Lack of credibility unites manifesto offering of three biggest Scottish parties

IFS researchers will be presenting a summary of their Scottish election analysis at 10am today at an online event in collaboration with the University of Glasgow and funded by the Scottish Policy Foundation. This press release highlights their key conclusions.

David Phillips, an Associate Director at the IFS and one of the presenters at the online event said:

“There is some consensus between the SNP, Scottish Conservatives and Scottish Labour in the manifestos they have presented. All aim for an expanded welfare state including doubling the Scottish child payment, universal free school meals for primary-school children, increases in carer’s allowance, and expansions of free childcare. Investment priorities are also similar, including a focus on social housing and energy efficiency, albeit with different scales of ambition – and different price tags.

Overall visions are quite different, though. The SNP and Scottish Labour envisage what they might think of as a Scandinavian-style future – with a smorgasbord of new entitlements for Scottish residents. In contrast, the Scottish Conservatives’ public services and benefits offer, while an increase on what is there today, is less expansive with an aim instead of modestly reducing tax.

Another thing these manifestos have in common is, unfortunately, a disconnect from the fiscal reality the next Scottish Government is likely to face. Rising demand for, and costs of, health and social care could easily absorb three-quarters of the projected cash increase in the Scottish Government’s budget over the next few years, substantially more than the SNP and Conservatives have budgeted for. Scottish Labour have not even set out NHS spending plans beyond this year but it is hard to imagine them spending less given their plans for a £15-an-hour minimum wage for care workers by the end of the parliament. Paying for the billions in additional pledges in these manifestos would therefore mean either increases in Scottish taxes or cuts to some other areas of spending, unless substantially more UK government funding is forthcoming.

It is also disappointing that, with the exception of the Scottish Conservatives, there is no serious attempt by the parties to provide transparent and comprehensive costings for their plans. And the Conservatives’ document underestimates the true cost of their flagship policy – the NHS ‘double lock’ – by at least £600 million, or more than a quarter.

If the hope was that fiscal devolution would improve the financial accountability of Scottish politics, the evidence of this election is that it a hope that has not yet been fulfilled.”

Different visions building on a distinctive Scottish approach

All three manifestos reflect a degree of consensus on what might be termed a Scottish model of the welfare state. This is, and would continue to be, paid for largely by the transfer of cash from the rest of the UK which allows funding for devolved services to be around 30% higher per person than what is spent on comparable services in England. This model involves the provision of a wide range of universal services, free to all, with the latest offerings adding to a list that already includes free university tuition, free personal care, and free prescriptions. In contrast, on the benefit side the focus is on targeting those with low incomes – notably families with children, carers, and social housing tenants – with top-ups to UK-wide benefits.

Nevertheless, the three largest Scottish parties – the SNP, Scottish Conservatives, and Scottish Labour – set out different visions for the long-term future of Scotland, and not only on the question of independence.

The SNP and Scottish Labour envisage a substantial expansion of the welfare state. This includes:

• A national Care Service and free non-residential care, with less stringent eligibility criteria and a big increase in workers’ wages also promised by Labour.
• A range of new entitlements including free bus travel for young adults, and free digital devices for children, with the SNP also adding in free dental care and free bikes for children from low income families, and Labour aiming to eventually make bus travel free for all.
• Taking steps towards a Minimum Income Standard to which all Scottish households’ incomes would be topped up. Without details on its level it is hard to say how radical or expensive this would be. Labour also have a long list of other benefit increases they would like to introduce. And the SNP favour introducing Universal Basic Income, if the powers to do so were available to the Scottish parliament. This would be a payment to all residents of Scotland, irrespective of their income, which would definitely be a radical and expensive change.

The Scottish Conservatives’ offering on public services and benefits is less expansive, but they also aim at modest reductions in overall tax levels. This includes a stated ambition of cutting income tax to slightly below levels in the rest of the UK for everyone, rather than have the top-half of income taxpayers paying more than elsewhere. This would be achieved by retaining the 19% starter rate of income tax and bringing other income tax rates and thresholds back into line with the rest of the UK.

