Meeting of the Parliament 07 January 2026
I agree with the notion that our current politics is defined by the cost of living and by people’s perception of whether their Government or Governments are on their side—or not, as the case may be. That includes the question of tax policy. This Parliament has had tax-varying powers since its inception, but only since 2017 has the Scottish Government used them, to varying degrees of success and popularity. Over the next few weeks, particularly regarding the approaching budget, the focus will centre on the conversation about tax bands and rates and on the perceived doves and hawks in relation to taxation. However, we are completely missing the other elephant in the room, which we rarely debate: whether the tax differential north of the border actually generates the level of additional revenue that the public are led to believe that it does.
The answer to that question is that it does not. We are not seeing a proportionate net benefit as a result of paying more tax. In this financial year, as other members have mentioned, the Scottish Government expects to generate an additional £1.7 billion in Scottish income tax due to its policy decisions. That is fine—that is its decision. However, the Scottish budget will benefit to the tune of only £616 million. Those are independently verified figures. To put it simply, for every £1 in extra tax that is paid by a Scottish taxpayer, only 36p will be available to the Scottish Government to spend on public services.
The Auditor General has been crystal clear about that disparity. He states why that is the case. I see the minister looking at me strangely. I can hand him the Audit Scotland report, which states that fact. We know that what is generated in revenue does not all come back to the Scottish purse. The reason why it does not is that we have an underperforming tax base, sluggish wage growth and productivity in Scotland, and sluggish overall economic growth compared with other parts of the UK. That is what is creating the funding gap.
I know that the fiscal settlement is complex—probably only a handful of people truly understand how it works—but the Government too often cites the tax intake figure as gospel in order to vindicate its tax policies. Audit Scotland has also criticised the Scottish Government for its complete lack of transparency on the issue.
If we ask people in the real world whether they are comfortable paying that wee bit more in tax to fund our precious NHS or to make sure that our teachers are paid well, as others have argued, some might very well say, “Yes, absolutely.” However, I am not so convinced that they would sign up to an alternative tax regime if they knew how little of it benefited the Scottish budget.
Of course, we need to raise the size of the overall tax base—