IFS: Initial response to the SNP’s manifesto

• A manifesto pledging a bigger welfare state with or without independence, but which fails to properly confront the fiscal implications of its plans

David Phillips, Head of Devolved and Local Government Finance at the IFS, said:

‘In a pattern familiar by now from several other manifestos in the devolved elections, the SNP manifesto pledges additional spending – costing an estimated £1.4 billion a year by 2031–32 – without credibly saying how it would pay for this. A large proportion is from assumed efficiencies – on top of the substantial savings already assumed in existing Scottish Government spending plans. More likely in reality, paying for these plans would require further tax rises or deeper cuts to lower-priority spending.

The biggest-ticket item is a big expansion of childcare – to older children as well as the younger children that other parties' policies target, albeit on a means-tested basis. While means-tested provision would cost less than universal provision, means-testing also weakens work incentives.

Another stand-out policy is the pledge to cap the prices of the cheapest varieties of 20 – 50 essential food items in large supermarkets. Depending on how this is implemented, it could be a radical but risky policy – or a paper tiger. It is also possible that the UK government would decide it is incompatible with the Internal Market Act.   

But it is independence that is front and centre of the SNP's pitch to voters. As part of this, the manifesto highlights ‘years of austerity' that Scotland has faced as part of the UK, and the impact of Brexit on the economy and ‘the amount of money available to fund our NHS'.

Of course, independence is about more than the public finances. And there is scope for genuine debate about how independence would affect Scotland's economy, public finances and public services in the long-term. Higher growth in an independent Scotland is far easier to promise than deliver, but is a possibility, with the right policies. The manifesto suggests lower energy costs would be one potential benefit, for example.

But independence would not in itself ease the budgetary pressures faced by future Scottish Governments. Scotland currently enjoys higher public spending per person than the rest of the UK, funded largely via fiscal transfers from London and the South East of England. Those transfers would end with independence. Thus, while independence would give the Scottish Government power over more policies, if anything it would add to fiscal pressures – increasing the need for tax rises or spending cuts – at least in the short-term.'

Taxation

The SNP manifesto has very few concrete tax policies.

On income tax it says an SNP government would not add additional bands, nor increase tax rates in the coming parliament. It says it would aim to make the system ‘simpler' – which could imply reversing course and reducing the number of tax bands. This would be a good idea: it would be possible to achieve very similar distributional effects with a simpler system with fewer bands. However, cutting the number of bands would require people in some ranges of income to pay more tax, unless the SNP were willing to forgo revenue.

The SNP also pledges to ‘ensure that the majority of income taxpayers continue to pay less tax than if they lived in the rest of the UK': at present just over half of income taxpayers are expected to pay up to £40 a year less in Scotland than they would in the rest of the UK (though that is dwarfed by the thousands of pounds more that higher-income taxpayers pay in Scotland). But the manifesto leaves some wiggle-room to increase revenue: its commitment not to increase tax rates does not preclude freezing or reducing thresholds (on top of existing freezes for the higher, advanced and top rates of tax until the end of 2028–29), dragging more people into higher tax bands. From a fiscal perspective, the SNP is right to leave some flexibility on income tax – the largest source of devolved tax revenues by far.

On council tax, the manifesto restates recently announced plans for a ‘mansion tax' – two higher council tax bands on properties with a current value of £1 million or more, account for perhaps the top 0.5% of all properties in Scotland. As we have recently argued, this is no substitute for real reform of a tax that is currently based on relative property values now over 35 years old. The Scottish Government recently consulted on a revaluation and wider reform of council tax in its entirety, including additional bands and changes to tax rates to reduce the regressivity of the tax. The SNP manifesto says such reform would require ‘consensus', in line with outgoing ministers' statements and the Scottish Labour manifesto. There is no firm promise of reform here; and requiring a consensus – not just a parliamentary majority – before reform can proceed risks it never happening. After already spending 20 years saying council tax needs reform and 19 years in government, this is disappointing from the SNP.

Turning to business rates, the manifesto hints at reforms that would ‘ensure that online giants like Amazon pay their fair share and contribute to their local communities' to make the system ‘fairer'. It is not clear what that would mean. It is worth noting that the claim in the manifesto that Scotland has ‘the lowest business rates poundage in the UK' is not true. In fact, as we recently noted, the poundage in Scotland is higher than in England for properties with a rateable value (estimated annual market rental value) above about £18,000.

There is no mention at all in the manifesto of land and buildings transaction tax, arguably the tax in most need of reform and which has been made bigger and even more damaging under the SNP government.

