Tax and spending in the Scottish parties’ 2021 manifestos

This article compares the main parties’ manifesto commitments on taxation and the most significant areas of public spending: health and social care; early years and education; local government; social security; and policing and justice. The full article follows the summary.

Summary

Tax 

  • All five parties commit to freeze income tax rates and thresholds, retaining the existing tax differential between Scotland and rUK (the Conservatives aspiration to return income tax to parity with rUK seems unlikely to be realised based on the stated conditions for it to be realised).
  • Neither the SNP nor Conservatives make any firm commitments on council tax reform, beyond the SNP objective to establish a citizens assembly to consider the issue further. The other parties want to replace council tax with a tax on property value (Labour and Greens) or land value (LibDems).
  • The Conservatives, Labour and LibDems each want to reduce, to varying degrees, the burden of business rates on high street and town centre retailers, but none have costed their proposals.
  • There appears little appetite to use current tax levers to vary the budget materially up or down. Labour and the Greens have proposed new taxes, but the proposals are all likely to prove extremely challenging to implement.

Health and social care

  • Only the SNP and Conservatives make funding commitments in relation to overall health spending. In practice, these parties’ proposals amount to the same – a commitment to ‘pass on’ health related Barnett consequentials to the NHS in Scotland.
  • Whilst the manifestos differ slightly in their specific commitments, there are many broad commonalities across the manifestos in relation to the priorities for health: addressing covid-related treatment backlogs, a significant emphasis on both public health and mental health, a push-back against a perceived centralisation of service delivery, and effusive discussion about the need for ‘fair’ pay awards.
  • In terms of social care, all parties support in general the findings of the Feeley Review, notably around commitments to improve pay and conditions for employees in social care. There is more divergence on the Feeley Review’s recommendation to establish a National Care Service to oversee consistency, set standards, and ensure integration with the NHS. The SNP and Labour support the establishment of a National Care Service. But the Conservatives and Liberal Democrats have concerns about centralisation and do not support the proposal.
  • Both the Liberal Democrats and SNP propose to scrap charges for care services delivered at home, a recommendation of the Feeley Review with a £50m price tag. Only the SNP manifesto appears to contain a specific funding commitment in relation to social care – an £800m cash increase by the end of parliament – amounting to a 2.5% real terms per annum increase.

Childcare and education

  • All parties support the current rollout of 1,140 hours of funded childcare to all 3- and 4-years-olds. But the parties have divergent views on whether, and to what extent, funded childcare should be extended to other age groups or for more hours. The SNP and Conservatives also have plans to expand wraparound childcare for younger school age children (means tested under SNP plans, universal under Conservative plans).
  • On school age education the main parties make expansive commitments on hiring additional teachers. All parties emphasise policies to narrow the attainment gap, with both the SNP and Conservatives pledging a £1bn fund (£200m per year) over the course of the parliament. All five parties commit to extending free school meals provision to all primary pupils, all year round.
  • The manifestos generally lack specific funding commitments on universities or colleges. All parties are united in their commitment not to introduce tuition fees for university tuition.

Social security

  • All five parties propose to double the Scottish Child Payment from £10 to £20 per week over the course of the next parliament. This unanimity on a policy which has only just begun rollout is in some ways remarkable. It will double the cost of the existing SCP commitment, taking it to £360m by 2026/27.
  • Most parties also support an increase in the rate of Carer’s Allowance and its planned replacement in Scotland, Carer’s Assistance. Beyond this, the manifestos are surprisingly ‘lite’ in relation to the some of the other disability related benefits that are being transferred to the Scottish Parliament.
  • The Greens, SNP and Labour propose some form of ‘minimum income guarantee’, although details are vague at this stage, and whether these are aspirations or firm commitments is not always clear.

Local government

  • The four current opposition parties each make commitments to strengthen the funding and autonomy of local government. The proposals range from bold sounding but fairly vague pledges of Labour and the LibDems to the more specific, but more modest, proposals from the Conservatives (whose proposed local government funding rule will likely prove either unhelpful or unsustainable). The SNP manifesto says very little on local government, while it awaits the findings of the ongoing Local Governance Review.

Policing and justice

  • Policing and justice are not areas in which parties ‘flagship’ policies are found. In funding terms, only the SNP appears to have a specific commitment, which is to at least maintain the police budget in real terms – a commitment rolled over from the 2016-21 parliament.
  • A common thread across all non-SNP manifestos is an ambition to place renewed emphasis on local accountability, ranging from a ‘statutory role for local government’ (Labour) to ‘more community input’ (Conservatives).

