Tag: Economy

Scottish Budget: Delivering for families and public services?

The 2026-27 Budget will support a stronger NHS, with a record £22.5 billion for health and social care, expand cost of living support and invest in Scotland’s infrastructure.

Published alongside the latest multi-year Scottish Spending Review, Infrastructure Strategy and Infrastructure Delivery Pipeline, the draft Budget invests almost £68 billion including direct support for families and household budgets.

The 2026-27 Budget includes: 

  • a cost of living package to: help families with funding to trial a programme of activities in a range of primary schools between 3-6pm; a Summer of Sport – free children’s sporting activities, including lessons on how to swim for every primary school child in the country; and a breakfast club for every primary school by August 2027
  • continued investment in Scotland’s existing cost of living measures, including free prescriptions, free eye examinations, removal of peak rail fares on Scotrail, free tuition fees for young Scots, free school meals for thousands of children, including all pupils in P1 to P5, and free bus travel for under-22s and over-60s
  • funding to increase Scottish Child Payment to £28.20 per week and investment to allow the introduction of a premium payment of £40 per week for eligible children under 12 months from 2027-28, bolstering efforts to drive down child poverty
  • extra funding to keep more children out of poverty from funds initially set aside to mitigate the UK Government’s two-child cap, including £50 million of whole family support and a further £49 million for measures to be announced in the Child Poverty Delivery Plan in March
  • tax choices which increase the Basic and Intermediate rate income tax thresholds to put more money in the pockets of low and middle income earners, maintain current income tax rates and bands, and provide a competitive non-domestic rates relief package worth an estimated £864 million, including measures for pubs, restaurants and retailers
  • a record £22.5 billion for health and social care, including a record £17.6 billion for NHS boards and resources to begin the national rollout of walk-in GP clinics, making it easier to access same-day appointments
  • an almost £15.7 billion record settlement for local government to support the services communities rely on including social care and education
  • significant extra funding for universities and colleges, with colleges seeing a combined increase of £70 million in resource and capital funding, equivalent to a 10% uplift,  targeted support to help retrain workers in the oil and gas sector and ongoing commitment to Scotland’s apprenticeships, which this year will provide more than 31,000 Scots with a pathway to sustainable, well-paid jobs
  • over £5 billion to tackle the climate emergency, reduce carbon emissions and increase resilience as well as backing regenerative and sustainable skills in food and farming
  • £4.3 billion transport funding including investment in railways, the renewal of the ferry fleet, removal of peak season fares for residents of Orkney and Shetland on Northern Isles ferries and nearly £200 million for the dualling of the A9
  • record investment in new affordable homes

Ms Robison said:“This Budget delivers for families across the country, for a stronger NHS, and for a more prosperous future. 

“It will fund landmark policies to continue efforts to eradicate child poverty – investing in a brighter future for Scotland and the children growing up here.

“Almost £68 billion is being invested in 2026-27 and almost £200 billion through the Scottish Spending Review and Infrastructure Investment Pipeline, demonstrating the scale of our ambition for our nation.”

Other measures include:

  • from April 2027, an Air Departure Tax (ADT) will come into force and the framework offered by the new ADT will be used to introduce a private jet supplement
  • the introduction by April 2028 of two new council tax bands for the most expensive properties in Scotland, those worth more than £1 million, on an up-to-date valuation
  • support for high-growth firms to attract private investment and connect entrepreneurs
  • £200 million for the Scottish National Investment Bank – delivering on the commitment to invest £1 billion in the Bank by the end of the parliamentary term
  • record funding for police and fire services and an additional £10 million investment in community justice services
  • a £20 million increase in the culture budget, recognising Scotland is richer because of its world-famous culture and creative sector
  • support for the creation of a diverse and sustainable supply chain for offshore wind, to boost the economy.