Childcare and cost of living measures

On childcare, the manifesto pledges to offer year-round ‘affordable' childcare to all children from 9 months to the end of primary school, with the generosity of the subsidy depending on both household income and the child's age. Primary-school-aged children from better-off households could expect up to £1,400 a year in childcare subsidies, while the youngest children from poorer households would be entitled to over £11,000 in subsidies – equivalent to the cost of a full-time childcare place for the whole year. It is not clear if the subsidy would cover a percentage of childcare costs (with families picking up the rest of the tab) or fully fund families' childcare spending up to the cap (with parents paying full rates out of pocket for any additional childcare). These design choices could have big implications for expected take-up and work incentives.

Pre-school and primary-school-aged children in working families can already benefit from subsidised childcare through the UK-wide ‘tax-free childcare' scheme (covering 20% of childcare costs, up to £2,000 per child per year), or through universal credit childcare support (which covers up to 85% of childcare costs). These programmes would continue to operate and could cover any costs above those subsidised by the SNP's proposed policy. This means that, for low-income working families already receiving universal credit, the SNP's proposed policy would make relatively little difference over and above the existing funded hours and 85% subsidy rate.

Families that are out of work or otherwise do not meet eligibility criteria for these programmes stand to benefit the most, receiving large subsidies for childcare they may not have used otherwise. For this group, the SNP's proposal could well increase take-up of formal childcare – but the scope for savings in household budgets is smaller, because existing spending is lower. And if families chose to work more as a result of the policy, they would risk reducing the amount of childcare support they are entitled to – an illustration of this proposal's potential to weaken work incentives.

We have been told this policy would cost £540 million per year by the end of the parliament, which would see total state support for childcare increase by half. However, these figures assume take-up rates for children aged 9–23 months (the most expensive group to subsidise) based on take-up rates among eligible disadvantaged 2-year-olds (55% in 2025). If the SNP's offer proves more popular than forecast – as was the case for funded entitlements for under-2s in working families in England – the costs could rise by even more.

On free school meals, the manifesto includes a pledge to extend universal entitlement to all primary school pupils, regardless of family income. At present, entitlement is universal only for P1 to P5, whereas in P6 and P7 entitlement is based on family earnings and receipt of means-tested benefits. This does not appear to have been costed.

All children, like the over-60s, are already eligible for free bus travel in Scotland. But fares for adults aged 22 to 59 are currently unregulated in most of Scotland. The SNP proposes rolling out a £2 bus fare cap across Scotland – building on current local pilots – at a cost of £210 million a year by 2031–32.

Last, but certainly not least when it comes to the ‘cost of living', the manifesto also pledges to establish statutory price ceilings on 20 to 50 essential food items, in order to prevent cost-of-living pressures from harming families' nutrition. If these ceilings are set above market prices, the proposals could turn out to be toothless. But if these ceilings are below prevailing market prices, this proposal would be very radical and risky.

Unless there are specific anti-competitive reasons for elevated prices, ceilings could have the unintended consequence of creating shortages of these items, by causing demand to exceed supply. Indeed, suppliers or retailers could also deliberately restrict the availability of these items in Scotland. Products could also be reformulated to reduce production costs, which could adversely affect their quality.

Higher prices often reflect spikes in the costs faced by producers, so a price ceiling may cause some of them to stop producing. The manifesto indicates that a framework to support Scottish producers would be put in place, but it is unclear what form this would take. If it were financial support for producer when costs increased, then it would probably be more efficient for the government to redirect cash directly to households rather than to cap prices and support producers.

Public services

On health and social care, the SNP commits to spending at least £10 billion on capital investment over the next ten years. This is in fact almost certainly lower in real terms than its current Spending Review plans for the next four years, which imply average health and social care capital spending of just over £1 billion per year in cash terms between 2026–27 and 2029–30. It also commits to passing on all funding received as a result of any increases in day-to-day funding for the NHS in England to health and social care services in Scotland.

The manifesto promises to eliminate waits for elective treatment longer than 26 weeks by the end of the parliament. This would be delivered in part by growing elective capacity – as we have shown recently, Scotland's hospitals are still treating fewer elective patients than pre-pandemic, unlike in England or Wales. This would be a stretching target, not least because the Spending Review implies relatively small increases in hospital funding in order to shift more funding to community and social care. The challenge of improving NHS performance should not be underestimated.

The manifesto commits to a range of further improvements to health and social care services. These include delivering new Community Health and Care hubs, creating GP walk-in clinics, expanding mental health support, focusing more on prevention and delivering care in the community, and expanding various parts of the health and social care workforce, including guaranteed NHS employment for new graduates in frontline health-related subjects. Improving services in the ways the SNP promises would require more staff, but increases in health and social care staffing would mean deeper cuts to other public sector employment if the Scottish Government wanted to meet its workforce reduction targets.