Affordability

  • All manifestos provide limited and ad hoc detail on costings, apart from the Conservatives who provide detailed, but not completely comprehensive, costing information. On the basis of the current projected outlook for the Scottish budget, it seems likely that all manifestos imply the need for budget cuts to some areas of nonprotected spend. No manifesto has given an indication of areas where spending might fall.

Concluding points

  • There is more similarity across the manifestos that you might expect on the broad direction of travel and priorities for tax and spending in the next parliament.
  • In health, social care, education and social security, the parties largely share views on what the big priorities for policy are. Differences are more in the detail (which is not to say they are insignificant) – the scale of ambition and associated funding, priority groups and timescales for rollout, delivery responsibilities.
  • One particular question on which the parties have divergent views is on the role of national and local level organisations to plan, oversee or deliver policy. The autonomy of local government, the need for additional healthcare delivery in the community, and the merits of a national care service are examples of where the parties have divergent views in this regard.
  • No party proposes to use tax to vary the budget materially up or down. There are some differences between the parties on priorities for smaller taxes, but these differences are small in the scheme of things. Council tax reform looks unlikely to happen with urgency, unless parliamentary dynamics put the Greens, Liberal Democrats or Labour in a position to leverage meaningful change.
  • There is more divergence between the parties in relation to their more aspirational objectives. The Conservatives have a longer term ambition to return Scottish income tax rates to parity with rUK; Labour seek an unprecedented rollout of funded childcare; all parties bar the Conservatives have an aspiration to establish a universal basic income. These more aspirational objectives may have salience with voters, but they are aspirations rather than commitments.

Full article

Introduction

At a high level, the parties’ manifestos appear to have a great deal in common. They all frame their manifestos around the process of recovery from the pandemic. And as part of this they each stress, to a greater or lesser extent: health and caring; the economy and jobs; education; and the environment.

But beneath this high level framing, what are the parties’ specific views on the priorities for public services spending and taxation in the next parliament? To what extent is there consensus on the key issues, and where are the major areas of disagreement?

This article compares the manifesto commitments on taxation and the most significant areas of public spending: health and social care; early years and education; local government; social security; and policing and justice. The areas account for around £30bn of resource spending.

It focuses on the manifesto plans of the five parties represented in the 2016-21 session of parliament: Conservatives, Greens, Labour, Liberal Democrats and the SNP. It also considers the ‘affordability’ of the commitments made.

The article does not attempt to cover all aspects of policy covered by the manifestos. It focuses on plans for day-to-day resource spending, not infrastructure spending. And it does not cover two policy areas that are given prominence by all parties: climate change and the environment; and the economic and jobs recovery. We will return to these important issues in subsequent analysis.

 

Tax

All five main parties propose to keep income tax thresholds and rates frozen. The effect of this on taxpayers is to increase the tax burden over time. But the impact on the budget is neutral, as a freeze in thresholds in Scotland mirrors the proposed freeze in rUK. All Scottish parties are therefore committed to retain the existing tax differential between Scotland and rUK.

The Conservatives do have an aspiration to return Scottish income tax policy to parity with the rest of the UK; but this seems likely to remain an aspiration. It is an aspiration that is uncosted in their manifesto (it would cost around £450m per annum), and their stated condition for cutting Scottish income tax – when ‘tax revenue outstrips public spending demands’ is unlikely to be realised under most interpretation of public spending ‘demands’.

Labour says that if there is a need to raise additional revenue during the parliament, it would seek to generate these from taxpayers with incomes exceeding £100,000 – approximately the top earning 70,000 of Scottish income taxpayers.

Neither the SNP nor Conservatives support unequivocally the need for a council tax revaluation, nor propose any alternative to the tax.  The SNP punt the issue into the future by establishing a citizens assembly to consider the issues, whilst the Conservatives propose to do nothing.  The issues with council tax have been examined many times: it is a tax system based on 30-year old valuations, and the tax is regressive with respect to property value (and income).

Labour and the Greens propose to replace council tax with a tax based on property value (with discounts for those on lower incomes). The LibDems are in favour of council tax reform, but are somewhat noncommittal around specifics of what should come next – ‘maybe this time’ is how they summarise their position.

Four of the five parties propose no major change on Land and Buildings Transactions Tax. The Conservatives however propose cuts to residential and non-residential LBTT which would take smaller properties out of tax altogether, and reduce the divergence between Scotland and England for higher value properties, at a cost of around £65 million per annum. The rationale for the tax cut is to broaden opportunities for home ownership, but since the tax is capitalised into house prices, a tax cut is unlikely to achieve this (tax cuts are most likely to boost house prices, benefitting current owners).