Scottish Budget 2026-27

Scottish Spending Review 2026

Infrastructure Strategy

REACTIONS:

Responding to today’s proposed Scottish Budget, Poverty Alliance Policy & Campaigns Manager Ruth Boyle said: “People in Scotland want a just and compassionate society – but too many feel the system is rigged against them.

“There was some good news today – but we can do much more to make sure that every child in Scotland gets the investment they need for a decent life and a better future.

“Ensuring that every child in primary school gets a healthy breakfast is an excellent investment, because no child should go to school hungry.

“Increasing the Scottish Child Payment to £40 for eligible households with a baby under 1 is welcome and will help families at a time when they face increased costs. However, this must be a first step towards boosting that payment to £40 for every eligible child in the country.

“That is the kind of fundamental investment the Government needs to make if they are serious about meeting the 2030 child poverty targets.

“With Scotland not on track to meet those legally binding targets, we need all political parties to set out their plans to invest in country where no child lives in poverty. Our children can’t wait any longer.

“We can make that kind of investment in Scotland – and there is support for it. In among the Budget documents is new polling from YouGov showing that 54% of people in Scotland believe that Government should redistribute income from the better-off to those who are less well off. Just 29% disagree.

“The Scottish Government must raise revenue to invest in our shared national priorities, like tackling child poverty and reducing the cost of living. It’s right that the Government has turned to those with the biggest assets to contribute more with a tax on private jets and increased council tax for the highest value homes. 

“This has to be the start of long-promised, fundamental reform of council tax so that our local councils can provide the services that all of us need, and that are a vital lifeline for so many households in poverty.

“The Poverty Alliance will continue to call for the measures we need to provide a Minimum Income Guarantee that no-one will fall under – including increasing wages, investing in strong public services, and providing a social security system that gives everyone in Scotland a secure foundation to build a better future.

“Today’s budget has some positive steps towards that ambition – but we need to go further and faster if we are to build a Scotland free from poverty.”

Commenting on today’s draft Scottish Budget, Mary Glasgow, Chief Executive of Children First, Scotland’s national children’s charity, said: “It’s hugely positive to see child poverty being made a top priority in today’s budget.

“The significant funding boost to whole family support and extra resources for third sector organisations will provide a lifeline to families who need help most, right across Scotland.

“But we can’t afford to slow down. Scotland’s legal target to eradicate child poverty demands bold, accelerated action. Life is tougher than ever for many children and families and at Children First we witness this first-hand every day.

 “That’s why we urgently need a National Front Door that offers a simple accessible way for families to get the help they need when they need it.”

Children First’s manifesto for the 2026 Holyrood elections calls on the next Scottish Government to deliver a comprehensive offer of whole family support to tackle child poverty and give every family the emotional, practical and financial support they need.

Read the manifesto here: 2026 Holyrood Election Manifesto | Children First

Trussell’s Cara Hilton said: ‘While we welcome the @scotgov‘s £40 SCP rate for babies under 1, we continue to call for an increase to £40 a week for all.

‘Our @TrussellUK data shows food parcels for families with children aged 12-16 in Scotland rose by 7% over the past 5 years. #ScotBudget‘.

Responding to the Scottish Budget and Scottish Spending Review, Anna Fowlie, Scottish Council for Voluntary Organisations (SCVO) Chief Executive, said:   “Too often and for too long, voluntary organisations that provide vital services to people and communities across Scotland are treated as the poor relation to mainstream public services.

“They have had to contend with budget cuts, short-term funding cycles, late payments, incoherent decision-making, poor communication, inadequate grant management, and more. 

“Reform of the voluntary sector funding landscape is long overdue. The Scottish Spending Review is welcome, giving the Government the long-term outlook to make progress on its commitment to deliver improvements, including multi-year funding for Scotland’s voluntary organisations. 

“Welcome too is the Scottish Government’s commitment to multi-year funding for sections of the voluntary sector—this shows, again, what is possible.  

“Today we had hoped for more than a recommitment to the ‘first step’ announced last February—the Scottish Government’s ‘Fairer Funding’ pilot.

