The Scottish Cabinet Secretary for Finance and Local Government, Shona Robison MSP, published the Scottish Budget 2025-26 on 4th December. The Budget centered on four key government priorities – eradication of child poverty, growing the economy, tackling the climate emergency, ensuring high quality and sustainable public services.
The Scottish Government has faced difficulties in 2024, which have been exacerbated by the collapse of the Bute House Agreement with the Scottish Greens and the resignation of Humza Yousaf as First Minister. John Swinney, the former SNP leader and longstanding Deputy First Minister under Nicola Sturgeon, was elected by his party to repair the damage and save the government’s fortunes.
As a minority government, the SNP does not have the ability to pass the budget on its own. The government needs either the Scottish Greens or Scottish Liberal Democrats to support the budget and avoid an early election. The Parliament will vote on the proposals in February. If the budget fails to pass, this will trigger a general election.
The UK General Election in July was a disastrous result for the Scottish National Party, with the party losing 39 seats at Westminster, falling behind Scottish Labour with only 9 MPs elected. Up until recently, opinion polls throughout the year had predicted that Anas Sarwar would become the first Labour First Minister of Scotland since Jack McConnell lost the 2007 Scottish Parliamentary elections.
However, new polling over the weekend following the budget announcements by The Times now has the SNP 14 points ahead of Labour. This is a drastic departure from polling as recently as a month ago, which put the two parties neck and neck. The headline measures in the budget have been squarely targeted to whittle away Labour support. If early polling is any indication, this plan looks to have worked.
The Budget – Headline Announcements
Shona Robison stated to MSPs that the Budget was “filled with hope for Scotland’s future.”
Among the main pledges:
- The Scottish Government pledged £21 billion to health and social care, including an increase in capital investment spending.
- The Affordable Housing Supply Programme will receive £768 million to enable housing providers to deliver at least 8,000 homes for social rent, mid-market rent and low-cost home ownership.
- Over £300 million will be invested in energy efficiency and clean heat measures to help reduce household energy bills.
- £7 billion will be invested in Scotland’s infrastructure network, including £150 million for offshore wind installations and £1.1 billion for rail infrastructure. This includes previously announced funding for the electrification of the East Kilbride line.
- £100 million will be allocated to continue the rollout of Scottish digital connectivity programmes.
- The Scottish Government also proposes to invest over £2 billion in Scotland’s colleges, universities and skills development programmes in ‘recognition of their contribution to driving economic growth.’ This includes a commitment to continuing free tuition at universities and widen access to lifelong learning in the workplace.
- The Scottish Budget for the next financial year has increased funding for the Scottish Government’s cladding remediation programme to £52.2 million – up from £41.3 million in 2024-25.
- The budget increased funding for town centre regeneration to £62.2 million – an additional £1.5 million. The focus is on supporting disadvantaged communities through place-based, community-led initiatives. Projects will target high streets in areas like Dundee, Arbroath, and Stranraer, among others, aiming to reduce inequality and foster economic growth.
- Health and social care has been prioritised, with significant investments aimed at improving services and addressing challenges within the sector. The proposed total funding for health and social care is £21.7 billion, marking a £2 billion increase from the previous year. Funding has been allocated for major hospital projects, such as replacing Edinburgh’s Eye Pavilion, rebuilding Belford Hospital in Fort William, and constructing the new Monklands Hospital in Airdrie. Approximately £200 million will be used to reduce waiting times, with a pledge to ensure no one waits more than 12 months for outpatient, inpatient, or daycare treatments by March 2026.
What does this mean for Scotland?
Shona Robison announced that the funding made available by Chancellor of the Exchequer, Rachael Reeves MP, will increase the Scottish Government’s spending power by around 1%. This is limited primarily because of the increase to national insurance contributions for public sector organisations.
- Income Tax changes have been made to the Starter and Basic Rate thresholds. Taxpayers in Scotland earning up to £15,397 will pay 19% income tax and those earning up to £27,491 will pay 20% income tax. The tax base in Scotland will raise just under £20.5 billion in revenue.
- Scottish Government funding in skills is targeted to ensure that c. 500,000 people will gain new employment skills and learning. It is also designed to accommodate c. 40,000 apprentices in training, earning as they learn. The funding will be granted to three main bodies – Skills Development Scotland, the Scottish Funding Council and Student Awards Agency Scotland who grant free tuition to students.
- The Budget includes investment in green jobs. This includes enhancement of public transport networks across rural areas and ensure private investment streams for green energy projects. The funding also includes the support for the construction of a Renewable Energy Hub in Aberdeen (in partnership with the UK Government) and funding of £100 million over five years to support Hydrogen projects as part of the Emerging Energy Technologies Fund.
- There will be further investment in the Learning State Investment Programme for new, modern state-of-the-art school buildings. This is part of a government pledge to deliver 47 modern, state of the art schools by 2028. Other building projects supported through the Budget include the Dunfermline Learning Campus.
Reaction and Next Steps
- Shona Robison MSP announced that she “was proud to present a budget that delivers on the priorities of the people of Scotland” and that the Scottish Government “understand the pressures that people are facing.”
- Craig Hoy, Scottish Conservative MSP for South Scotland, said that the Budget “was a chance for the SNP to set a new direction on tax and spending” but “is just more of the same—inputs, not outputs, and half-hearted attempts to fix the problems that the SNP has created.”
- Michael Marra, Scottish Labour MSP for North East Scotland, said that the Budget “benefits from an additional £5.2 billion from the UK Labour Government” but concluded that “Scotland is going in the wrong direction under the SNP.”
- The Scottish Parliament now must decide whether to support or oppose Shona Robison’s proposals by February. The start of party negotiations between government and opposition begins in earnest.
The SNP have presented a formidable challenge to Scottish Labour, with pledges to re-introduce winter fuel allowances and the scrapping of the two-child benefit payment cap. It is now a difficult task for Anas Sarwar and his party to reject a budget that maps out the delivery of both. Scottish Labour has a lot of work still to do if it is to become the next Scottish Government – an early election in 2025 might hinder this opportunity. Before the next election, whenever it comes, Scottish Labour’s success at the polls depends heavily upon how Scotland views the work of the UK Labour Government – the UK Government’s function (or dysfunction) may determine the outcome of the Scottish election.
The Budget published last Wednesday will be one of the defining moments in Scottish Parliamentary history – a budget that keeps a minority government in power for its final year or a budget that will, for the first time, force an early Holyrood election.
In 2024, Cavendish expanded its services in Scotland. If you’d like to find out more about how the Scottish Budget and upcoming Scottish Parliament elections will impact your business and how Cavendish are best placed to help you – get in contact with us here.