On business rates, most parties articulate concerns about the way the tax might disadvantage town centre retailers relative to online specialists. The Conservatives say that they would ‘support local authorities to exempt high street and town centres from business rates’ and implement a ‘wholesale’ review of the tax. Labour would reduce the tax for non-grocery high street shops, increase the amount paid by retail warehouses, and set up a taskforce to review the tax. The LibDems would also ‘take the burden off high street retailers’ and introduce a land tax. None of these three parties presents costings of these proposals.

Whilst there is little divergence between the parties on the existing devolved taxes, there remains scope for disagreement around Air Departure Tax once that becomes operational, with the Conservatives favouring parity with rUK, the SNP interested in ‘the possibility of levying a higher tax on more polluting aircraft’ and the Greens and the Liberal Democrats proposing an ‘international frequent flyer levy’ that would tax passengers in proportion to the number of trips they take per year.

The Greens are the only party to propose ‘new’ taxes. These include a windfall tax on ‘extraordinary profits enjoyed by larger companies as a result of the pandemic’ and a 1% wealth tax on wealth and assets above a £1m threshold. Both of these proposals would be challenging to implement practically. The issues in relation to wealth tax – which include how valuations would be made, how the tax would be collected, and how to treat wealth held in trusts or similar vehicles – were explored by the Wealth Tax Commission last year.

 

Health and social care

Health and social care in combination accounts for around half of total Scottish Government resource spending. This, together with an ageing population and the fallout from the pandemic means it is no surprise that this a key priority for all parties.

There are many similarities across the manifestos in relation to the priorities for health: addressing covid-related treatment backlogs, and a significant emphasis on public health and mental health.

Some of the parties compete on pledges for the proportion of the health budget allocated to mental health services – The Conservatives and SNP pledge 10%, Labour pledges 11%, the LibDems want 15% of new health spending directed to mental health services. It is debateable whether these sorts of pledges are sensible, when the ultimate size of the health budget is uncertain.

Only the SNP and Conservatives make funding commitments in relation to overall health spending. Both parties propose ‘minimum’ levels of spending increases for the NHS (a ‘double lock’ for the Conservatives and a £2.5bn cash uplift for the SNP). But both also commit to ‘pass on’ health-related consequentials to the NHS in Scotland. In both cases, the minimum proposed funding increases, whilst sounding large (£2.5bn by 2026/27 for the SNP and £2bn by 2025/26 for the Conservatives), equate to real terms increases of just over 2% per annum, and will almost certainly be surpassed by the Barnett consequentials from the UK Government. In practice therefore, the two parties’ funding commitments on health are likely to amount to the same thing – to pass on health related consequentials to the NHS in Scotland.

A common theme across all manifestos is a push-back against a perceived centralisation of service delivery. For the SNP this means more funding in community based GP and primary care services. For the Conservatives this means a Local Healthcare Guarantee to restore a presumption against centralisation and protect local services. For the LibDems this means a ‘bigger range of specialists, diagnosis and treatment in local communities’. These aspirations are broadly in line with the Scottish Government’s ‘Re-mobilise, Recover, Re-design Framework’ published in May 2020.

All manifestos also talk effusively about pay awards in the NHS, but there is variation across manifestos in terms of the level of detail behind the words.

One headline grabbing policy that does appear unique to the SNP is the commitment to abolish NHS dentistry charges. The policy is not costed, which makes it hard to evaluate – but it would not benefit the lowest income households, who are already exempt from charges.

In terms of social care, all parties support in general the findings of the Feeley Review. Notably, all parties commit to improving pay and conditions among social care staff. Establishment of national pay bargaining for the sector is supported by the LibDems, SNP and Labour. The SNP propose a National Wage for care staff, whilst Labour and the Greens support moves towards a £15 per hour wage in the sector by the end of parliament – which would clearly require additional funding support. The Feeley Review estimated that every pound beyond the Real Living Wage (£9.50) will increase the national social care support wage bill by about £100m per annum.

However, where there is more divergence is on the Feeley Review’s recommendation that there should be a National Care Service to oversee consistency, drive improvements, set standards, and ensure integration with the NHS. The SNP and Labour support the establishment of a National Care Service (the Greens support a ‘publicly owned’ national care service). But the Conservatives and Liberal Democrats have concerns about centralisation and do not support the proposal.

Both the Liberal Democrats and SNP propose to scrap charges for care services delivered at home. This policy extends the type of care services beyond those required to stay healthy to those that support people to remain living in their own home. This includes things that help people keep on top of day to day tasks like shopping, laundry and paying bills. The policy follows a recommendation of the Feeley Review, estimated to cost £50m per annum.

