader of a minority Government for four years, until 2011.
“There are some advantages to minority government. When we were in a minority, we could only win votes by winning arguments. Sometimes we had to compromise. That process can - and often did - lead to better budgets. At different times we won support from Labour on increasing apprenticeships; from the Greens on a home insulation scheme; from the Conservatives on regenerating town centres; and from the Liberal Democrats on college bursaries. It involved a process of building consensus across a whole parliament – not just forcing decisions through using the party whip.
“And the point is this - the Scottish system lends itself to that, because there is time for negotiation to take place and Parliament can see and scrutinise the compromises which are made between the Draft Budget and the Budget Bill.
“Doing anything similar at Westminster would require substantial changes to how budgets are put together – most importantly, perhaps, it would require a different, far more consensual approach. I think that would be very beneficial and, who knows, it could be one of the benefits of a period of minority government following the General Election.”
The First Minister highlighted decisions taken to freeze the work allowance as an example of a policy that hadn’t been fully considered in terms of equality impact. She called on the Chancellor to implement an increase in the allowance to help those on lower incomes.
Ms Sturgeon continued:
“The lack of meaningful consultation on budgets contributes to another problem – the fact that the culture of the UK Parliament often limits debate on genuinely complex issues.
“Any serious attempt to tackle inequality has to focus hard on in-work poverty. For those of us with well-paying jobs the work allowance is something we may be unfamiliar with. But for anyone who relies on employment support or housing benefit or is entitled to the new Universal Credit it is more important than the tax rates we all pay so much attention too.
“The work allowance determines when people entering work start to have their benefits reduced. It’s often set at a very low level. For a lone parent with housing costs, for example, it’s currently just over £3,000 a year. After that point, benefits start to be withdrawn. For people on universal credit, £65 of benefit is lost for every £100 of post-allowance salary.
“Now, of course, there needs to be some sort of deduction rate, or tapering system, in order to make work pay while also keeping the benefits bill manageable. There are some really difficult trade-offs in all of this. But that complexity is part of the problem, and perhaps part of the reason that it's easier for Chancellors to ignore it and concentrate on simpler measures instead - even if they are less effective.
“That’s why the current UK Government policy of freezing work allowances is so misguided. It effectively cuts the benefits of workers on low incomes.
“So the Scottish Government is calling for a significant increase in the work allowance to help ensure that those in work have a better chance of lifting themselves and their families out of poverty.”
Notes To Editors
The text of the First Minister’s speech will be put online here -http://news.scotland.gov.uk/content/default.aspx?NewsAreaId=139
For more information about the work of the First Minister visit www.firstminister.gov.scot
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