“We know the benefits of multi-year funding: better staffing, stability, and future planning for the services people and communities rely on. The Government’s own research confirms this.  

“Multi-year funding alone, however, will not provide the sustainable funding environment the voluntary sector so desperately needs, funding that is flexible, sustainable, and accessible.  

“We need to see real progress and recognition of SCVO’s Fair Funding asks beyond multi-year funding. Wider reforms are, unfortunately, now unlikely to be seen before  the next parliamentary term.

“In the meantime it is essential that in the weeks following the Scottish Budget the Scottish Government support local authorities and voluntary organisations by meeting their commitments to timely notifications and payments. 

“We look forward to further engagement on both Fair Funding and charity regulation in the next parliamentary term.”  

Shelter Scotland Director, Alison Watson said: “Social housing delivery in Scotland remains too slow, too little and too late for the more than 10,000 children homeless tonight. Today’s budget doesn’t do enough to change these facts.

“Shona Robison’s budget was an opportunity for Ministers to put their money where their mouth is. On the face of it an additional £34 million for social housing, compared to the most recent budget, is a step in the right direction – but it is not enough.

“The extra money will only deliver 36,000 affordable homes by 2030 – more than 26,000 short of where they say they would need to be to deliver their promise of 110,000 affordable homes by 2032.

“The new Parliament will need a new approach and new money to deliver the social homes needed to reduce homelessness. Homes that the government promised, that academics say we need but for which there is still no credible plan to deliver.

“We must be honest about the real costs of failure. Failing to build the social homes we need means rising homelessness, rising child poverty, rising costs for councils, health boards and the taxpayer.”

Responding to the Scottish Government’s Budget, Debbie Horne, Scotland Policy and Public Affairs Manager at Independent Age said: “It is disappointing to see nothing new in this Budget to adequately respond to the growing number of older people in poverty. 

“One in six pensioners now live in poverty across Scotland, a total of 160,000 older people, and we must see more action to support them.  

“We want the Scottish Government to set out a clear, targeted strategy to bring down the alarming number of older people in poverty, increase access to the vital Discretionary Housing Payments that can help older renters meet shortfalls in rent, and increase the social security support available to those on a low income in later life. 

“With pensioner poverty at its highest level in nearly 20 years, and likely to continue to rise as our population ages, it’s vital all political parties include measures to bring down the levels of poverty in later life in their manifestos’ ahead of May’s Holyrood elections. In a compassionate and wealthy society, we should all be able to live a financially secure, dignified later life.” 

Responding to the Scottish Government’s Budget statement which slashed the 40% discount on business rates bills for pubs at the same time as a rates revaluation will lead to higher bills from 1 April, Stuart McMahon, Director of pubgoers group CAMRA Scotland said: “Pubgoers and publicans simply won’t stand for a Budget which will force more of our locals to go to the wall by landing them with bills they simply can’t afford. 

“I fear that slashing the 40% discount on business rates bills for pubs to just 15% at the same time as these bills are increasing will be absolutely disastrous. 

“Transitional reliefs may sound good but if this Budget still means higher business rates bills than pubs are paying now then this will be the straw that breaks the camel’s back for many hard-pressed licensees.

“Pubs need permanently lower business rates bills so that they can survive, thrive and play their part as vital community hubs.” 

The Scottish Government’s budget announcement of further funding for the college sector, which includes a combined increase of £70 million in resource and capital funding, received a qualified welcome. Principal of Edinburgh College, Audrey Cumberford said: “While this is a welcome step in the right direction for college funding, there is still more that needs to be done.

“This increase will help to undo some of the damage done by years of real terms cuts, but more is needed if we are to ensure the future sustainability of our sector.

“There is now a clear consensus across the political spectrum for better funding for colleges.

“I would urge parties to continue to work together to make sure we unleash the true potential of our sector so we can continue to drive economic growth and improve the lives of Scots across the country.”

