Initial response to the Scottish Greens’ manifesto

CORRECTION: A previous version of this response stated that increasing the marginal rate of LBTT on values above £1 million to 15% would increase the tax on a £1.5 million purchase by £30,000, from £138,350 to £168,350 – over 11% of the purchase price. This has now been corrected to an increase of £15,000, from £138,350 to £153,350 – over 10% of the purchase price.

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

‘At 165 pages, this is a big manifesto proposing huge changes to policy. The Scottish Greens propose large increases in spending on families with children and substantial investment in public services and public transport. A combination of a large increase in property taxes and borrowing by councils would partly cover the cost of these ambitions.  

These tax plans would cement Scotland’s position as the highest-taxed part of the UK. Whether the expansion of the welfare state would make that worthwhile will be in the eye of the beholder. From a purely fiscal perspective, it is welcome to see a party that plans substantial spending increases combine them with a recognition that this would need higher revenues too – something missing from the England and Wales Green Party’s Senedd manifesto, for example. But while the manifesto omits specific revenue estimates, the proposals set out seem unlikely to raise enough revenue to fund all the additional spending that would be required to deliver the Scottish Greens’ plans. To pay for those, increases in taxes would probably have to be even larger than suggested, or cuts made to other day-to-day spending that the Scottish Greens deem lower priority. And big tax increases to fund new, universal free entitlements – to childcare, dental care, domiciliary social care, and bus travel – would make the tax rises that already look likely be needed to maintain existing services in the longer term more difficult.

Revenue aside, the tax changes proposed are something of a mixed bag. Planned reforms to council tax, while raising revenue for councils, would also address serious shortcomings with the current system – a reliance on relative property values from 35 years ago and a regressive structure that taxes lower-value properties at a higher percentage rate than higher-value properties. The Scottish Greens are right to push for real reform here, after years of dithering by the SNP-led governments. But proposed increases and reforms to land and buildings transaction tax would make a bad tax bigger and even more damaging. It is clear that the Scottish Greens see tax as a tool not just to raise revenue but also to reward certain activities and penalise others – sometimes justifiably, but often in ways that would less justifiably distort and reduce economic activity, and would seriously complicate the Scottish tax system.’

Property taxation

The Scottish Greens have a lot to say about taxation – both to raise significant revenue, and to change individuals’ behaviour and the shape of the economy.  

Their main tax proposal is to replace the current council tax with a new residential property tax which would be more proportional to property values. The property tax – whether council tax in the short run or its replacement – would be based on valuations that were brought up to date and updated at least every five years thereafter.

While the Scottish Government would control the design of the tax, like now, it would be up to councils to decide what tax rate to levy on properties in their area. These rates would depend on how much councils thought they needed to spend on local services, and the amount of Scottish Government funding they received to help pay for those services. A substantial part of the new spending proposed by the Scottish Greens would be undertaken by councils. All else equal, this would increase the amount of tax revenue councils needed to raise. The total grant funding provided to councils could also be changed.

We have been told that, in costing their proposal, the Scottish Greens have assumed councils would set a tax rate of 1% of property value. This compares with an average under the existing council tax system of around 0.7% of property value as of 2025–26.  

So, the average tax bill would rise under the Scottish Greens’ proposal. But not all properties would see a tax rise. The existing council tax is regressive with respect to property value: tax bills are a higher share of property value for low-value properties. As a result, lower-value properties – most in Band A, some in Band B and a few in Band C – would attract a lower tax liability under a 1% proportional property tax than currently. On the other hand, a property currently in Band D and with a value of £211,000 (our estimate of the mean property value as of Q4 2024) would face a bill (before any discounts) of £2,110 a year, compared with an average of £1,653 currently. A property currently in Band F and with a value of £392,000 (our estimate of the 90th percentile of property values as of Q4 2024) would face a standard bill of £3,920 a year, compared with an average of £2,686 currently.  

