2026 Scottish manifesto analysis: Scottish Labour

Anas Sarwar’s Scottish Labour announced their manifesto for the Scottish Parliament election yesterday. We’ll go through the main announcements on tax, spending and public sector reform, and we’ll look at whether the level of detail matches what we would expect from a manifesto.

Tax: a cautious offer

The Labour manifesto has a far more cautious tax offering than the other manifestos we’ve seen so far. Their only concrete commitment is to reduce Land and Buildings Transaction Tax (LBTT) for first time buyers by increasing the relief threshold to £200,000 (from £175,000), saving first time buyers up to a total of £1,100. This is a targeted and relatively modest intervention that helps buyers at the margin of the existing threshold but does nothing to address the underlying affordability challenge facing the Scottish housing market.

On income tax, Labour commits to not increasing rates across the parliament. However, the manifesto makes no mention of increasing thresholds, meaning fiscal drag could remain, quietly increasing individual tax liabilities as incomes grow over the next five years without any change in rates. Given the significant boost to tax revenues from fiscal drag, this is an understandable choice for a government seeking to protect its spending envelope. But it is worth being clear that this is an active policy decision, not an oversight.

Labour does state that, contingent on delivering growth and closing the economic performance gap, it would look to reduce tax for those facing the highest marginal rates as a result of the interaction between Scottish and UK taxes. This implies raising the Scottish higher rate threshold (£43,663) towards the level in the rest of the UK (£50,270). However, it is important to note that this is an aspiration and not a firm policy commitment – more later on how likely the pre-conditions are to be met.

Labour also proposes to replace non-domestic (business) rates with a new tax raising the same revenue, with the aim of better supporting retail and hospitality in town centres. The revenue neutrality of the proposal is worth flagging: while some businesses will benefit, others will face higher bills to compensate. The manifesto provides no detail on how the new tax would be designed or which businesses would gain or lose.

Public spending

Health and Social Care

Health and social care dominates the Labour manifesto in terms of both page count and policies, but the sheer volume of proposals makes it difficult to discern where the priorities actually lie.

The headline commitment is to raise health and social care spending to at least £25 billion by 2030–31. Given the budget currently stands at around £21 billion, a £4 billion increase over five years is reasonably achievable within a growing block grant. The more important question is what that money is expected to deliver.

As part of this, Labour has committed £200 million per year to reduce waiting times and improve productivity. Part of this plan is to make use of excess capacity across Scotland, and the UK health system, in addition to purchasing capacity from the independent sector. This would be a big shift from the current care provision localised to health boards and would require significant administrative investment. Labour also proposes introducing a new funding system where health boards will only be paid for the work they carry out, similar to the ‘Payment by Results’ model in the English NHS. Labour suggests this would improve productivity and maximise capacity. However, the English experience of Payment by Results has shown a tendency to incentivise hospitals to cherry-pick lower-complexity patients to maximise income, which risks disadvantaging boards serving more deprived populations with more complex needs.

On social care, Labour commits to raising pay for social care workers to £15 per hour. This is a meaningful commitment to a chronically underpaid workforce and would make a real difference to recruitment and retention. However, social care pay is largely delivered through local authority contracts, meaning the cost would fall primarily on councils whose budgets are already under significant pressure. The manifesto does not address where the funding for this would come from, or how it would be passed through to local authorities.

Labour has also committed to 300 step-down beds and 1,000 care at home packages to tackle delayed discharge. Delayed discharge is a significant problem in the social care sector that needs addressing, but the manifesto does not clarify whether the cost of these interventions is included within the £25 billion envelope or represents additional spending on top of it.

Labour estimates that its productivity reforms will release £90 million in savings by 2030–31. This represents a little over 2% of the proposed £4 billion spending increase – a relatively modest self-funding element, and one that should be treated cautiously given the NHS’s track record of missing productivity targets in practice.

Taken together, the health commitments are ambitious and in many cases well-targeted. But the absence of any clear account of how individual policies within the £25 billion envelope are prioritised or funded makes it difficult to assess whether the package as a whole is deliverable.

