Ianuary and February were not the best months for the Labour government, nor indeed for Labour in Scotland. Last month’s Norstat poll for the Sunday Times found that only 18% of voters intend to back Labour at the Holyrood election in May 2026. This would leave the party tied with the Scottish Conservatives on 18 MSPs each.

The poll also predicts the SNP could secure 55 MSPs, falling short of the 65 required for an overall majority, and the Greens 10. That leaves the door open to an unofficial partnership between the two pro-independence parties. Reform is predicted to return 15 MSPs, with the Lib Dems on 13. This comes just over six months since Sir Keir Starmer won a landslide victory in the general election, when the SNP plunged to just nine MPs. At the time, it seemed almost certain that Scottish Labour leader, Anas Sarwar, was on course to be First Minister next May. 

How this happened in such a short space of time was on many people’s minds at the party’s Scottish conference in Glasgow last month. How much of Scottish Labour’s doldrums are down to the shine having quickly dulled on the government in Westminster? I’m sure we’ve all heard business-owner friends who welcomed the new government, but for whom the 2% NIC increase imposed on employers has wiped out most of that goodwill. 

Since we first drafted this article, however, global political events have overtaken the headlines and all eyes have been on Keir Starmer’s leadership around European support of Ukraine following the heated argument between Trump, Vice-President Vance and President Zelensky in the White House on 28 February. Starmer’s popularity has increased since his visit to the US, having hosted Zelensky in Downing Street, quickly followed by the European leaders’ summit. Over the course of a week he saw his net approval rating bounce up 11 points, although he is still in the doldrums at -28. But people are calling it his best week yet.

But domestically, he still has a steep hill to climb. The spring statement is due on 26 March, and while we were told there would only be one fiscal event each year, many think given everything that’s happened since the Budget, there could be further movement on tax. A U-turn on inheritance tax or NICs looks doubtful. As the recent increase in MoD spending illustrates, the government has the capacity to surprise us, but where could it turn for income if it opted to scrap its NIC increase?

The business environment is challenging right now. The combination of inflation rising to its highest levels in 10 months, pending tax increases, and increasing employer costs makes for one big headache. The business community has been unrelenting in its criticism of the NIC rise. It has come up time and again at business events.

However, as this piece was written, the new monthly survey from Lloyds Banking Group reported a 12-point jump in business confidence to 49%, its highest level since last August. In Scotland, the same measure rose 11 points to 53%. These numbers seem to defy concerns about the increasing costs announced in October. But one survey does not a summer make!   

“We’ve now attended four roundtables, had numerous meetings with HMRC and are meeting Treasury officials to discuss tax policy. But at times it feels we’re no further forward”

An impressive line-up of senior UK ministers, including the Secretaries of State for Business and Trade (Jonathan Reynolds) and Scotland (Ian Murray), were out in force at the Crowne Plaza, down by the Clyde in Glasgow. They joined the top team in Scottish Labour, including Sarwar and Daniel Johnson, the Shadow Scottish Business and Economy Minister, who compered the whole event.    

Murray talked about the UK government needing to be surer-footed and faster-paced. Douglas Alexander, now a trade minister, spoke about the strained post-Budget relationship between government and business but emphasised that Labour is still serious about its growth mission. Chief Secretary to the Treasury, Darren Jones, said that everything on its agenda orbits the conclusion of the spending review, not due until June, because the government is doing zero-based budgets and reviews for the first time.  

There was lots of talk about “brand Scotland” and the need to sell the country globally. The government is intent on coming out to bat for SMEs internationally, with the Scotland Office working closely with the Department of Business and Trade and Foreign Office.  

But there was also lots of chat about the thicket of regulation, with its unintended consequences, and the need to streamline rather than add to it. There were fewer voices talking about best standards and timely and predictable decision making.  

Elsewhere we’ve taken part in discussions about whether there’s a need to rip up the tax code and start again. Clearly defining what the UK tax system needs to address, and assessing whether the current system can achieve that, is something we’ve been talking about for years. And as the sustainability agenda advances, it may be time for a fresh look at how we incentivise green business behaviour, especially in the face of events in the US. 

Currently our tax code and systems are too complex. ICAS has been calling for tax simplification for a long time, as well as for detail on what a strategic (and green) tax road map could look like. We’ve now attended four roundtables with James Murray (Exchequer Secretary to the Treasury with responsibility for HMRC and tax strategy), had numerous meetings with HMRC and will meet Treasury officials this month to discuss how tax policy is made and implemented. But at times it feels we’re no further forward.  

This month also brings meetings with officials and committee staff about the long-awaited audit reform and corporate governance bill – which, it is rumoured, may be delayed once again. This is just one of the topics on the agenda for our cross-party MPs dinner in mid-March. We’ll bring you more of that at a later date. 

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