Overall, a 1% proportional property tax rate would increase revenues by around £1.3–£1.5 billion a year compared with 2025–26 council tax revenues, assuming existing discounts, premiums and means-tested reductions continued to exist. As noted above, how high each council set its tax rate and how much it raised would depend on the cost of the additional spending responsibilities in its area and on how the Scottish Government changed grant funding and/or redistributed it across council areas.

Different people will have different views as to whether the tax rise and associated increase in spending is good or not – and these plans would cement Scotland’s position as the part of the UK with the highest tax rates. But from a tax design perspective, a revalued, reformed property tax would be a substantial improvement on the current out-of-date council tax. And given the more limited scope for evasion, avoidance and other behavioural responses to annual property taxes than to income tax, for example, if the next Scottish Government did want to raise revenue and further increase the progressivity of the tax system, the plans for council tax set out by the Scottish Greens would be a good place to start.

In contrast, proposals to further increase land and buildings transaction tax (LBTT) would be economically damaging. The Scottish Greens say they would increase the marginal rate of LBTT on values above £1 million to 15%, increasing the tax on a £1.5 million purchase by £15,000, from £138,350 to £153,350 – over 10% of the purchase price. The additional dwelling supplement paid on second homes and rental properties – paid on top of standard LBTT rates – would be increased from 8% to 10%, and even more for landlords who buy multiple properties or in certain parts of Scotland.

LBTT is one of the most economically damaging taxes. It discourages mutually beneficial transactions, so properties are not owned by the people who value them most. It makes it more expensive to trade up as your family grows and downsize as you age, and to move to take advantage of job opportunities or be closer to family. The already high rates on second and rental properties come on top of differences in income tax, capital gains tax and inheritance tax that all penalise the rental sector relative to owner-occupation – hitting tenants as well as landlords. LBTT is a tax that should be reduced and ideally abolished – making up the revenue from less economically damaging sources – rather than increased and made even more distortionary.

Changes proposed to the business rates system are also a mixed bag, at best. A proposal to bring vacant and derelict land into business rates could potentially be a step in the right direction, reducing the extent to which the tax system discourages property development. But varying tax rates and reliefs by a wide range of business characteristics would significantly complicate the system – both for taxpayers and for councils which administer it – and distort business investment decisions. Surcharges for online and out-of-town retailers would tilt the playing field in favour of traditional town-centre retailers, but potentially reduce choice and increase costs for consumers (who are choosing to shop online and out of town).  

The wider tax system and tax strategy

Despite a wide-ranging tax agenda, the Scottish Greens’ manifesto is relatively quiet about the biggest devolved tax, Scottish income tax. They do not propose any further change in the main rates and thresholds of income tax (beyond the tax rise already pencilled in in the form of freezes to the higher-, advanced- and top-rate thresholds until 2028–29). But they do propose higher tax rates on landlords’ rental income. Combined with other policies that penalise landlords, such as higher rates of land and buildings transaction tax (LBTT) for rental properties and tougher rent controls, this would encourage landlords to exit the market – making more properties available to buy for owner-occupation, but making rental properties even harder for would-be tenants to find – and to increase rents sharply when they do have the opportunity.

The Scottish Greens also propose numerous other tax changes, including a raft of new taxes. Some of these are aimed at addressing issues with the current tax system – such as the absence of any carbon tax for land-based emissions, and distortions caused by the zero-rating of new construction but not refurbishments. The justification of other proposals such as a ‘stadium levy’ and ‘point of entry levy’ for tourism, is less clear.  

The Scottish Greens clearly want to use the tax system to shape the economy and society, by rewarding some activities and penalising others. The merits of such an activist approach, versus leaving people and businesses to do what they would choose in the absence of tax, can be debated. One effect will be to change behaviour in various ways. In some cases, this is the point of the policy; in other cases, the behavioural changes will be undesirable side effects.