Welfare and childcare

Labour commits to maintaining the Scottish Child Payment and increasing it to £40 per week for children under one. Given this policy was already announced by the SNP in the January 2026 budget, this policy represents continuity rather than new ambition. It will provide genuine support to low-income families with young babies, but it is not a new commitment.

On childcare, Labour proposes two weeks of funded holiday clubs during the summer and an increase in the value of tax-free childcare from £2,000 to £3,000 per child. Both measures will benefit working families, but like similar proposals elsewhere in this election campaign, much of the benefit is likely to flow to families who would have worked regardless and paid for childcare themselves. The reach into child poverty, particularly for children whose parents are not in work, is limited.

More notably, Labour makes no proposals on how it would address the long-term sustainability of welfare spending in Scotland – a growing pressure that any incoming government will need to confront. Labour’s approach is to maintain and modestly expand provision without engaging with the question of how it will be funded as demand continues to rise.

Education

Labour has also made a number of spending commitments on education. The largest commitment is £630 million to recruit 1,500 additional classroom teachers and 2,000 education recovery teachers. Given existing teacher recruitment and retention challenges in Scotland, the feasibility of this target deserves scrutiny – expanding the teacher workforce at this scale would require sustained pipeline investment that goes beyond the spending commitment alone.

Labour also proposes to permanently ringfence £130 million per year for Pupil Equity Funding. Making this funding permanent is a meaningful commitment to tackling the attainment gap, but the manifesto is not clear whether this represents genuinely additional money or a reallocation within the existing education budget – a distinction that matters considerably for schools currently receiving this funding.

On colleges, Labour commits to increasing funding by £120 million to deliver more apprenticeships and employability programmes. College funding has fallen significantly in real terms over the last parliament, so this is an important commitment. However, without clarity on the source of this funding it is difficult to assess how deliverable it is in practice.

The manifesto also commits to maintain free university fees for Scottish undergraduate students, while also promising to ‘protecting the sustainability of the sector’ working with universities to ‘deliver financial sustainability’. Labour does not say how they plan to achieve this. However, removing the option of charging university fees for Scottish students limits policy options for this that will not require increased government spending.

Energy, housing and transport

On energy, Labour’s offer is broadly pro-Net Zero transition. They have committed to ringfencing at least £100 million of ScotWind revenues to provide low-cost finance for communities to develop or take equity in local energy projects. This has potential to be a well-designed policy that recirculates investment and uses the funds in the way that they were originally intended. It does, of course, imply that the ScotWind funds would no longer be available for the kind of top-ups that the Scottish Government has been using in the last few years, especially given the lack of substantial revenue raisers elsewhere in this manifesto. This a better practice in terms of budgeting, but it comes at a cost of flexibility.

On housing, Labour pledges to deliver 125,000 new homes by 2031, with 30,000 in year five alone. A housing emergency has been declared across 14 of the 32 local authorities, so the ambition is well-directed. However, given the current capacity constraints in the construction sector it is not clear whether the planning reforms announced in the manifesto alone, without additional funding commitments, will be enough to deliver these houses.

On transport, Labour commits £350 million to road repairs, up to £2 billion for rail infrastructure upgrades, and £200 million to support bus franchising. These are substantial capital commitments, but the manifesto does not identify the source of this funding or clarify whether it represents additional investment or a reprioritisation of the existing capital budget. Scotland’s capital budget is already under significant pressure, and without additional funding, delivery of these projects would displace other capital commitments currently in the pipeline.

Public sector reform and efficiencies

A common theme across manifestos has been the promise of driving efficiencies through eliminating ‘quangos’ (non-departmental bodies, part of the public sector but at arm’s length), and the Labour manifesto is no exception. They promise to reduce quangos by at least a third, however, give no indication of how these quangos will be identified of what savings could be expected by their removal. They also propose to reduce the number of Cabinet Secretaries and Ministers, however, give no detail on the target number or how they will deliver this in practice.

