SCOTLAND’S Finance Secretary, Derek Mackay, will on Wednesday deliver his latest Budget statement at Holyrood. Sadly, this important event is likely to be overshadowed by whatever happens at Westminster the day before.

While Unionist politicians continue to offer gratuitous advice to the SNP Government about sticking to the day job, it is those Unionist politicians’ gross incompetence regarding Brexit that is diverting attention from the serious task of building Scotland’s economic future. Fortunately, I think we can rely on Derek to focus on the job at hand.

The main Scottish Budget event will come in the new year, setting taxes and spending for 2019/20. Derek’s immediate task is to lay out a fiscal framework and seek support from the other Holyrood parties, the Greens in particular. The Finance Secretary has already committed to protecting “vital public services” which means maintaining real spending on health and education. Green co-convenor Patrick Harvie is “ready to talk” but wants the Scottish Government to commit to wider reform of local taxation, which could include a land tax. Patrick, to his credit, recognises such reform will take a while, but he needs a down payment (of which more below).

Meanwhile, Scottish Labour – in their mendacious and opportunist attempt to portray the SNP Government as pro-austerity – are punting a £5-a-week rise in child benefit, partly funded by freezing tax thresholds. But Labour shadow chancellor John McDonnell is the very man who has just accepted the latest Tory UK Budget which … er, raises tax thresholds. Query to Richard Leonard: Is John McDonnell now pro-austerity?

One way or the other, tax thresholds will loom large on Wednesday. In his October Budget, Chancellor Philip Hammond increase the rUK higher rate threshold on incomes to £50,000, as a pre-Brexit bribe to English middle-class voters. North of the Border, the higher rate threshold stands at £43,340, with Scots-based taxpayers paying 41p in the pound as opposed to England’s 40p. If Derek Mackay keeps the Scottish higher rate as it is, anyone earning £50,000 here would contribute £1560 more than in England to funding public services. What will he do?

Enter the Scottish Tories who are happily punting their Tartan version of neo-liberalism. Conservative finance spokesman Murdo Fraser promises to “invest in public services” yet still cut taxes. But Murdo was never good at logic. Neo-liberalism wants to shrink the state and privatise it for profit. Scots Tories are too sleekit to come out with that in public, so they spout fiscal nonsense as in the case of Mr Fraser. I urge Derek Mackay to tell Scotland the truth: if you want decent schools and hospitals, you will have to pay for them.

Derek may tweak tax thresholds a bit (but not as much as in England) to minimise public reaction. After all, there are much-needed doctors and senior teachers in Scotland earning circa £50k. And he could also offset that by upping the take from the very top (“additional”) payers earning £150k plus.

But I would advise him not to follow the Labour shadow chancellor by cravenly capitulating to Philip Hammond’s naked tax bribery aimed at securing middle-class votes for Theresa May’s incoherent Brexit scheme.

However, the tough tax nut for Derek Mackay to crack is that Scotland’s tax base is very narrow – thanks to Gordon Brown’s de-industrialisation programme and later Tory austerity – which means we have few top-rate payers. Mackay already raised their tax rate to £46p in his last Budget, harvesting a fiscal bonus of circa £164m per annum. Handy cash and there could be a little more to squeeze if he raises the top rate to 50p as Scottish Labour has argued.

However, the more you squeeze the top-rate payers, the more likely they are to seek tax avoidance measures, including switching from salaries to investment income over which the Scottish Government has no financial powers.

And remember: it was Labour who opposed devolving powers over income tax and who then opposed extending those powers to cover income from investments. If Richard Leonard is serious about devolving more powers to Scotland, he can start right there.

Taxing incomes in Scotland in the current situation has limited scope. The only effective solution is to widen the fiscal base to tax wealth rather than incomes (which can be hidden). Scotland is one of the richest nations on earth, per capita. And a lot of this wealth is in the ground under your feet. Just 432 individuals and organisations own more than half of Scotland’s non-public land. Which suggests some form of land tax makes sense, especially as Scotland’s large geographical area relative to population size results in higher infrastructure costs compared to the UK average. I don’t expect Derek to introduce a land tax on Wednesday. But he should endorse the principle, have it voted on in the Budget, and then set up the necessary government machinery.

Eventually such a device could replace domestic council tax and some elements of business rates. A comprehensive reform package would go a long way to reviving the hard-pressed Scottish high street. But above all, taxing wealth effectively will give any Scottish Government the tools to shift spending from consumption to investment, in order to keep the economy competitive.

And what is the state of the Scottish economy? Better than one might expect given Brexit blues. The latest GDP numbers show the Scottish economy grew by an above- trend 1.7 % in the year to June, compared to 1.3% for the UK. According to the most recent Fraser of Allander business survey (covering the third quarter of 2018), there is “an improving picture with an uplift in optimism”.

On the pessimistic side, Scottish economic growth since 2010 averaged only 1.1% per annum, half the UK growth level. But much of the recent weakness in the Scottish economy was due to the sharp fall in oil prices in 2014, followed by a massive contraction of investment in the North Sea, and the Scottish oil and gas sector has enjoyed a remarkable improvement in productivity since then, resulting in a revival of investment. Witness the coming on stream last month of oil from BP’s Claire Ridge development.

So while the economy still has issues – investment is soft because of Brexit uncertainties – Derek Mackay has room for manoeuvre. He can plan for the long term rather than fight economic fires. What should he do? For starters, Scotland needs to boost investment in plant, machinery and infrastructure – because that grows productivity.

The priority here is to get the new, state-owned Scottish National Investment Bank properly funded and running by 2020. Memo to Derek Mackay: appoint entrepreneurial risk-takers to run the new bank or it will fail.

In his dash to bribe the voters last October, Chancellor Hammond loosened some of the Treasury purse strings. As a result, Scotland gets an extra £1 billion through the Barnett consequentials. That extra cash gives Derek Mackay a bit of leeway in this Budget.

One suggestion: make a gesture. Pay Scotland’s teachers the 10% they are asking for – they’ve lost one-fifth of their earning power over the past decade. Show that an independent Scotland will crush austerity and educate for a bright future.