Responding to the Scottish government’s 2026-27 budget, announced today by Finance Secretary Shona Robison, RCEM Vice President for Scotland Dr Fiona Hunter said: “Scottish Emergency Departments are in the midst of a crisis born of political apathy towards tackling the difficult problems of social care capacity, delayed discharges and the overall issue of hospital flow.  

“Today’s budget indicates once again that the Scottish government understands what the issues are. £2.3bn extra for social care, an uplift in frontline NHS spending, specific targeted action on delayed discharge and local engagement – these are all measures we warmly welcome from the government.  

“As well as this, our members will be pleased to hear about improvements to training, retention and working conditions. 

“However, we’ve been here before. Time after time the reality in our A&Es has got worse, not better, despite claims from the government that the NHS has been on ‘the path to recovery’ in recent years.  

“We are seeing more and more patients waiting alone on trolleys in hospital corridors for hours on end, getting sicker and being put at risk of harm.  

“This has happened because exit block has not been tackled, despite promises to the contrary from the government. 

“The devil will be in the detail and I will reserve judgement for when myself, and the members I represent, see improvements in our Emergency Departments.   

“We look forward to continued engagement with the government on how it seeks to tackle hospital flow, and await further information on how the Health Secretary will take today’s promises and turn them into action and, ultimately, improvements for our patients.”

Jonathan Carr-West, Chief Executive, LGIU, said: “This Budget offers some short-term stability for councils, but it ducks the bigger questions about how local government is funded. 

There is still no meaningful move towards multi-year settlements, which councils overwhelmingly say they need in order to plan sustainably. Our annual State of Local Government Finance in Scotland research, launched last week, reinforces this.  

Incentivising a council tax freeze risks further undermining local fiscal autonomy, while adult social care remains the single biggest pressure on council finances without clear, dedicated funding. 

Housing investment is welcome, but spreading it across the country without enabling local flexibility limits its capacity to tackle the areas of greatest need. 

Overall, this is a Budget that manages immediate pressures but avoids the structural reform required to put local government finance on a sustainable footing.”

The Existing Homes Alliance (EHA) is a coalition of over 20 housing, environmental, fuel poverty, consumer and industry organisations calling for urgent action to transform Scotland’s existing housing stock.

Lori McElroy, Chair of the Existing Homes Alliance said: “While we welcome the ongoing support to help homeowners, landlords and tenants to make their homes warmer, healthier and more affordable to heat, this remains a drop in the ocean when we have over 800,000 households living in fuel poverty and 44% of Scotland’s homes falling below Energy Performance Certificate band C. 

“Scotland has excellent fuel poverty and energy efficiency programmes such as Warmer Homes Scotland, Area-based Schemes and the Social Housing Net Zero Heat Fund, as well as generous grants through the Home Energy Scotland Grant and Loan Scheme, but the gap between what is needed and what is currently being delivered is wide.

“This Budget, as it stands, is a missed opportunity to significantly scale up these programmes which would reduce fuel poverty, improve public health by tackling damp and mould, and prepare the workforce and supply chains needed to deliver our climate change targets – supporting thousands of jobs and economic opportunities across Scotland.”

Joanne Smith, Policy and Public Affairs Manager for NSPCC Scotland, said: “For children to thrive, it’s vital that they have the best start in life, and so we are heartened by the Scottish Government’s commitment to increase the Child Payment for under ones. But we are disappointed that young families now will not reap those benefits, with it starting in more than a year’s time.

“We also welcome the Scottish Government’s renewed investment in the whole family support fund and its work to continue to deliver the Promise. But it is so important that in this it recognises the fundamental need for support for very young children, just like the Scottish Child Payment does, so that families get the help they need right from the start.”

Scotland’s Chief Constable Jo Farrell has responded to the Scottish Government’s tax and spending plans for 2026 to 2027.