Labour also proposes to create a Scottish Treasury tasked with setting long-term funding plans through three-yearly spending reviews. The intent – to establish a tighter grip on public spending – is understandable, but it is worth noting that the relative power of HM Treasury at UK level has been built up over decades of institutional practice and political convention. Replicating that through a structural announcement is far from straightforward, and there is considerable debate about whether concentrating fiscal power in this way produces better outcomes for public services.

Labour also proposes to pass a ‘Local Democracy Act’ which would give more powers to local councils, and give areas the right to elect regional mayors. This policy is limited in detail of the fiscal implications or timelines this would be delivered in, but it is an important point to highlight the proposed streamlining the Scottish system more closely with that currently operating in England. This is one of a few policies that is encouraging more alignment of systems with those in England, even without directly acknowledging ties to the current Labour Westminster Government.

Overall level of detail

This is a manifesto with a tremendous number of policies. It is good to see parties putting out proposals of what they want to do in office, but this feels a step before decisions have been taken. It seems implausible that all these policies could be implemented, especially within the spending envelope that the manifesto implies would be stuck to. There also don’t appear to be massive additional efficiencies claimed, which is a welcome grounding in reality – although the manifesto seemingly presupposes the current Scottish Government targets for public sector productivity being achieved, and those are already pretty challenging.

The level of detail on many of the policies is quite low, both in terms of what they actually entail and what they might cost. Public sector pay, for example, is recognised as a challenge, but all the manifesto says is that a “sustainable and coherent approach to public sector pay” will be established.

The relative adherence to the spending totals is a welcome change from the other manifestos we have seen so far. The Scottish Government’s block grant is broadly set for the majority of the coming Parliament, and apart from adjustments at the margin, there isn’t that much an incoming government could do to increase this. And the absence of any major tax cuts would also make prioritisation a less daunting task than those other parties have set themselves so far.

The economic impact claimed by this manifesto, however, seems at odds with the paucity of policy action. Page 89 (fortunately we have read that far so you don’t have to) claims that “Scottish Labour’s economic proposals have the potential to increase Scottish GDP by between 2.1%-2.4% over five years. This could close the economic performance gap and deliver between £600m-£700m more to spend on public services by 2030/31.”

It’s not clear from the manifesto, but this seems related to the Scottish Fiscal Commission’s newly renamed ‘tax base performance gap,’ which was also previously known as the economic performance gap, and which measures the difference between the Scottish Income Tax net position (the difference between revenues collected and the block grant adjustment) and what that net position would have been if Scotland’s employment and earnings had grown at the same rate as the rest of the UK.

This has become an important point of analysis for the SFC in recent forecasts, illustrating the impact of Scotland’s slower aggregate earnings and employment growth compared with the rest of the UK. The SFC also notes that there are other effects such as Scottish and UK policies, taxpayer behaviour, sectoral composition and income distribution differences – particularly the more tax-rich distribution in London and the South East of England – which contribute to this gap emerging.

While a useful explanatory device for what has happened, relying on it as a measurement and policy goal comes with difficulties. For one, the Scottish Government – and indeed any government – has limited levers to change labour market outcomes in such a grand scale, especially in the short to medium term.

The policies mentioned in the manifesto as generating a closing of this performance gap – skills and employability, planning, innovation and productivity-enhancing technological adoption – are all supply-side, long-term reforms. These can have large effects, but not over three to five years. While we would very much like to be wrong, it seems implausible that they would raise GDP by over 2% in the course of a Parliament. That’s a huge number to achieve, especially without prior additional spending to boost demand. If any tax cuts or the additional public services spending are conditional on this being achieved, as the manifesto implies, then this seems as good as pledging they won’t happen.

 

This work is supported by the Nuffield Foundation. The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds and undertakes rigorous research, encourages innovation and supports the use of sound evidence to inform social and economic policy, and improve people’s lives. The Nuffield Foundation is the founder and co-funder of the Nuffield Council on Bioethics, the Ada Lovelace Institute and the Nuffield Family Justice Observatory. Find out more at: nuffieldfoundation.org.

The views expressed are those of the authors and not necessarily those of the Foundation.