The SNP’s manifesto offers big gains to a number of targeted groups in Scotland - but would involve difficult trade-offs in a tight budgetary environment.
The SNP manifesto contains significant pledges that if delivered would significantly expand service provision for and/or boost the take home income of a number of groups in Scotland. This includes a significant expansion of childcare provision, increases in a number of means-tested benefits and council tax exemptions for all 18–21 year-olds.
On public services, the policies also continue with a trend of making services free for everyone, rather than targeted on those with the lowest incomes through a means-test. The manifesto pledges to add to the list free dental care, as well as free breakfasts and lunches all year round for all primary aged children, and to abolish charges for all social-care services received at home.
On taxes, the short-term changes proposed are modest, but there are hints of bigger changes in the longer-term. Proposed changes to benefits continue the theme of recent years – more for low-income families with children in particular – although if a universal basic income is taken forward in the longer term, that would be a much more radical (and challenging) change (and as recognised in the manifesto, not practical under the Scottish Government’s current powers).
The manifesto does not provide information on how much these various pledges will cost altogether, which is disappointing. But the list of policies included clearly has a significant net cost. Paying for this in the context of what will likely be a tight fiscal environment in the coming parliament would require tricky trade-offs, and potentially either (as yet, unspoken) tax rises, or cuts to at least some other areas of public spending. A stated aim of not increasing income tax – the main tax currently under the Scottish Government’s control – and plans to cut business rates could make this an especially difficult circle to square.
David Phillips, an Associate Director at the IFS who leads the institute’s work on devolved and local government finance, said:
“The SNP’s manifesto continues with a trend of greater universality in public service provision - providing services free to everyone, rather than using means-testing to focus support on those with the lowest incomes. The plans set out would also mean substantial gains for certain groups of households: many families with, particularly younger, children; households that would benefit from the exemption of all 18 to 21 year-olds from council tax; and those paying for home care, for example.
Paying for all of these pledges in what could be a tight funding environment over the next few years will require tricky trade-offs though: tax rises or spending cuts in at least some other areas. The tougher fiscal situation an independent Scotland would face in at least its first few years would make the challenge of delivering these commitments even harder.”
Childcare and early education
The SNP have promised a major expansion in government subsidies for childcare, with free early education extended to disadvantaged 1- and 2-year-olds as well as subsidised wrap-around childcare for school-aged children. The SNP estimate that these will cost £232 million and £304 million, respectively, once fully implemented.
This is certainly a generous offer, and one that will be welcome to families struggling with the cost of childcare. Early education for disadvantaged 1-year-olds could also patch a hole in the system: at the moment, there is relatively little support for childcare in between the end of parental leave and the start of free childcare at age 2 or 3. Focusing the offer on disadvantaged 1-year-olds means that - done well - this policy could help to reduce inequalities in child development between children from poorer backgrounds and those in better-off families. This direction of travel contrasts with England, where the focus of recent reforms has been extending more childcare to working families with 3- and 4-year-olds (rather than to more disadvantaged younger children).
However, the key caveat is that this policy must be done well to be effective. The Scottish childcare sector will already be making a step change this summer to accommodate a doubling of existing free childcare entitlements. Asking providers to accommodate higher demand (and lower private fee income) off the back of these new subsidies could, if not planned carefully, stretch their ability to deliver high-quality provision. The Scottish Government worked with councils and providers over several years to deliver this summer’s doubling of entitlements; this next, arguably more ambitious, step will require an equal level of planning and engagement.
Free school meals
The SNP has pledged to extend its offer of universal free school meals from all pupils in Primary 1-3 to all primary school pupils (and those in state-funded special schools). Going forward, this support will be made available year-round (as will free meals for secondary school pupils from low-income families). The SNP has also pledged to offer free breakfasts to all primary pupils. This continues a trend of universality by the SNP in its public services offerings.
There is good evidence that school nutrition policies can help children to learn better and have better health. But - since children in the most disadvantaged fifth of families already have access to means-tested free school meals - making school meals universal will inevitably have bigger benefits for families who are not at the very bottom of the income distribution.
Overall, the SNP estimates that this package will cost around £250 million per year once fully implemented (excluding the cost of making permanent the payments to low income families with children in primary or secondary school during the school holidays, which is already in the budget for this year). Around £140 million of this comes from extending free school meals to all primary school pupils, with the rest spent on year-round school breakfasts for primary school pupils.
