Labour has just thrown a drowning SNP a lifeline for Holyrood 2026

This week began with what seemed a clear sign that Labour was set to tighten the screw on the SNP, boxing nationalists in, and smoothing the way to a possible Anas Sarwar premiership at Holyrood.

The week ends, however, with the SNP shored up thanks to Labour, and the chances of Sarwar making a breakthrough at the Scottish Parliament as slim as they’ve ever been.

On Sunday, the public was drip-fed Labour talking points ahead of a planned speech by new Chancellor Rachel Reeves about the state of the nation’s finances. Tory vandalism had left a £20 billion hole in the coffers, we were told.

Simultaneously, the Resolution Foundation – a think-tank closely linked to the Labour Party – set out how wealth taxes, like inheritance and capital gains, could be used to plug the shortfall.

Torsten Bell was chief executive of the Resolution Foundation until May when he stood down after being selected to run for Labour. Now an MP, Bell is parliamentary private secretary to Pat McFadden, the key architect of Starmer’s general election victory.

Any notion, though, that this was a softening up exercise to prepare the rich for a taste of heavy taxation was quickly put to bed.

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On Monday, Reeves – an economist – was much less John Maynard Keynes and more George Osborne, the Tory chancellor who first gave us austerity.

On the back of what turned out, according to Labour, to be a £22 billion budget blackhole, Reeves announced cuts to infrastructure spending on hospitals and roads, and curbs on the winter fuel payment for pensioners.

She also announced the scrapping of plans to cap care charges for the elderly, and warned that the autumn budget would “involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”.

Chancellor Rachel Reeves was much less John Maynard Keynes and more George Osborne (Image: PA)
Evidently, many of these announcements apply only to England and Wales, but they have downstream ripple effects in Scotland, and more importantly they signal the direction of travel for the new Labour government. It does not appear to be one which squeezes the rich to help the poor.

Indeed, Reeves specifically inverted the Keynesian mantra ‘anything we can actually do, we can afford’, when she said: “If we cannot afford it, we cannot do it.”

Reeves was handing the SNP its surest lifeline for Holyrood. Last week, the SNP made clear what its survival strategy was for the Scottish Parliament: positioning itself as Labour’s conscience. If Labour was mean-spirited, then the SNP would be kind.

The SNP tabled an amendment in the Commons calling for the hated two-child benefit limit to be scrapped. It should be noted this was not a cynical move by the SNP, the party firmly believes the policy is immoral and has made that clear over a long period of time. However, in this case party morality collides neatly with the SNP’s best hope to stave off ruin at Holyrood.

Starmer had to suspend seven Labour MPs who backed the SNP amendment. To some, it was a sign of strength from the new Prime Minister. In Scotland, many – especially those who once voted SNP but lent support to Labour at the election – will see it as a worrying omen for the future.

This is not the landscape Anas Sarwar wishes to enter if he hopes to take Holyrood from the SNP. Regardless of the rights or wrongs of means-testing benefits – like the winter fuel payment – for wealthy pensioners, it opens up the field to the SNP, allowing the party to portray Labour as Tory-lite.

Not just that, it allows the SNP to portray Scottish Labour as ‘the branch office’. There’s some fairness in that. Sarwar told voters before the election that he did not accept there would be spending cuts under any new Labour government. Now he’s facing calls to apologise for misleading the electorate.

Sarwar has also backed the Scottish replacement benefit for the winter fuel payment, which is due to take effect next year, being means-tested. That will create concerns around other universal benefits in Scotland, like prescriptions and tuition fees – though Sarwar insists there’s nothing to worry about.

It also presents Sarwar as falling neatly into line behind his boss in London. Again, not a great look in Scotland.

Bundle all this together and two themes appear: the bear-trap Labour has built for itself when it comes to Holyrood in 2026, and the gift Labour has handed to the SNP.

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Let’s go back to those swing voters at the election. Most of them were once Labour voters who sickened of the party throughout the 2000s and shifted to the SNP in numbers large enough to secure the party its 2011 majority.

They also shifted away from the SNP and back to Labour in numbers large enough this July to decimate the nationalists at Westminster and help beef up Starmer’s muscular majority.

However, those leftwing and progressive Scottish swing voters do not want Osbornomics. They do not want austerity. And they do not want anything which smacks of the poor having to carry the burden for the rich.

If Labour had moved towards a policy of wealth taxes – justifying it through the economic mayhem wrought by the Tories – then the SNP would have been flat on its back today.

John Swinney would have little room for manoeuvre and even less scope rhetorically. Sarwar would have been able to forge deeper, more stable bonds with voters who switched earlier in the summer.

Now, though, with UK Labour seemingly in Tory-lite mode, those voters who switched have every reason to return to the SNP at Holyrood. The SNP can promise to mitigate Labour austerity and paint Sarwar and Starmer as liars, vigorously applying the ‘Red Tory’ slur with abandon.

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Put crudely: when Westminster is nasty, the SNP do well; when Westminster is nice, the SNP do badly.

Now, perhaps, come the autumn budget, Reeves will pull the biggest switcheroo in political history and say she must bring in wealth taxes to offset Tory ruin. It’s unlikely, but if she does then the SNP is in trouble.

The only way for the SNP to secure its hold on Holyrood is to bang the leftwing Keynesian drum relentlessly – it was the left which abandoned the party after all – and to paint Starmer as a charlatan and Sarwar as his mini-me.

Starmer and Reeves hold the fate of both the SNP and Scottish Labour in their hands. Stick with austerity and give the SNP a free pass at the next Holyrood election; shift direction towards a more progressive position, and hand the keys of the castle to Sarwar.