Some of the policies proposed do not look well targeted. This partly reflects the limited powers available to the Scottish Government: for example, reducing alcohol and tobacco consumption by taxing the value of property used by large retailers selling them is clearly inferior to taxing actual sales of these goods directly via alcohol and tobacco duties, but excise duties are not under the control of the Scottish Government. However, it is also unclear why alcohol and tobacco should be considered socially harmful if sold by large retailers but not if sold by small retailers. In some instances, there may be better ways – through the spending side of the budget, for example – to encourage the behavioural change the Scottish Greens want, in a more targeted way.

The manifesto does also propose removing some existing reliefs, but the net effect of the plans would be a big increase in the complexity of the tax system – aside from the upheaval and complexity associated with the process of change itself.

Support for families with children

Turning to the spending side of the budget, the Scottish Greens propose big increases in spending on both childcare and the Scottish child payment.

For childcare, the plan is a large expansion of the system to cover younger age groups, plus new flexibility for families with younger children to receive cash instead of a funded place. The Scottish system currently offers 1,140 hours of funded Early Learning and Childcare (equivalent to 30 hours a week for 38 weeks of the year) to all 3- and 4-year-olds and disadvantaged 2-year-olds.  

The Greens would first extend the entitlement to 1,140 hours of funded care to all 2-year-olds (up from around 20–25% currently). We have been told that the party expects the running costs of this policy to be around £400 million. The costings seem to assume full take-up of the childcare offer, which may be unlikely for 2-year-olds, meaning that total costs could come in lower (only around half eligible for the existing offer took it up in 2023, for example). On the other hand, funding rates would need to rise in cash terms over time, pushing up the cost per child.  

For under-2s, the party has a more novel proposal. It aims to roll out an annual entitlement to 570 hours of funded care (equivalent to 15 hours a week during term-time) to all children aged 6 to 23 months, at a cost of around £9,600 per child over the full 18 months. But the party also proposes to allow families to opt out of funded hours, instead taking a cash benefit to top up family income. We have been told that the cash benefit would be lower than the allocated funding for a childcare place, and would be tax-free. Depending on the relative generosity of the benefit versus local childcare costs, take-up of this option (rather than funded childcare hours) could be quite high. For families that are able to access childcare at cheaper rates than what the government funds, or who prefer to look after their children themselves, this could mean a large increase in average cash incomes at this age range. That would help with their cost of living but blunt work incentives. The effects on children’s development are much less clear.

This sort of ‘opt-out’ programme could also change the shape of the childcare market, if many families with the youngest children (who yield the highest funding per hour for providers) choose to forgo formal childcare, leaving settings with an older and lower-funded intake. To the extent that settings cross-subsidise across age groups, this could require a big shake-up in market structure.

The manifesto also proposes to immediately increase the means-tested Scottish child payment to £40 per child per week, which would cost just over £200 million a year, before any behavioural responses. The payment would then be increased faster than inflation to reach £55 per child per week by 2030 (compared with £30.60 under the current plan of standard inflation-based uprating). This will cost around £420 million per year more than standard inflation uprating. This would boost the income of low- and lower-middle-income families with children, and contribute to substantial further reductions in child poverty. But it would also weaken work incentives, not least because of the cliff-edge structure of the Scottish child payment: a £1 a week increase in earnings can mean losing entitlement to the entire payment. If the payment were to be increased substantially as the Scottish Greens propose, it would be even more important to reform it so that it tapered more smoothly as families’ incomes increase. At £55 a week per child, a family with two parents each earning £32,390 a year in 2030–31 and four children would lose £220 a week in benefits income if either parent increased their earnings marginally. Assuming both parents are already working full-time, they would need to work almost 19 hours extra a week between them to offset the loss of benefits.  

Other increases to family benefits are also planned. A further increase in the Scottish child payment for parents under 25 is intended to mitigate the lower universal credit standard allowance received by young parents. Increases in the generosity of Best Start grants and Best Start goods – which provide cash grants and food vouchers for parents of young children – are also planned, though the size of these increases is not stated.