Chief Constable Farrell said: “I recognise a £90m cash-terms uplift to revenue funding and an improved capital allocation for policing against a challenging public finance picture.

“I set out the funding requirements for policing in evidence during the Criminal Justice Committee’s pre-budget scrutiny work.

“Police Scotland will continue to engage with the Scottish Police Authority and the Scottish Government to understand the full implications of the budget and develop our planning for the year ahead.

“My focus continues to be on prioritising our frontline to deliver safer communities, less crime, and supported victims as part of our vision for policing.”

COSLA: Budget Reality

26-01-13 Budget Reality 26-27 FINALDownload

Scotland Demands Better briefing on the Scottish Budget 2026/27

Budgets reflect the choices and priorities of our Governments. Our political leaders have a responsibility to use them to build an economy and society in which all people the income necessary to live in decency and dignity.

In October 2025, thousands of people from across Scotland took to the streets of Edinburgh in the Scotland Demands Better campaign march and rally, the largest anti-poverty demonstration our country has seen in decades.

They stood together to demand that politicians build a Scotland free from poverty, creating the conditions for better jobs, better investment in life’s essentials and vitally, better social security.

In this briefing, we set out how MSPs can build a better future for Scotland’s children:

Scotland-Demands-Better-Briefing-on-Scottish-Child-Payment-for-Scottish-Budget-January-2026Download

download it here.

Chancellor’s Budget ‘to build a fairer, stronger and more secure Britain’

The Chancellor will deliver a Budget later today [26 November] that takes the fair and necessary choices to deliver on the Government’s mandate for change.

It will include action to cut NHS waiting lists, cut debt and borrowing, and cut the cost of living to secure a strong future for the country, built on fairness and fuelled by growth.

Action to keep prescription costs under £10 (in England – Ed.), freeze rail fares for the first time in 30 years and increase the National Minimum Wage and National Living Wage by £1,500 and £900 respectively has already been confirmed to put more money in people’s pockets at this Budget.

Investment for 250 Neighbourhood Health Centres (in England – Ed.) has also been confirmed as part of the Chancellor’s commitment to slash NHS waiting lists further and end the postcode lottery of healthcare access.

Ahead of her Budget speech, Rachel Reeves said: “Today I will take the fair and necessary choices to deliver on our promise of change.

“I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.

“I will take action to help families with the cost of living…cut hospital waiting lists…cut the national debt.

“And I will push ahead with the biggest drive for growth in a generation. 

“Investment in roads, rail and energy. Investment in housing, security and defence. Investment in education, skills and training.

“So together, we can build a fairer, stronger, and more secure Britain.”

“GENERATION DEFINING” BUDGET MUST DELIVER FOR WORKERS

Scotland’s largest trade union body has issued a stark warning ahead of the Chancellor’s budget calling on Rachel Reeves to “deliver for workers” as the UK Government sets out, what the STUC call, a “generation defining” budget.


The Scottish Trades Union Congress (STUC) has set out five tax demands ahead of the statement, including actions on wealth taxes, bank profits and a “settling up” tax for those moving wealth and assets abroad.  

The trade union body, as part of the wider Scotland Demands Better campaign, has also reiterated the call to scrap the two child-benefit cap in a move STUC General Secretary Roz Foyer said was “long overdue”.   

The STUC is further calling for increased investment in publicly owned energy as well as direct support for workers in carbon intensive sectors such as those in Grangemouth and Mosmorran.

Commenting, STUC General Secretary Roz Foyer said: “The upcoming statement from the Chancellor is generation defining. It will signal to all whether the UK Government will continue to adhere to self-imposed financial rules and chaotic quick fixes, or whether they will invest in the public services and the industries and jobs of the future, delivering for workers with bold, radical policies to redistribute wealth.

“We’ve set out how the Chancellor can target those with wealth and assets and use it for the public good. For too long Labour Government policy has been about meeting self-imposed fiscal rules rather than setting out a bold plan for public sector-led growth.

