- Energy costs lowered as home heating oil tariffs removed and 0% VAT on household electricity extended.
- Growth backed with investments in Glasgow and Edinburgh.
- The Scottish Government will have an additional £600 million for public services.
Families and businesses in Scotland will get breathing space from action announced in Budget 2026.
Against a backdrop of global uncertainty, rising energy costs and pressure on household finances, Chancellor John Healey has taken action on the cost of living, fuel prices, and local jobs — alongside more funding for the Scottish Government to provide public services.
In the Budget, John Healey announced:
- Support with energy bills: The removal of the 4% tariff on kerosene will support the 142,000 Scottish households that rely on heating oil. The UK government will extend 0% VAT on household electricity bills for three months, to 30 June 2027, while a Debt Relief Scheme will write off crisis-era debt for eligible households.
- Fuel: the extension of the 5p cut to fuel duty for a further six months until 30 June 2027. The 3.7p cut to red diesel duty continues, which matters for farmers, rural hauliers and other fuel-heavy users across Scotland. He also announced a permanent increase to the generosity of mileage rates to support those who drive for work.
- Food prices: Tariffs axed on over 100 food products, including chocolate and fruit juice. Combined with tariff suspensions earlier this year, this will save households up to £21 annually.
- Pensions: by the end of this Parliament, 93,000 low-income pensioners in Scotland will pay less tax or none at all on their income, as a result of reducing the disproportionate administrative burden of paying small amounts of tax.
- Wages: Increasing the National Living Wage by 3.9% to £13.21 per hour and the National Minimum Wage by 3.9% to £11.27 per hour for 18 to 20-year-olds and by 3.9% to £8.31 per hour for 16 to 17-year-olds and eligible apprentices. An estimated 180,000 workers in Scotland saw a direct pay rise following April 2026’s increase to the National Living Wage and National Minimum Wage.
Backing growth in Scotland
- The establishment of a new Energy Wealth Fund to support Scottish clean energy jobs way into the future.
- £18 million will fund a UK Advanced Chip Design Academy led by the University of Edinburgh, building on Scotland’s strengths in advanced technology.
- £6 million will expand Glasgow’s Scottish Event Campus (SEC), subject to business case, allowing the venue, which hosted COP26 and the Commonwealth Games, to go bigger and better.
- £20 million will see the creation of two Defence Technical Excellence Colleges in the East and West of Scotland.
- Extending duty suspensions for 350 goods to help businesses in the chemicals, plastics, hydrogen, automotive and food and drinks sectors.
- The Budget strengthens Britain’s national security by fully funding the £15 billion Defence Investment Plan, including £4.7 billion that was previously unfunded. Defence spending supports 12,200 industry jobs in Scotland, up 7% from 2025.
Secretary of State for Scotland, Douglas Alexander, said: “This is a budget that puts money back in the pockets of Scottish households, backs businesses, and puts Scotland firmly at the heart of the UK government’s plan for growth and reindustrialisation.
“We’re helping families tackle the cost of living by cutting the standing charges from gas bills, saving households around £45 a year, then looking to remove them altogether. We’re also extending the VAT cut on energy bills, as well as removing the tariff on heating oil.
“But we’re not just easing the pressure today, we’re building Scotland’s future. £18 million for a semiconductor manufacturing research centre at the University of Edinburgh, £6 million to expand the Scottish Event Campus and grow on the legacy of COP26. That’s creating jobs and good growth in every postcode.
“There’s a boost for Scotland’s public services too, with an extra £600 million for the Scottish Government to spend.”
Funding for public services
The Scottish Government’s main source of funding comes through the block grant. This includes money collected from taxpayers across the UK – including from people in Scotland – which is then available for the Scottish Government to spend on devolved services. The Scottish Government also raises its own revenue, through the Scottish Rate of Income Tax, and non-domestic rates on businesses, for example.
Spending Review 2025 provided the Scottish Government with their largest spending review settlements in real terms since devolution in 1998, receiving an average of £50.9 billion per year between 2026-27 and 2028-29.