Only the SNP manifesto appears to contain a specific funding commitment in relation to social care – an £800m cash increase by the end of parliament. This amounts to around a 2.6% real terms increase per annum. This seems likely to fall short of the Feeley Review’s overall recommendation on funding.

 

Childcare and education

All Scottish parties support the current policy to provide 1,140 hours of funded childcare to all 3- and 4-years-olds. But they have divergent views around the extent to which that provision should be expanded:

  • The Conservatives and Greens make no firm commitments beyond ensuring that rollout of the existing policy is completed by August 2021.
  • The SNP commit to expand free early years education to all 1 and 2 year olds, but only to the lowest income families in the next parliament.
  • The Liberal Democrats commit to increase the current 1140 hours entitlement to cover all two-year olds in the next parliament, with an aspiration to extend further to one year olds (not a firm commitment).
  • Labour has an ‘eventual ambition’ to provide 50 hours per week to all children. This would more than double the existing provision, and expand eligibility to 1 and 2 year olds. But no information is provided on timescales, and no firm commitment is made.

The parties also support the expansion of ‘wraparound’ childcare for younger school age children. The SNP proposes that this support will be means tested (i.e. fully funded only for lower income families). The Conservatives would introduce free, non means tested wraparound childcare for children in Primary 1-3, equivalent to five hours a week (costed at £160m per year on rollout).

On school age education, there is the inevitable competition on teacher numbers. The Conservatives commit to 3,000 new teachers, the SNP 3,500 and Labour 3,000 + 1,000 additional support staff. Policy on the curriculum will be informed by the ongoing OECD review of Curriculum for Excellence, according to most manifestos.

The aim to close the attainment gap is a priority, with both SNP and Conservatives pledging £1bn over the course of the parliament to tackle the attainment gap, allocated direct to schools (compared to the £750m fund allocated in the previous parliament). There is a cross-party emphasis on reducing barriers to education through action on activities like school trips (Greens and Labour).

All five parties commit to providing free school meals for all primary pupils, all year round. In the SNP, Labour and Conservative cases, this includes breakfast as well as lunch, whilst the Greens would expand universal free school meals to secondary schools too.

The manifestos generally lack specific funding commitments on universities or colleges. But one thing we do know with certainty is that tuition fees will remain completely off the agenda in the next parliament, regardless of what happens in other parts of the UK – all parties are united in their commitment to continue to fund the costs of university tuition.

 

Social security

All five parties currently represented in the Scottish Parliament propose to double the Scottish Child Payment from £10 to £20 per week over the course of the next parliament. The SCP is a supplement paid to low income families with children, and will help towards (but not in itself be enough to achieve) the Scottish Parliament’s targets for reducing child poverty.

The fact that all parties have proposed an identical measure (all exactly doubling, no more, no less) is remarkable, but reflects the high effectiveness of the policy in addressing an issue that is salient to the electorate. The policy to double the rate will cost around £180 million, bringing the total cost of the SCP by the end of the next parliament to upwards of £360 million per annum.

Most parties also support an increase in the rate of Carer’s Allowance and its planned replacement in Scotland, Carer’s Assistance. The detail of that is covered in a briefing by my colleague Emma Congreve.

Beyond this, the manifestos are surprisingly ‘lite’ in relation to the some of the other disability related benefits that are being transferred to the Scottish Parliament. The payments being transferred include the Personal Independence Payment (PIP) and Attendance Allowance, and are received by over half a million adults in Scotland.

Labour, the SNP and Greens commit to exploring the scope for some form of minimum income guarantee, although at this stage there is little detail on what this will involve in practice – Emma Congreve’s article examines this further.

Local government

One area where there is more divergence between the parties is on the question of how the design and delivery of various public services should be shared, or allocated, at local or national levels. As noted above, the Conservatives and LibDems are both opposed to the idea, supported by the SNP and Labour, for a new national care service. But the parties also differ in their vision for the roles and responsibilities of local government more generally.

All four of the current opposition parties propose to enhance the accountability and responsibility of local government.

The LibDems make a big play of local government, arguing that ‘the SNP have centralised the life out of Scotland’. They propose to devolve powers over council tax and business rates, and give more local control over ‘economic development, education, the police, transport planning and health services’, although detail is lacking.

Labour places significant emphasis on devolving powers to local government and subsidiarity – making sure that decisions are taken as close as possible to the people they affect. It promises reform of funding for local authorities and a complete review of taxes levied by local government, although again, specificity is somewhat lacking.

The Scottish Greens promise a ‘new era’ for local government, including a commitment to above inflation funding increases, multi-year funding settlements, an end to ring-fencing of budgets, and tax devolution.