“That must change. We must see, once and for all, the long overdue scrapping of the two-child benefit cap in addition to targeted action on reforming Capital Gains Tax. The Chancellor must also reign in the wild-west of banking profits, raising the surcharge from 3% to 35%, potentially netting £50 billion over four years.

“The people of Scotland and the wider United Kingdom voted for change. It’s high time it was delivered and the Chancellor simply cannot afford to waste this opportunity come Wednesday.”

Implications for Scotland of abolishing the two-child limit

FRASER OF ALLANDER BUDGET PREVIEW

One of the key decisions that UK Ministers will be making ahead of Rachel Reeves announcing the Budget later this month is what to do about the two-child limit (write Fraser of Allander Institute’s SPENCER THOMPSON and HANNAH RANDOLPH).

This policy, which limits Universal Credit to the first two children in a family, has been widely criticised for driving up child poverty rates. And given that the UK Government has pledged to reduce child poverty, with the publication of its child poverty strategy expected sometime around the Budget, the pressure is on to abolish the policy.

The Scottish Government has committed to mitigate the two-child limit by introducing a new benefit, the Two-Child Limit Payment (TCLP). If the two-child limit is abolished, this payment would no longer be needed, freeing up resource for the Scottish Government. The First Minister has pledged that the savings would be spent on additional measures to tackle child poverty, which he has stated is the Scottish Government’s top priority.

How much would the Scottish Government save?

The Scottish Fiscal Commission has forecast the TCLP will cost £155m in 2026-27. This represents the amount that the Scottish Government will directly save if the two-child limit is abolished.

There would however be some offsetting costs to the Scottish Government, coming through two main channels. First, removing the two-child limit would push more families onto the Benefit Cap – unless this was also abolished – which the Scottish Government mitigates through Discretionary Housing Payments.

And second, it would bring more families onto Universal Credit, namely those whose incomes are just too high to be entitled with the two-child limit in place.

These families would in turn become eligible for devolved benefits that are linked to receipt of Universal Credit, including the Scottish Child Payment, raising spend on these benefits.

We estimate that these spillovers would amount to around £34m in 2026-27.

Whether this cost is met from within the £155m pot or counted separately is a political question. The fiscal context, which will become even more challenging if the UK Government chooses to raise income tax in the rest of the UK, may encourage the former choice. But this would likely be seen by campaigners as penny pinching at a time when urgent, ambitious action is needed to tackle child poverty.

Even with the two-child limit abolished, we would still be a long way off meeting the statutory child poverty targets in 2030 – and these are approaching quickly, with the final Delivery Plan due in March.

How could the savings be spent?

If the spillover costs from the abolition of the two-child limit (£34m) were funded from within the TCLP budget (£155m), that would leave £121m to be spent on other policies. We have modelled the child poverty impacts of five illustrative policy options, all of which we estimate will cost about this much in 2026-27 assuming no changes in behaviour or administrative costs. Clearly, a £155m policy could go further than a £121m one, so this represents a conservative scenario.

Impacts of policy options on relative child poverty after housing costs, 2026-27

OptionRaising the Scottish Child Payment to……and…… would reduce child poverty by about…
1£35–1ppt
2£31extending Scottish Child Payment from children under 16 to include dependents aged 16-191ppt
3£34increasing Best Start Grants and Best Start Foods by the same proportion1ppt
4£30extending universal Free School Meals from P1-P5 to include P6-P7–
5£34increasing the maximum discount on water and sewerage charges from 35% to 100% for families with children1ppt

Source: FAI modelling using UKMOD.
Notes: Dash indicates that impact is too small to report. Scottish Child Payment is currently projected to be about £28 per child per week in 2026/27. Free School Meals count as income for purposes of measuring poverty. Technical details of modelling available on request.

