Scotland’s election: what’s at stake for the economy?

Good afternoon from New Economy Brief.

Next week, Scotland will go to the polls to elect the 129 members of the Scottish Parliament and decide who will lead the next government in Holyrood. After 19 years in power, the Scottish National Party (SNP) leads the polls, with Scottish Labour and Reform UK vying for second place. However, Scotland’s more proportional electoral system means the outcome remains highly uncertain, and smaller parties could end up holding the balance of power. 

This week, we explore the economic backdrop to the Scottish election, and examine the policy platforms of the major parties contesting it. 

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What issues are driving the election?

After a parliamentary term marked by the legacy of Covid-19, inflation, and geopolitical turmoil, polling consistently shows Scottish voters prioritising three issues above all others:

Cost of living: Like the rest of the UK, Scotland has faced a prolonged squeeze on living standards, with rising prices for essentials compounded by nearly two decades of weak wage growth. Recent analysis by Future Economy Scotland finds that average real earnings grew by just 0.13% per year over the last parliament – the worst performance since devolution, apart from the immediate aftermath of the 2008 financial crisis. Unsurprisingly, polling consistently ranks the cost of living, and the state of the economy more broadly, as together voters' top concern. 

Healthcare: The state of the National Health Service (NHS) remains the other big issue, with long waiting times and pressure on services driving voter concern across all demographics. Although long waits are now declining, and Scotland outperforms England and Wales on A&E waits, performance across most measures is still considerably worse than before the pandemic.

Immigration: While historically less salient in Scotland than in England, concern about immigration has risen substantially, and it is now voters’ third priority. Two years ago, around 10% of Scots cited it as a top-three issue; recent polling suggests this has increased to around 23%. 

The future of North Sea oil and gas has also featured heavily in the debate. Although licensing is reserved to the UK Government, parties are sharply divided over new fossil fuel extraction and Scotland’s 2045 net zero target. As IPPR Scotland has highlighted, climate targets feature far less prominently in manifestos than in 2021, even among parties that support them.

While the debate over Scotland’s constitutional future continues to loom large, polling suggests it is less of an immediate priority for voters than in previous elections.

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What are parties proposing for the economy?

The manifestos Scotland's political parties have published in recent weeks set out starkly different visions for the future of the economy. 

The SNP has placed tackling the cost of living at the centre of its platform, with a headline proposal to cap prices on 20 to 50 “essential” food items. Other priorities include expanding free childcare, investing in public services and the NHS, and delivering Scotland’s 2045 net zero target. While not proposing major new tax changes, the party defends the more progressive income tax system it has set up over the last decade.  Yet some experts question whether its spending plans add up without further tax rises.

The Scottish Conservatives’ manifesto focuses on cutting income tax to realign rates with the rest of the UK, funded by public spending cuts. This includes introducing a two-child cap to the Scottish Child Payment, and slashing disability benefits – as well as savings on “administration costs”. However, economists have challenged the credibility of these plans. The party has also pledged to scrap the net zero target and support new oil and gas developments.

Scottish Labour emphasises economic growth, with pledges to remove Scotland’s opposition to nuclear power, overhaul the planning system, and create a new industrial strategy. The party also highlights policies to raise workforce participation, including expanded childcare and skills provision. On tax, the party has ruled out immediate changes but has signalled it would reduce income tax in future when it is “affordable”.  However, some economists have warned that the manifesto relies on optimistic assumptions about GDP growth to fund future improvements.

The Scottish Greens present the most expansive programme, with a strong focus on tackling the climate emergency, creating green jobs and reducing inequality. This includes higher public spending, large-scale investment in green energy and infrastructure, and a faster transition away from fossil fuels – alongside proposals to replace council tax and explore new wealth taxes. Yet as with other parties, the fiscal feasibility of the package has come into question -  economic analysts have suggested that the scale of spending may not be credible without broader-based tax rises.  

The Scottish Liberal Democrats focus on targeted tax reform and investment in public services, including proposals to replace council tax and increase  support for small businesses. They also propose more spending on health and social care, alongside investment in education, skills and net zero. While they support higher spending on frontline services, their fiscal stance is cautious compared to other parties, emphasising balanced and deliverable plans.

Finally, Reform UK’s manifesto advocates lower taxes and a smaller state, centred on £4bn of income tax cuts, which it argues would be partly self-financing through higher economic growth. The party also proposes substantial reductions in public spending and a smaller welfare state, though again economists have described its fiscal plans as “not credible”. Reform UK also calls for scrapping net zero targets and all related spending, in favour of expanding domestic oil and gas production.

Overall, the manifestos diverge more widely on economic policy than at any election since devolution, offering voters a stark set of choices on tax, spending, and the role of the state in Scotland’s economy.

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What next?

Polling day is 6 May. Under Scotland’s proportional Additional Member System, it is difficult – but not impossible – for any single party to secure an outright majority. This means the final shape of the government may take days or weeks to resolve, and smaller parties could end up holding significant influence over key decisions on tax, spending and climate policy.

Polling suggests the likeliest outcome is another SNP-led government, either alone or dependent on support from a smaller party like the Scottish Greens. This would represent continuity, rather than a dramatic break with Scotland’s existing economic model. Yet such a government would still have to wrestle with fundamental challenges. Will a more interventionist approach on the cost of living – especially the intractable issue of food prices – bear fruit, and could it provide a model for other critically important sectors or for the rest of the UK? Tight public finances and weak growth will present difficult choices. As Future Economy Scotland has highlighted, no party is being fully honest about the scale of Scotland's fiscal challenges and how they will respond – as in the run-up to the 2024 UK general election. How the government navigates these issues won't just shape Scotland's economic direction over the coming years – it may also provide lessons for progressives facing similar constraints elsewhere.