Changes in the devolution roadmap may have an impact on the funding of the devolved governments. Our approach to fiscal devolution in Scotland, Wales and Northern Ireland is already well established, however, we will engage with devolved governments on any implications for their budgets in the usual way to ensure they continue to be funded to deliver a comparable policy offer.
The Scottish Government has at least 20% more funding per person than equivalent UK Government spending in the rest of the UK. The higher amount reflects that providing services across Scotland genuinely costs more. This means that for each £1 of equivalent UK Government spending in the rest of the UK, the Scottish Government has at least £1.20 to spend per person in Scotland.
The Scottish Government will receive an additional £600 million, on top of an additional £1.7 billion from Budget 2025 and Spring Forecast 2026.
an Murray MP – the MP for Edinburgh South – has welcomed cost of living support for families as the Labour Government announced its Budget today.
John Healey’s Budget provides breathing space for families by extending the cut to fuel duty and the removal of VAT from household energy bills.
It also sets out a plan to abolish gas standing charges, which will save the majority of households an average of £45 a year.
The Budget provides an additional £600mn for Scottish public services, meaning that the Scottish Government have received over £18bn in extra resources since Labour came to power in July 2024.
Across Scotland, Labour also announced it was investing in the Edinburgh-Glasgow Central Belt, a key area for world-leading strengths as identified in the UK’s Modern Industrial Strategy, through £6mn of new funding to expand Glasgow’s Scottish Event Campus (subject to business case) and £18mn new funding for a UK Advanced Chip Design Academy led by the University of Edinburgh.
Ian Murray MP said: “These are Labour decisions: backing families and businesses today while building a stronger Britain for tomorrow.
“I know people are struggling with the cost of living. I see it every day in my constituency mailbag.
“That’s why we’re extending the cut to fuel duty and the removal of VAT from energy bills, and working to abolish gas standing charges.
“It’s also why the Chancellor announced a £100 energy support payment to households in Council Tax bands A – D in England.
“That money will be passed onto the Scottish Government via the Barnett Formula. It’s now over to them to ensure the support is passed onto households here in south Edinburgh and across Scotland.”
UK Budget delivers ‘real cut’ to Scotland’s funding
JENNY GILRUTH – Action on energy bills ‘falls short of what is needed’.
The UK Budget delivers a real terms cut in Scotland’s budget of around £650 million in 2027-28, the Deputy First Minister has warned.
Scotland’s resource block grant is set to reduce by 1.3% in real terms in 2027-28, equivalent to a reduction of around £550 million. Scotland’s capital budget will see a 1.5% real terms reduction in 2027-28, equivalent to around £100 million.
The Deputy First Minister also confirmed that the Scottish Government will ensure that households in Scotland benefit from the £100 payment for energy bills support.
Jenny Gilruth said that while any measures to bring down the cost of energy bills are welcome, the steps confirmed by the Chancellor today fall far short of what is required and do not meet the promises on which the UK Government came to office.
The Deputy First Minister said: “The Scottish Government’s budget will be cut by around £650 million next year – reducing the money we have to spend on public services and supporting people with the cost of living.
“The Prime Minister has previously claimed that he would respect devolution and the Scottish Government – but his actions do not match his words. Cutting Scotland’s budget shows that, yet again, we are being treated as an afterthought.
“The Scottish Government will ensure that households in Scotland will benefit from the one-off £100 payment for energy bill support, however, it is clear that the measures announced today fall far short of the action which is required. “
Furthermore, this support does not come close to meeting the promises on which the UK Government came to office, including reducing energy bills by £300 which remain significantly higher than they were in July 2024. The UK Government has failed to meet the moment and has failed to keep its promise.
“It is also unacceptable that there was no announcement about ending wider austerity policies which are pushing families into poverty like the bedroom tax, the benefit cap and “young parent penalty” in Universal Credit which would make a significant difference to tackling poverty.
“The Chancellor had the opportunity to lift thousands more families out of poverty, and he has chosen not to.
