Voters are being wooed with election “goodies” instead of being told hard truths about Scotland’s strained public finances, a leading economist has warned.
Speaking to The Herald’s Unspun Live podcast, David Phillips, head of devolved and local government finance at the Institute for Fiscal Studies, said the next Scottish Government will face a budget squeeze.
He said the last SNP administration had “pencilled in” cuts to areas such as justice, police and local government to protect health, and had “got into the habit” of using one-off pots to fund permanent pay rises, a pattern he warned could come to a head in the 2027–28 budget.
“It’s not an enviable task,” he said. “The funding this government gets from the UK Government is set to slow down over the next few years. That means finding money for things like health and social care becomes much harder."
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“The 2027 budget, that’s the real tough one,” he added.
“The first budget for this new government could be one of re-opening those spending plans that it’s inherited from the government that has just left and looking at maybe even making some further cuts to free up more money for the NHS. So not a nice task.”
Despite that, Mr Phillips said parties across the political spectrum had largely opted to offer voters eye-catching pledges in their manifestos rather than confront the fiscal reality.
“I think they must be aware it’s a difficult situation,” he said. “But they’re also facing an electorate that’s clearly unhappy about the cost of living and the state of public services.
“And they’ve not yet found a way to level with that electorate to say, well look, actually fixing those things will cost money.
“So rather than levelling with the public they’ve come with another set of goodies to tempt them.”
All six main parties have now set out their manifestos ahead of next month’s Holyrood election. Tax cuts, expanded public services and cost-of-living measures dominate the promises made.
But Mr Phillips suggested many of the plans risk worsening the underlying fiscal position.
Reform UK, which was first out of the blocks, was criticised for proposing sweeping tax cuts without robust funding plans.
“They do set out quite a bold vision of a lower-tax Scotland,” he said. “But the key problem here is they not only have not really faced the fiscal challenge, they’ve not really done the simple maths.”
He pointed in particular to claims that economic growth could offset the cost of tax reductions.
“They compare the impact of growth over 10 years with the impact of the tax cuts cost over one year,” he said. “So they say it’s four times as big in terms of the revenue boost, but actually it’s just 40% as big.
“Whilst they’ve set out a bold vision, they’ve not done the homework to see whether or not this can be funded.”
The Scottish Conservatives, meanwhile, produced a manifesto they described as “costed, credible and comprehensive”, but the IFS said the sums did not fully add up.
“It was costed more on paper than in reality,” Mr Phillips said.
He highlighted plans to rely on almost £4 billion a year in efficiency savings to balance the books.
“That is huge in anyone’s books,” he said, “especially given they would have to come on top of the savings already baked into the outgoing government’s plans.
“There’s a big hole still sitting in there,” he added.
Scottish Labour took a markedly different approach, with a more restrained set of pledges .
“Compared to all other parties, the plans for new spending or tax cuts really are quite pared back,” Mr Phillips said.
“From a purely fiscal perspective, that’s less risky. It means there’s less additional pressure on the budget.”
However, he questioned whether Labour’s more cautious stance would resonate with voters, and cast doubt on claims its policies could significantly boost economic growth.
“They say that over the space of four to five years, their policies could grow the economy by about two and a half percent over four to five years,” he said.
“That’s close to a half percent extra growth a year. Now that might not sound much but actually that’s big in economic growth terms.
“I just do not buy they could get that amount of growth in the policies they’re suggesting,” he added.
The Scottish Greens, by contrast, set out one of the most ambitious programmes, including major spending on childcare, public transport and healthcare, all funded by a raft of new taxes.
“They are suggesting a really big expansion of the welfare state in Scotland,” Mr Phillips said. “A big expansion of free childcare.
“A huge increase in the number of doctors. They’re saying 50% more GPs, which obviously makes it easier to get an appointment. But obviously that costs money and there are issues about how quickly you could train and recruit that number.”
He said the party’s plan for free buses could cost £600m a year, far more than the £275m identified by the Greens.
Mr Phillips warned the scale of proposed tax rises may not be sufficient to fund the plans.
“The tax rises don’t look quite big enough to fund that whole smorgasbord of entitlements,” he said, adding that proposals would also “massively complicate the tax system”.
He noted that replacing council tax with a 1% levy on up-to-date property values could leave owners of £1 million homes facing bills of around £10,000 a year, while still not fully funding the Greens’ plans.
The SNP’s manifesto, launched by First Minister John Swinney, was described as more limited in scope but still containing headline-grabbing measures, notably a proposed cap on the price of essential food items.
Mr Phillips warned it could have unintended consequences.
“If you’re capping the price of certain items that will probably increase demand for them. At the same time, unless there’s some sort of anti-competitive nature in the market, that would also reduce supply.
“You might even find retailers restricting the availability of those most capped lines and then people might need to involuntarily trade up from Tesco value to the branded goods because there’s not as many of the Tesco value ones on the shelf now the price is capped.”
He suggested direct financial support for households would be more effective.
“If the Scottish Government is worried about the budgets of the lowest income households, it might be better to use cost of living payments,” he said.
On childcare, he said the SNP’s move towards more means-tested support could help lower-income families but risked discouraging parents from taking on more hours or higher-paid work as support is withdrawn.
“For an opposition party they’re quite pared back in terms of the number of new entitlements or tax cuts or things that are being offered,” Mr Phillips said.
“A more targeted, smaller set of things, maybe presenting themselves as the fiscal voice of reason.”
Across all the manifestos, he said the dominant theme was the cost of living crisis, with sharply different solutions offered by the parties.
“On the right, with Reform and Conservatives, it’s tax cuts, keep more in your pocket in the first place.
“With the parties more towards the left, it’s more in new entitlements, free childcare, potentially cheaper or free buses, expansion of free school meals.
“And I think there’s a recognition this is an issue that has affected many people and is going to motivate many people’s voting.”
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But he cautioned that none of the proposals, taken in isolation, amounted to a complete solution.
“Any of these measures would either cut your taxes or increase government spending without saying how it’s paid for.
“Well, there’s a sting in the tail of that, it needs to be paid for somewhere.”
Hear the full interview with David Phillips on Unspun Live — available on Spotify, Apple and wherever you get your podcasts.
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