The manifesto also proposes a double lock for uprating Scottish family benefits, with payments to rise by the higher of inflation and average income growth each year. Wanting benefits to keep pace with average incomes over time is a legitimate policy goal. However, a double lock is a poorly designed mechanism for achieving this. In the long run, it causes benefit levels to rise faster than both inflation and income growth, by an amount that depends arbitrarily on the year-to-year volatility of these annual growth measures rather than on any deliberate decision about generosity. This is the same problem as with the triple lock on the state pension. A more coherent approach would be to ensure benefit rates track income growth in the long run, while maintaining their real value by increasing with annual inflation in years where prices rise faster than incomes, before allowing them to fall back to the income growth trend once income growth exceeds inflation again.

Other public spending plans

The Scottish Greens propose a wide range of other spending increases.

A key cost-of-living measure they propose is making bus travel free for all, rather than just under-21s and over-60s as now. The roll-out would start with adults aged 22 to 29, with an initial £2 cap on fares for 30- to 59-year-olds, before transitioning to free travel for all. We have been told that £275 million a year has been earmarked for free bus travel, although the source cited to support this appears to relate to passenger fares income in 2022–23. Inflation and a further recovery in passenger numbers since then mean passenger fares income was £391 million in 2024–25, suggesting a true cost north of £400 million a year. The manifesto also proposes to bring buses back into public ownership, with councils borrowing to cover the cost of purchasing buses and depots from the private sector.  

Dental treatment would also be made free for all – something which the current government had pledged to do in the current parliament, but failed to deliver. All non-residential social care would also be free, subject to care needs assessments – fulfilling another pledge the current government made but did not keep. Again, the external costings the Scottish Greens cite for these seem likely to understate costs: not only are they based on data that are several years old, but demand would likely increase if services are made free.  

Sticking with health and social care, the Scottish Greens’ flagship policy is a substantial boost to GP numbers to achieve at least 1 GP per 1,000 people. Given Scotland had around 0.65 GPs per 1,000 people as of March 2025, this is a very large increase indeed. The Scottish Greens also want to increase NHS staffing, raise pay for resident doctors and social care workers, increase mental health spending (including rolling out a network of free mental health support hubs), and deliver more care in the community. These changes, aimed at improving access to care and aiding recruitment and retention, would not come cheap: we have been told that the Scottish Greens have costed the increases to GP numbers at just over £400 million a year, and a £15 minimum wage for social care workers at £250 million a year (although how much of this is ‘extra’ on top of existing plans will depend on how quickly wages are increased to this level).  

On schools, the Scottish Greens pledge maximum class sizes of 20 pupils (compared to an average of 23 currently), reduced teacher workloads and increased Additional Support Needs teachers. Falling pupil numbers will help to reduce the costs of these policies, but given class sizes are already relatively low in Scotland, it is unclear whether smaller class sizes would be an efficient way to improve educational standards. Other policies include reducing the number of standardised tests that pupils take. These are in stark contrast to proposals by some other parties which place testing and a move back to a more formal, knowledge-based system at the heart of their plans.

The manifesto also proposes more pilots of four-day working weeks in the public sector. Given pressure on public services, trialling this rather than rolling it out more broadly would be sensible. But results of trials would need to be interpreted carefully: the impact on recruitment, retention and productivity of four-day weeks is likely to be smaller if four-day weeks became the norm, rather than being only among a relatively small set of employers. And it would be harder and more expensive to move to four-day weeks for citizen-facing roles, such as in schools, the NHS and social care.  

Summary: a bigger state with higher taxes

The manifesto proposes a substantial increase in property taxes for mid- and particularly high-valued properties, landlords and many businesses in order to further substantially expand the Scottish welfare state (already more expansive than that in the rest of the UK). However, delivering the full set of spending increases planned by the Scottish Greens would require even more revenue than would be generated by the increases in taxes that the party seems to have assumed. That means a government implementing its plans would likely need to seek to raise even more revenue, or make cutbacks to spending deemed lower priority – on top of the cuts already inherent in the current Scottish Government’s plans. More generally, the scale of change proposed is huge – whether plans could be delivered over a parliament, even if funding were available, is far from clear.