“We will now take the time to assess the full implications for Scotland of today’s statement. I will be announcing further details as part of the Scottish Budget on 3 December.”
Anti-poverty campaigners say Budget won’t share the wealth
The Poverty Alliance welcomed Budget moves to help people with rocketing energy bills – but warned they won’t go far enough to help people in fuel poverty.
Peter Kelly said: “There are nearly 750,000 households in Scotland who are in fuel poverty. The energy price cap today is £1,723, and in January it’s predicted to rise to nearly £2,000. In that context, a payment of £100 is welcome, but it won’t be enough for people who are already being pushed into debt and arrears.
“As well as looking at standing charges on energy bills, the UK Government must bring in a social tariff – making sure that no-one is hit with bills that they simply can’t afford to pay.”
Scotland’s anti-poverty network expressed disappointment at the lack of any major extra investment in social security.
Peter Kelly said: “We can’t expect people to build a life out of poverty on quicksand. When rates of Universal Credit and other social security payments are too weak to support people, it pushes them closer to destitution and makes it harder to build a better future.
“We hope that the forthcoming reviews into support for disabled people and young people have clear vision for improving financial security and investing in a stronger society for all of us.”
The Poverty Alliance also expressed disappointment over the Chancellor’s failure to tax wealth in the same way that work is taxed.
They had backed calls to equalise the way Government treats wealth and work, by bringing rates of Capital Gains Tax into line with Income Tax.
Tax Justice UK estimates the move could have raised £14 billion for the Treasury, with the Scottish Government getting over a billion pounds a year extra for its budget.
Peter Kelly said: “People are losing faith in politics because they feel that politicians aren’t working to meet their needs. Taxing wealth in the same way as work would bring in extra resources that we could invest in building a better future, and a more just and compassionate society.
“We all rely on social security and local services being there when we need them – and for people who are pushed into poverty, they are an essential lifeline.
“The money raised from fairer taxes on wealth could have been used to take more children out of poverty.”
STUC: Budget provided sticking plasters when Scotland needs radical surgery
Reacting to the UK Government’s Budget, STUC General Secretary Roz Foyer said: “We always knew exorcising the ghost of Thatcher and eradicating 40 years of neo-liberalism was going to be a tall order for the Chancellor and there are some welcome tricks in the Budget, but not enough to scare away fears of rising costs.
“Whilst this Budget offers some helpful sticking plasters on energy costs, cost-of-living support and food prices, it falls short of the radical surgery needed to fix the UK economy and support working-class communities. Perhaps most significantly, the Budget failed to set out the radical rewiring of the state and the end to neo-liberalism that the Prime Minister himself had promised.
“Payments to stave off the cold for those in targeted council tax bands are a good first step in lieu of bringing down wholesale energy bills and it is right that the Chancellor has listened to the calls of unions to tax the banks to fund this measure. However, bills are likely to rise far quicker than this payment can offset and we will continue to press the UK Government to go further and faster, given the ‘big four’ banks made £29 billion in the first six months of 2026 alone
“With an expected £600 million allocated to Scotland, Scottish Government ministers cannot credibly sit on their hands and plead poverty. The Scottish Government should urgently review its public sector cuts agenda in light of this Budget.
“Rewiring the state will take longer than just one Budget and changes to procurement rules which strengthen British jobs and domestic supply chains are to be welcomed. The commitments made on defence spending require further examination, but unions are clear that funding for defence cannot come from public sector efficiencies. Co-funding for Defence Technical Excellence Colleges (DTECs) in both the east and west of Scotland is welcome and should help provide well-paid, unionised jobs.
“This Budget doesn’t yet offer the concrete reindustrialisation Scotland needs, nor the further devolved powers for our Parliament and local authorities that had been envisioned. The Prime Minister must work at pace to show that his words on ensuring communities are empowered from the bottom-up, rather than the top-down, were not hollow.
“Workers can ill afford any further delay to the hope that was promised to them.”