The Conservatives have also pitched themselves as a party of local government. The centrepiece of this claim is a ‘new financial framework that ensures councils automatically receive a set percentage of the Scottish Government budget each year’. This might be well meaning but it is poorly thought through. It won’t necessarily help councils if additional responsibilities are transferred to them, but they still get a set percentage of the government’s budget.

More importantly, as the IFS as pointed out, the rule is inherently unsustainable given how it interacts with other commitments. If the Scottish Government receives additional Barnett consequentials for health, the Conservatives have committed to pass those on to the NHS in Scotland. But their proposed local government rule would require them to increase funding to local government too, to maintain its ‘share’. Effectively, the consequentials are double-committed.

Beyond this, the Conservatives plans to support local government autonomy include some limited powers on tax (the ability to set their own LBTT discount schemes, this sounds like an ability to cut but not increase the nationally set tax), although the commitment also reiterates the Conservatives opposition to the proposed local ‘tourist tax’.

The story then is of all four current opposition parties making commitments to strengthen the funding and autonomy of local government. The proposals range from the fairly vague pledges of labour and the LibDems to the more specific, but comparatively modest, proposals from the Conservatives. The SNP manifesto says relatively little on local government, while it awaits the findings of the ongoing Local Governance Review.

 

Policing and justice

Policing and justice are not areas in which parties’ ‘flagship’ policies are found. In funding terms, only the SNP appears to have a specific commitment, which is to at least maintain the police budget in real terms – a commitment rolled over from the 2016-21 parliament.

A common thread across all non-SNP manifestos is an ambition to place renewed emphasis on local accountability, ranging from a ‘statutory role for local government’ (Labour) to ‘more community input’ (Conservatives).

 

Are the commitments affordable?

This is always a hotly contested question. Whether commitments are affordable depends on the outlook for the budget and the cost of commitments.

In the absence of any decision to raise or cut devolved revenues through taxation (which is what all parties are proposing), the outlook for the Scottish budget is largely determined by the block grant from Westminster.

The UK Government hasn’t set out specific departmental spending allocations beyond the current financial year, 2021/22. But its broad spending plans imply that the block grant will increase by around two per cent per annum over the period to 2025/26. This is consistent with the central assumption made in the Scottish Government’s Medium Term Financial Strategy published in January.

In cash terms, this means that the resource budget will be around £6.5bn, or 20%, higher by the final budget of the next session in 2026/27 than it was in 2021/22. In real terms the core resource budget will be around £2.8bn higher.

So that’s the outlook for the budget, but what about the cost of policies? The Conservatives can be commended for providing a costing document alongside the manifesto that costs most (but not all) commitments. The other parties’ manifestos provide costing details on a more ad hoc basis (and hardly at all in some cases).

Broadly speaking, the Conservatives costed commitments eat up slightly more that the projected real terms increase in the budget. The commitments therefore imply some public services might be on the receiving end of budget cuts – although which ones is unknown.

For the other parties, it is difficult to ascertain what the commitments made might imply for noncommitted areas of spending. But it seems safe to assume that most manifestos imply budget cuts for some unprotected areas – unless the block grant increases by more than currently projected.

This is not in itself a criticism – society’s spending needs evolve over time, they don’t just need to grow. But no manifesto has given an indication of areas where spending is planned to fall.

 

Concluding points

There is more similarity across the manifestos that you might expect on the broad direction of travel and priorities for tax and spending in the next parliament.

In health, social care, education and social security, the parties largely share views on what the big priorities for policy are. Differences are more in the detail – the scale of ambition and associated funding, priority groups and timescales for rollout, delivery responsibilities.

One particular question on which the parties have divergent views is on the role of national and local level organisations to plan, oversee or deliver policy. The autonomy of local government, the need for additional healthcare delivery in the community, and the merits of a national care service are examples of where the parties have divergent views in this regard.

No party proposes to use tax to vary the budget materially up or down. There are some differences between the parties on priorities for smaller taxes, but these differences are small in the scheme of things. Council tax reform looks unlikely to happen with urgency, unless parliamentary dynamics put the Greens, Liberal Democrats or Labour in a position to leverage meaningful change.

There is more divergence between the parties in relation to their more aspirational objectives. The Conservatives have a longer term ambition to return Scottish income tax rates to parity with rUK; Labour seek an unprecedented rollout of funded childcare; all parties bar the Conservatives have an aspiration to establish a universal basic income. These more aspirational objectives may have salience with voters, but they are aspirations rather than commitments.

Authors

David leads the FAI's work on fiscal policy and the Scottish budget.

 

 

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