On schools, the SNP says that it would ‘at least maintain' pupil-teacher ratios. With the number of school-aged pupils set to decline, this could allow reductions in teacher numbers while still meeting the pledge. This would free up spending for other services, but would increase the challenge some teaching graduates face in finding jobs, and require difficult decisions on schools. Squaring this with another pledge – a ‘Teacher Jobs Guarantee' for newly qualified teachers – would be tricky, though. Maintaining or increasing teacher numbers instead would allow for reductions in pupil-teacher ratios, allowing either reduced contact time or smaller classes.  Given Scotland's already small class sizes, it is not clear that further reductions would be a cost-effective way to improve standards.

The SNP manifesto says less than other parties' on reforms to teaching and assessment – perhaps unsurprisingly since the SNP is the architect of the current regime – to tackle seeming falls in performance over the last decade or so. Like most other parties it proposes a ban on mobile phones in classrooms. It also proposes reforms to provision for pupils with additional support needs, with a national model of staged interventions and thresholds for support. While this could lead to better targeted and more consistent support across Scotland, reforms to support for pupils with additional learning needs can be challenging.

Fiscal reality

The spending plans set out in this manifesto are modest compared to those set out by the Scottish Greens, but more significant than those set out by Scottish Labour. The SNP's policy costing document states that new measures would cost around £1.4 billion a year by 2031–32, with just over half of this due to expanded childcare (£540 million) and a £2 bus fare cap (£210 million).

We have been told that this would be paid for through a combination of the funding the Scottish Government is set to receive as a result of reforms to special educational needs (SEND) provision in England (£360 million a year from 2028–29 onwards) and £1 billion from some combination of higher growth boosting tax revenues, and additional efficiency savings.

These assumed savings are not on the scale of those proposed by the Scottish Conservatives. But, like the Conservatives', they would need to come on top of the already significant savings built into the Scottish Spending Review – which targets a £1 billion (20%) cut to spending on ‘corporate functions' and 3% recurrent savings each year in the NHS. And given that existing spending plans imply a cut in day-to-day NHS spending this year compared to the final budget for 2026–27, we think most, if not all, of the additional funding received as a result of SEND reforms will probably need to be channelled to the health service in Scotland, both this year and in the future.

In the context of a slowdown in UK government funding and existing tax forecasts that are more likely than not over-optimistic about the contribution of devolved income tax to the Scottish Government's budget, the SNP's plans would therefore further strain already stretched public finances. Delivering these plans would require further increases to taxes or deeper cuts to lower-priority spending than already planned – highly likely impacting at least some service users.

Scottish independence

While the manifesto has a range of proposals for Scotland within the United Kingdom, it puts Scottish independence front and centre – it is the focus of the first main chapter of the document, rather than the 27^thas in the Scottish Greens' manifesto. The SNP argues that, if it secures a majority, it would have a mandate for a referendum on independence.

As we highlight above, independence is about more than the economy and the public finances and there is scope for genuine debate about how independence would affect Scotland's economy, public finances and public services in the long term.

But in the short term at least, independence would be unlikely to improve Scotland's public finances. Indeed, more likely, it would add to the challenges. The key reason is that Scotland currently benefits from substantially higher public spending per person – driven by spending on devolved public services and the benefit system – than the UK as a whole. This is largely funded by fiscal transfers from London and the South East, in a similar manner to Wales, Northern Ireland and the north of England. This is illustrated in the latest Government Expenditure and Revenue Scotland (GERS) publication – an official Scottish Government publication with accredited statistics status. In 2024–25, spending per person for the benefit of Scotland – including a population share of UK-wide spending such as defence, overseas aid and debt interest – was 14% higher than the UK average. In contrast revenues, including a geographic share of North Sea revenues per person, were broadly the same. As a result, Scotland's notional fiscal deficit amounted to 11.6% of GDP, compared to 5.1% for the UK as a whole. It is largely borrowing by the UK government which currently funds Scotland's higher public

Independence would mean an end to such fiscal transfers. The Scottish Government would become responsible for financing its spending in full, whether through taxation or borrowing. But borrowing 11% of GDP a year would be unsustainable, meaning that further spending cuts (or at least restraint) and/or tax rises would be needed on top of existing plans to steady the finances. Moreover, while the SNP is almost certainly right that Brexit has harmed the economy and the UK's public finances , as we have discussed before, it does not necessary follow that rejoining the EU as independent nation would boost the economy, at least in the short term: Scotland trades more with the rest of the UK than with the EU, and there would be increased costs and frictions to such trade with the rest of the UK.

Independence would give the Scottish Government more powers. It is possible, though far from guaranteed, that the use of those powers could improve the economy, public finances and public services in the long term. But it would not provide an opt-out from the tough fiscal choices facing Scotland in the shorter term.