Scotland’s election – constitutional reset or fiscal reckoning?

“With the Scottish Parliament election imminent, attention has turned once again to the constitutional question. Will this campaign reopen the independence debate? Or will it be dominated by more immediate questions over public services and living standards, asks Graeme Roy . Enjoying this post? Then sign up to our newsletter and receive a weekly roundup of all our articles. The latest polling in Scotland suggests a complex picture. Polls tracked by What Scotland Thinks show the SNP polling in the low-to-mid 30s on both the constituency and regional list vote (in Scotland, voting is under the Additional Member System with seats for the regional list allocated using the D’Hondt method to make the overall Parliament broadly proportional). That keeps them well-ahead of their rivals, but below the 40-45 per cent levels seen at the height of the Salmond and Sturgeon eras. On current numbers, the SNP is on track to emerge as the largest party – 19 years after first entering office – yet achieving a majority remains a tall ask. But, if the Scottish Greens secure sufficient seats, a pro-independence majority in Holyrood remains plausible (albeit the last formal agreement between the SNP and the Scottish Greens didn’t end well). One interesting prospect following May’s election could be nationalist administrations in Scotland, Wales and Northern Ireland alongside a Reform-influenced politics in England. At the same time, headline independence polling continues to hover close to 50:50 . In short, twelve years on from the 2014 referendum, opinion appears remarkably settled – or remarkably stuck, depending on your perspective. For supporters of independence, a renewed parliamentary majority would be seen as a mandate to revisit Scotland’s constitutional question. For opponents, the absence of a clear and sustained majority in favour of independence – and a smaller vote share for independence’s leading advocates in the SNP – would likely be used to counter claims of a settled will. Where is Reform at in Scotland? An emerging story has been the rise of Reform UK in Scotland, and their potential to secure votes form supporters of the two main Unionist parties – Scottish Labour and the Scottish Conservatives. Reform are currently polling around 20 per cent in the Regional list, with the promise of a tax-cutting manifesto . One interesting prospect following May’s election could be nationalist administrations in Scotland, Wales and Northern Ireland alongside a Reform-influenced politics in England. This would represent a markedly different political dynamic from that of 2014. The economy and public finances If the politics of constitutional change is one axis of debate, economics is the other. And here the terrain has shifted significantly since 2014. The economics of independence have changed markedly over the last decade. Brexit, for example, has thrown up complex issues over an economic border and currency. At the same time, the devolution context has changed too. In the years following the referendum, further powers were transferred to the Scottish Parliament. Holyrood now controls non-savings, non-dividend income tax rates and bands, devolved taxes such as Land and Buildings Transaction Tax, and elements of social security. Scotland also now has its own revenue authority and a new social security agency. The Scottish Government has even explored issuing its first bond – dubbed a “kilt” – albeit within the constraints of a highly restricted fiscal framework. The expansion of powers: risk and reward This expansion of powers reflected what has elsewhere been described as the logic of “risk and reward” in fiscal devolution. On tax policy, the Scottish Government has sought to raise taxes on higher earners. Scotland now has six income tax bands. The higher rate threshold in Scotland is lower than in England, and additional and top rates are set above their UK equivalents. For example, for 2026–27, the higher rate in Scotland applies from just over £43,000, compared with around £50,000 in England; and, the top rate in Scotland is 48 per cent, compared with 45 per cent elsewhere in the UK. The (very slight) majority of Scottish taxpayers still pay the same or less than their counterparts in England, due to a lower starter rate – albeit the maximum saving is just £40 per year. But for middle and higher earners the differences are more material, particularly as fiscal drag brings more people into higher bands. In 2016–17, around 300,000 Scottish taxpayers paid the higher rate. On current projections , that figure could approach one million – well over a quarter of taxpayers – by the end of the decade. But this has brought risks too. Analysis by the Scottish Fiscal Commission has shown that while these policy choices have generally increased revenues, the underlying Scottish tax base has tended to grow more slowly than in the rest of the UK. If Scotland’s earnings and employment had grown at the same rate as the rest of the UK, the Scottish Budget would currently be around £700–£800 million stronger. On social security, Scotland has also charted a distinct course. New devolved benefits such as Scottish Adult Disability Payment are designed to be more supportive through the application and assessment process compared to Personal Independence Payments available in England and Wales. The Scottish Child Payment – now worth just over £27 per week per eligible child for families on Universal Credit – has no direct equivalent elsewhere in the UK. But these decisions now mean that devolved social security spending is forecast to exceed funding by around £1 billion a year by the end of the decade, a gap that must be filled from within the overall Budget. Overall, the budget outlook for whoever wins this May’s election is tight. Day-to-day resource funding is projected to grow by just over 1 per cent a year in real terms on average over the next parliamentary term. Capital funding, after a short-term uplift, is expected to fall in real terms thereafter. With more funding flowing to health (in part because of a more rapidly ageing population in Scotland), social security and to fund more generous public sector pay awards, new commitments will require difficult reprioritisation within existing budgets or additional tax increases. What does all this mean for the constitutional debate? For proponents of independence, the argument has long been that fuller powers would allow the Scottish Government to align economic and fiscal policy more closely with the priorities and needs of Scotland. The experience of the past decade of fiscal devolution has, indeed, shown differences in policy choices in the powers devolved. But the decade has also illustrated the practical challenges of managing fiscal risk and costs. While independence continues to divide opinion evenly, the more immediate question for voters may be how competing parties propose to navigate tight fiscal constraints. None of this settles the constitutional question. People will continue to disagree on whether the current framework strikes the right balance of autonomy and risk-sharing, or whether independence would better equip Scotland to manage long-term pressures. But it does mean that the coming election will be fought on two interwoven fronts. One concerns Scotland’s place in the Union and the mandate for another referendum. The other concerns the practical realities of funding public services in an era of greater fiscal autonomy coinciding with modest growth, demographic change and rising expectations. Interestingly, the latter may prove more salient in the short term. While independence continues to divide opinion evenly, the more immediate question for voters may be how competing parties propose to navigate tight fiscal constraints. Where additional spending is promised, how will it be funded? If taxes are to rise – or fall – what are the implications for the Budget and for households? The challenge for all parties is to demonstrate that those choices are credible within the economic and fiscal realities Scotland faces whatever its constitutional status. Enjoyed this post? Sign up to our newsletter and receive a weekly roundup of all our articles. All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Image credit: Fotokon on Shutterstock The post Scotland’s election – constitutional reset or fiscal reckoning? first appeared on LSE British Politics .

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