Health and social care spending
The SNP commits to increasing front-line health spending by at least 20% (or £2.5 billion) over the next Parliament, even if the Barnett consequentials resulting from increases in spending on the English NHS are less than this. That would represent a real-terms increase of around 2.1% per year, over and above expected inflation – similar to the average annual real-terms growth in Scottish health spending over the past five years, but slower than the 3.4% per year promised to NHS England in its most recent long-term funding plan, and slower than what previous analysis – produced prior to the COVID-19 pandemic, which will likely add to medium-term healthcare pressures – has suggested might be needed to keep pace with demographic and cost pressures.
The SNP also promises £10 billion of NHS capital investment over the next ten years. £1 billion of capital investment per year would equate to £183 per person in Scotland, around 12% higher than the £163 of NHS capital investment per person planned for England next year. In recent years, capital investment has represented a smaller fraction of overall health spending in Scotland than in other parts of the UK. If delivered, this investment plan could reverse that.
On social care, the manifesto promises a 25% funding increase over the parliament (equivalent to 2.9% per year over and above expected inflation), including a pledge to scrap all non-residential social care charges. This, on top of the pre-existing offer of free personal care to all adults, would represent a substantial increase in the generosity of the government-funded social care offer.
As elsewhere in the manifesto, the emphasis and priority placed on the universality of services is notable. It retains the SNP’s commitment to free NHS eye tests and prescriptions, and additionally promises to abolish NHS dentistry charges. This will benefit mainly middle- and higher-income working age individuals who don’t already qualify for free dentistry though receipt of certain benefits. The removal of a financial means-test for non-residential care is also in line with making public services free at the point of use to all users, rather than targeting support at just the most disadvantaged.
Taxes and benefits
Arguably the most important tax plan in the SNP manifesto is an intention not to do something: the SNP aims to freeze income tax rates, and to increase thresholds by no more than inflation.
The firm commitments to tax and benefit changes in the manifesto are relatively modest in overall revenue terms – though there are some giveaways that will be significant for the tightly targeted groups who receive them, such as those caring for more than one disabled person, young people leaving care, and under-22-year-olds who would otherwise pay council tax.
The biggest overall giveaway is the proposed doubling of Scottish child payments for low-income families with children, from £10 a week to £20 a week by the end of the parliament (on top of the existing plan to extend them from under-6s to under-16s by the end of 2022). This doubling would cost about £180 million a year by the end of the parliament. In today’s prices, it amounts to a giveaway averaging about £60 per year (0.2% of income) across all Scottish households, but the gains are highly concentrated among low-income households (see chart), peaking at £180 per year on average (1.1% of income) for the second-lowest income decile group. Campaigners have estimated that this would lift a further 20,000 children out of relative income poverty, but would not be enough to meet the Scottish Government’s child poverty targets, unless there are increases in parental employment or wages.
Figure: Annual gain from doubling Scottish child payments by the end of the parliament
The main permanent tax change proposed is to reduce business rates on the highest-value commercial properties to bring them into line with England’s rate over the course of the parliament (currently, firms pay 51.6% of such properties’ rental value in tax in Scotland, compared with 51.2% in England). In the long run, the main effect of this would probably be to bid up commercial rents, primarily benefiting landlords rather than making premises more affordable for the businesses that occupy them.
But while these firm commitments are relatively modest, the SNP wants to explore reforms that are potentially much more radical: reforming or replacing council tax, introducing a digital sales tax, and moving towards a minimum income guarantee – and potentially eventually a universal basic income. The development of these ideas could turn out to be the defining features of a new SNP government’s tax and benefit policy.
It is not clear how radical a minimum income guarantee would be. Arguably, the UK already has a minimum income guarantee in the form of universal credit. A key question is whether the SNP essentially wants to make that more generous, or to make it more truly ‘guaranteed’ by removing the restrictions that currently prevent some low-income families from receiving it (such as work search requirements and asset limits).
A universal basic income – a payment to all residents of Scotland irrespective of how much other income they have – would certainly be radical, and would not be possible under the Scottish Government’s current powers. And paying a genuinely meaningful UBI to all people resident in Scotland, irrespective of their other income, would require a substantial increase in expenditure and hence in taxes to pay for it. Piloting and wide consultation would be sensible before introducing such a major reform – although a small-scale pilot may provide only limited guidance on the likely impacts of a full-scale rollout.