Blog: Why baby steps towards tax reform won’t fund a fairer future

This blog was written by Jamie Livingstone, Head of Oxfam Scotland.

Tax Justice Scotland is seeking to promote a better conversation on tax policy. As such, the views expressed in this blog are those of the author and do not necessarily reflect the views of Tax Justice Scotland and its diverse supporters.

This week, we saw a blizzard of financial forecasts, strategies and plans in Scotland. There’s plenty of reading to be done, but here are some rapid early headlines. 

Overall Scottish public spending is growing in real terms. But the rise is nowhere near big enough to meaningfully strengthen over-stretched public services – from social care to schools – or to give comfort that legal targets on child poverty and climate action will be met. 

It also fails to adequately reflect the bigger picture: the impact of previous austerity on public services and the growing demands on them due to Scotland’s ageing population. In fact, there’s a growing gap between what’s needed and the funding available – even to largely stand still.

The Scottish Fiscal Commission (SFC) says, without action, the Scottish Government’s day-to-day ‘resource’ budget has a forecast gap of nearly £1 billion in 2026-27 and over £2.6 billion in 2029-30. The IFS warns that the latter gap could be closer to £3.5 billion, but – even at the lower level –  it says the gap is the equivalent of existing spend on police and fire services in Scotland put together. Let that sink in.

Similarly, without action, the SFC also forecasts that spending on infrastructure, including in crucial areas, like social housing, faces a £2.1 billion gap by 2029-30. The Scottish Government must fill these major gaps; in fact, it’s legally required to do so.

Three pillars, shaky foundations

With only limited borrowing powers, and no control over how UK tax and spending choices impact Scotland’s Block Grant, Scottish Ministers say they’ll make ends meet through action across three pillars. 

Firstly, public sector efficiency and reforms – including 0.5% annual cuts to the workforce, which they hope, but pointedly don’t promise, will be pursued without compulsory redundancies.  A Spending Review will be published alongside the Scottish Budget later this year to outline allocations by department, with Ministers pledging to “protect valuable frontline services”. Secondly, supporting faster economic growth – we’re told of the sustainable and inclusive variety – in the hope this will boost tax revenues. In our volatile world, that’s optimistic at best. And thirdly, somewhat encouragingly, “ensuring a strategic approach to tax revenues”.  

But will efforts across these pillars really be sufficient to cover existing spending plans, far less: 

… To meet the legal target that fewer than one in 10 children live in poverty by 2030?

… To tackle the social care crisis and housing emergency?

… Or to end Scotland’s contribution to the climate crisis by 2045 – as required by law? 

In legislation and policy rhetoric the Scottish Government is committed to each of these. Delivering upon those promises is critical to the individual and collective wellbeing of all Scotland’s citizens.

Increasingly, the choice is clear

To avoid sacrificing vital policy goals, it’s more and more obvious that tax justice must play a bigger role. Yes, we’ve seen some small, but positive changes to raise more from Income Tax in Scotland. For that, Scottish Ministers deserve credit: changes made to date are raising important extra money, with some £616 million more to invest this financial year alone.

But, if their promises are to be delivered, they must now show greater ambition and greater resolve. To be clear, the same fiscal challenge faces all political parties in Scotland – and all must respond. They should act for the people of Scotland, who think the very richest should pay more tax – with more than three-quarters (79%) saying they’d rather tax the very richest than see cuts to public spending. 

Baby steps towards reform won’t cut it

In practical terms, yesterday’s “Fiscal Sustainability Delivery Plan” commits the Scottish Government to “maintaining and protecting our progressive approach to taxation” – not to meaningfully and quickly advance it. For example, while Scotland’s Minister for Public Finance says a revaluation of the property prices upon which the Council Tax is applied is “absolutely needed”, the Plan extends the long-standing holding pattern.

Yes, there’s a commitment  to “explore the creation of more revenue-generating powers for local authorities” and “to build consensus for a coherent option for meaningful and long-term reform of Council Tax”, but reform “proposals” are again pushed to “the next parliamentary term”. Tax Justice Scotland believes revaluation is an essential step towards replacing the Council Tax.

Meanwhile, on the long-awaited Air Departure Tax, the planned devolved replacement for UK-level Air Passenger Duty in Scotland, we finally have new principles, but again no concrete progress – this despite new analysis showing more than 12,000 private jet flights used Scotland’s airports in 2024.

Finally, under a basket of activities branded “future tax reform” – there’s a promise to publish a literature review of wealth taxation and to consult on how this learning could be applied in a Scottish context.

These feel like baby steps towards change, when strides are needed – at both UK and Scotland levels – to make the tax system fit for purpose and particularly to better tax wealth.  While ensuring tax reforms are well designed really matters, a detailed plan for reform is both necessary, and overdue, but was perhaps always too much to hope for. 

However, Scottish Ministers should have set a clearer direction of travel towards swift and fair tax reforms,  rather than leave services to face yet more pressure. After all, while higher earners in Scotland pay a bit more tax compared to the rest of the UK, the proportion of income paid in personal tax for middle earners is still well below the EU average, and markedly below the rates in Nordic countries whose public services we often admire. 

Over-time, as IPPR Scotland says, many of us may need to pay more for the Scotland we want to see.

Putting the foot down on reform

Faster progress on tax justice isn’t an optional extra – it’s increasingly mission critical.  Fairer taxes should be seen as an investment in the Scotland we all want. 

People simultaneously want and need a strong NHS, quality social care and schools, action to protect our environment, and a dignified social security system that helps all of us when we need it. But to have these things, our political leaders must make our tax system work much harder and be much fairer, not cling to an unfair tax system that’s not fit for purpose.

Crucially, fair taxes can raise the money we need to grow cleaner, greener industries. That’s how we create an economy where everyone has a fair chance and prosperity is built to last.

So, as the dust settles on these new forecasts, strategies and plans, tax justice must quickly rise to the top.