Nicola Sturgeon is flailing in response to the Budget

The big tax and spend budget. More Gordon Brown than George Osborne. Sunak's spending spree. However you wish to describe it, one thing is clear: Rishi Sunak's budget marks a radical departure from previous Conservative chancellors. And while it might have ruffled the feathers of some Tories, it’s also causing problems for the SNP.

In some ways the break from Tory convention is no surprise. Calls by the International Monetary Fund (IMF) in 2020 for rich countries to spend their way out of the pandemic – and then further calls this year to shell out to boost recovery – signalled a new economic orthodoxy that Sunak has tapped into. Austerity is passé. Fiscal activism is the new normal.

Sunak's budget raised departmental spending in this parliament by £150 billion. The government is set to spend £9 billion more on public services in 2024-25 than under pre-pandemic spending plans. In Scotland, the spending increase means a boost to the amount of cash the Scottish government receives from Westminster via the Barnett formula funding system (as does the cuts to business rates in England, which also generates positive 'consequentials' for Scotland) to the tune of £4.6 billion each year.

Economists at Scotland's Fraser of Allander Institute have modelled the impact. 'Core' (excluding Covid) day-to-day funding is set to grow 2.5 per cent in real terms over the course of the parliament, and be higher in real terms than at any point since devolution. 

This presents a new challenge for the SNP, which has had a long run of beating the populist drum to the cry of 'Tory austerity'. Can they change the discourse to be in line with the new economic reality? Judging by the Sturgeon administration's initial reaction to the budget, the answer is no.

There are multiple ways in which the Scottish government could have credibly challenged Sunak. They could have argued that the economic damage of Brexit, as outlined by the government's own Office of Budget Responsibility, has forced the chancellor to rely more on tax rises than economic growth to make his sums add up. They could have acknowledged the end of the austerity era, but pushed on whether his new fiscal rules to rein in government borrowing are too draconian, particularly when the likes of the IMF are recommending stimulus spending.

What we got instead from the SNP was odd. Scottish Finance Secretary Kate Forbes said that 'while the chancellor announced what he described as an increase in the block grant, in reality the Scottish government will receive less grant funding in every year of the spending review than it has in 2021-22, despite the continuing challenges presented by Covid'. 

Sturgeon took this line again in the Scottish parliament, adding that 'between this year and next year, Scotland's resource budget is being cut by 7.1 per cent in real terms'.

In other words, they seem to be arguing that the specific Covid-19 grants should continue. At the end of the financial year to March 2021, the UK's deficit reached a peacetime record of 14.5 per cent of GDP as Britain battled the most acute phase of the emergency. It is simply not credible to argue that short-term funding to get us through this period should turn into a long-term funding settlement. It's a bit like insisting the Attlee government after 1945 should have maintained wartime levels of spending.

Arguing to push the historically high funding levels to greater heights to pay for post-emergency recovery in a measured way while more gradually tapering borrowing? Fine. But using the emergency period as the base year by which to judge future funding levels is patently ludicrous. The obviously more reasonable base year is the one immediately before the pandemic struck. Compared with that, we find spending in 2022/23 will be up almost £8 billion.

The SNP clearly took this line to keep the Tory austerity narrative running, but for once the grievance machine misfired. A party that was more in tune with economics would have understood the bigger picture around the changing thinking globally on fiscal policy and would have been ready to engage in the new post-austerity reality. Instead, they came across as out-of-touch and bewildered.

Sunak's budget has inadvertently put a spanner in the works of the SNP. It might be a one-off, or it might signal a new trend as fatigue sets into Sturgeon's first ministership, which reaches its seven-year anniversary next month.

Either way, for the SNP's opponents – and for anyone who values rational discourse over cack-handed populism – this is a big moment.