Letter from Edinburgh 24.04.09

I found Wednesday a totally surreal day. At lunchtime, Grieg Seafood Hjaltland in Lerwick opened its new factory extension. This will produce smoked salmon and other products for supermarkets and others across the country. People will be employed in the real economy in real work. The factory expansion is a tribute to the vision of the company, the hard work of the employees and the foresight of the funding agencies which helped with the finance.

At the same time we got a Budget from a Government which has bank­rupted the country. One business­man said to me in Lerwick on Wed­nesday that banks are not lending and are increasing overdraft terms and costs – and that is banks in Lerwick, under orders from head offices in Edinburgh and London.

The banking system, now partly owned by you and I, is not working. The housing market is stagnant with many experts thinking that prices have further to fall. Shetland is not immune from these pressures.

The Chancellor, with borrowings of £175 billion, says we are going to have growth in the economy of 3.5 per cent in 2010. As all independent analysis says – what planet is he liv­ing on? The International Monetary Fund and every financial correspon­dent, other than The Daily Mirror’s, say the figures are fantasy.

All this means that everyone’s taxes will be going up and public services will be cut. What that means in Shetland will depend on the council’s ability to manage its finances which are historically much stronger than any other local authority in Scotland. The squeeze on council and health board spend­ing, to say nothing of HIE and others who invest locally, will kick in hugely over the next five years.

Politics will now be all about choices. Labour reminds me of the US Republicans. It thought it could just win last year’s presidential election by appealing to its base vote. It tried and it failed. And Labour has sought to appeal to its base by breaking a manifesto promise not to increase income tax. It now will for the highest earners.

That’s not the bit that worries me. A progressive tax system should mean that people on the highest incomes pay more. It’s the fact that everyone else will pay more too. Middle and low income families will be hit by tax rises to pay for the huge financial black hole. It won’t matter who the government is. The general election will change the government. There is, after this Budget, no doubt about that. But it won’t matter what party or parties are in power. The economic and financial inheritance is ghastly.

Labour, being an urban party, has also hammered those of us who live in island and rural Scotland. Darling re-introduced the fuel tax escalator. Oil prices will go up too. Not for some time, but the pressure will be upwards. So those of us who are dependent on the car, and the truck hauling smoked salmon from a new plant to central belt Scotland and beyond, will see costs rise.

Tavish Scott MSP


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