The Scottish Budget: what’s in it?

Following weeks of speculation about its contents, Scotland’s finance secretary, Shona Robison, announced to MSPs the Scottish Government’s tax and spending plans for 2025/26 on Thursday.

With a confirmed uplift in the block grant from the UK Government to Scotland, much of this year’s budget - unlike last year’s - was good news for the majority of Scotland’s public services, for businesses, and for people who receive support through social security.

Setting the scene

Robison’s budget this year is the first since Labour came into government in Westminster in July, and there’s certainly a change of tone. The bleak reality of last year’s spending commitments left many public services having to make tough choices, with Robison herself suggesting there would have to be a significant reduction in the number of people employed in Scotland’s public sector.

Robison has more cash to play with this year. The block grant from Westminster is up overall, although it is worth noting there has been a decrease in capital funding through this grant (ringfenced money for infrastructure and other projects) compared with 2022/23.

In addition to this, the finance secretary pointed to an overall increase in the average earnings of Scots workers, leading to increased revenue gathered through income tax. This has enabled the Scottish Government to increase the basic and intermediate bands (the level with which taxpayers start paying these rates) by 3.5% each, meaning almost all taxpayers in Scotland will see a slight decrease in the amount coming off their payslips.

As a result of this, Robison noted, around 60% of workers in Scotland will pay less income tax here than if they lived anywhere else in the UK.

Who’s getting what?

There’s a serious focus on three key areas in this budget: health spending, net zero investment, and tackling child poverty.

On health, the Scottish Government is committing “record funding to the NHS”. They say this every year, though this year it’s worth talking about as health boards across are set to receive around £1.5 billion above inflation in funding from government. This will go some way in helping to reduce waiting times, tackling delayed discharge, and fully fund pay deals struck between the Scottish Government and NHS workers.

In funding the journey net zero, Robison’s flagship announcement is surely the near-tripling of funding to offshore wind, a spending commitment to be set at over £150 million in the next financial year. To help the offshore wind industry engage with Scottish Government teams, this funding commitment comes with an announcement of the establishing of a hub to be located in the North East of Scotland.

Coinciding with this is £25 million in funding to create and support jobs in the green energy sector supply chain, £190 million to promote active travel, and an overall £4.9 billion to “address the climate emergency.”

In tackling child poverty, the finance secretary’s headline-grabbing announcement was that the Scottish Government would scrap the two child limit on Universal Credit in 2026, with the caveat that the UK Government would have to share relevant data with the Scottish Government to enable them to do so. Many will welcome this as the right thing to do, however it’s also a cleverly crafted political stunt, and will push the Labour government closer to finally backing down to calls from opposition parties, as well as their own MPs, to scrap the cap.

The backdrop to this, of course, is the commitment by the Scottish Government to mitigate part of the Labour UK Government’s scrapping of the universal Winter Fuel Allowance, which has been a highly controversial policy since it was announced during the summer.

Overall, Robison announced a £800 million increase in social security spending, ensuring benefits rise by inflation.

A political challenge

It’s a parliament of minorities so they have to work together to get things done. Never is this more evident than when there’s a budget announcement and the finance secretary is appealing to all parties to back the SNP’s tax and spending plans for the next financial year.

The Conservatives criticised the SNP government and its budget for what they referred to as a “black hole” in its spending, which they say has been caused by mismanagement of Scotland’s finances and public services, though Craig Hoy MSP welcomes an increase in NHS spending.

Labour are being backed into a corner on this. If they vote against the budget, the SNP will criticise them for voting against the scrapping of the two child limit – something Labour MSPs have been calling for the Scottish Government to do.

However, Labour may calculate it has more to gain by the budget failing; this would likely result in a Scottish general election and current polling would suggest the party could make some gains at the SNP’s expense.

Historically, the Scottish Greens have worked constructively with SNP finance secretaries to support budgets - however, they have indicated a reluctance to do so this year. Instead, it may be the Liberal Democrats that give Shona Robison the votes she needs to get her tax and spending plans for 2025/26 over the line.

The next few weeks will be busy in the corridors and committee rooms of Holyrood as MSPs scrutinise the SNP’s budget and make calls for changes and amendments. It’s the Scottish Parliament working in the way it was always meant to, where politicians across the political spectrum are forced to work together to get things done.

Time will tell if this budget will be enough to bring people together.

Lee Robb.

Policy + public affairs strategist.

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