But their plans still involve increases in service provision and benefits compared with today. For example, like the SNP and Scottish Labour (and indeed the Scottish Greens and Liberal Democrats), they commit to doubling the means-tested Scottish child payment to £20 per week per child, providing year-round free meals to all primary-school aged children, expanding free childcare (albeit on a smaller scale), and increasing means-tested benefits for those caring for someone with a disability.

Unfortunately, another thing the manifestos have in common is a lack of realism in relation to the funding environment the next Scottish Government will find itself in.

Scottish Labour would find its plans the hardest to deliver financially and logistically this year – the only year for which it has set out costed plans. It sets out around £3.2 billion of resource (day-to-day) spending and £1.2 billion of capital spending. While some of this might be found from within existing budgets, the amounts proposed significantly exceed the remaining unallocated funding currently available to the Scottish Government this year – which is almost certainly less than half what Labour say that they would spend.

The Scottish Conservatives’ more modest plans for the current year come to around £1 billion – an amount potentially, but not certainly, fundable from remaining unallocated resources. The SNP provide very few details on how much would be spent on COVID recovery in the months and years ahead, in keeping with their more general lack of transparency on their spending plans – although this does give them the most flexibility to respond to conditions after the election.

NHS funding figures underplay the funding that will likely be needed

By far and away the biggest ticket items in the SNP and Scottish Conservative manifestos were promises to the NHS. Both parties pledge that they would pass on to the Scottish NHS any funding received from Westminster as a result of increases in English NHS spending (with the Conservatives also guaranteeing increases of at least 2% above inflation as a ‘double lock’). And both parties have almost certainly underestimated the cost of this pledge.

• Based on the English NHS’s long-term budget, the pledge would require an increase in funding for the Scottish NHS of around £1.5 billion by 2023–24. If, as seems likely, funding for the English NHS continues to increase at a similar pace, that figure would rise to £3 billion extra by 2025−26 (relative to this year).
• In contrast, the Scottish Conservatives headline with a figure of £2.0 billion by 2025−26, and the SNP an extra £2.5 billion by 2026−27. Real-terms increases in English NHS funding would have to virtually grind to a halt after 2023−24 for either of these figures to be sufficient to meet these parties’ pledge to pass on funding in full to the Scottish NHS – a highly unlikely scenario. And its implausible that such small increases in funding post 2023−24 would be enough for the Scottish NHS to meet rising demands and costs.

Both parties would therefore almost certainly have to spend more on the NHS than they have budgeted for, in order to meet their pledges and to keep pace with demands. Indeed, it is difficult to escape the conclusion that the SNP and Scottish Conservatives have downplayed likely increases in how much they would need to allocate to the NHS, in order to flatter the amount available for their other myriad pledges.

Scottish Labour simply do not provide figures for NHS funding – or indeed for anything – after 2021–22, but it is difficult to imagine them feeling comfortable spending less than the SNP and Conservatives, especially given the increases in wages and expansion in services they hint at.  

And plenty of other spending promises add up to make it unlikely any of these manifestos could be delivered in full without tax rises or cuts elsewhere…

This is before taking account of the costs of the parties’ significant promises elsewhere. This includes the SNP’s promise of an extra £800m for social care; the Conservatives’ poorly designed funding guarantee for councils; and Labour’s promise to increase pay for care workers to £12 an hour immediately and to £15 an hour by the end of the parliament. And many more besides these.

For all three parties, therefore, paying for the additional billions of pounds of commitments and ambitions set out would require increases in Scottish taxes or cuts to some other areas of spending – unless there is a substantial increase in UK government funding. Some loosening of the purse strings in the UK government’s spending review this autumn is more likely than not, but probably not on the scale needed to fund these manifestos.