The impacts of these policies would be over and above the impacts of the two-child limit being abolished, which we estimate to be around 1 percentage point in 2026-27. All else equal, each of the options would reduce relative child poverty after housing costs by a further 1 percentage point in 2026-27, representing an additional 10,000 children who would be kept out of poverty.

The exception is Option 4: extending universal Free School Meals to all primary school students would not have a measurable impact on aggregate child poverty levels, even when coupled with an increase to Scottish Child Payment of around £2 per child per week.

Although most of the policies are similar in terms of their aggregate impacts, under the surface there are some important differences:

  • Option 1 is the simplest, but does involve steepening the so-called ‘cliff edge’, whereby households lose their entire Scottish Child Payment award if their incomes increase beyond the point at which they are entitled to Universal Credit – which could incentivise them to forego opportunities to earn more. This option also increases Scottish Child Payment for recipients who are not in poverty, including those kept out of poverty by the payment at its current rate.
  • Option 2 is arguably preferrable in these respects, since it extends Scottish Child Payment to families who are not currently eligible while also benefitting many multi-child families who currently are, with the overall cliff edge not steepening as much. However, it does favour older children, when families with young children have been identified as a priority group.
  • Option 3 targets younger children specifically – Best Start Foods is available until the child turns three, while Best Start Grants are paid to children at various points until the child starts school. This option would also channel some of the TCLP savings into one-off grants as opposed to recurring payments, which may be less distortionary when it comes to work incentives even though they have similar eligibility criteria as the Scottish Child Payment. By the same token, their one-off, targeted nature limits their direct impacts on overall levels of child poverty.
  • Option 4 removes a cliff edge of sorts in the form of the means test for Free School Meals that applies to children in Primary 6 and 7, who are typically between 10 and 11 years old. Although this policy would benefit some households that lie just above current eligibility, it would primarily benefit those with higher incomes. On the other hand, the distributional impacts would depend on take-up, and there could be wider benefits such as a reduction in stigma.
  • Finally, Option 5 is unique in featuring a gradient across households – both because discounts on water and sewerage charges are proportionately linked to Council Tax Reduction, which tapers with income, and because these charges themselves vary by council tax band. Other changes to Council Tax Reduction would also be possible, but these will tend to extend entitlement to higher-income households rather than just benefitting current recipients, most of whom already receive a 100% reduction.

These are by no means the only options available, but they highlight some of the factors that the Scottish Government will need to weigh up when reallocating the TCLP budget, along with the potential impacts of doing so, in a scenario where the two-child limit is abolished.

Time will tell

Whether or not that that scenario will transpire remains unclear. It is possible that the UK Government will take an intermediate approach by relaxing the two-child limit in some way without abolishing it entirely – for example by exempting certain groups, moving to a three-child limit, or introducing a taper.

Mitigating the remainder of the limit would cost less than the planned TCLP – meaning there would still be some savings – but may require more time to be designed and implemented. It is also possible that the Budget will include a commitment to eventually abolish the two-child limit, but not in the coming year, meaning the TCLP would be needed temporarily.

For now, all eyes are on Rachel Reeves – but the focus will quickly turn to the Scottish Government. Keep an eye on our website and social media for more analysis of the UK and Scottish Budgets over the next few months!

Short term measures ‘not addressing gap in public sector finances’

The Scottish Government recorded a £1 billion underspend in 2024/25 but still needs to move away from short-term measures to address a stark forecast gap between its spending plans and funding.

The underspend was supported by over £2 billion of additional funding from the UK Government, meaning a plan to help balance the budget with £460 million of offshore wind leasing revenues was not needed.

Significant pressures remain in achieving financial balance in 2025/26, and many of the necessary savings identified and delivered so far are non-recurring. This continued short-term approach to managing spending is not supporting the fiscal sustainability of the Scottish public sector.

The Scottish Government’s latest Medium Term Financial Strategy projects a combined resource and capital funding gap of £4.7 billion by 2029/30. This is due to policy choices and higher workforce costs. However, the government’s plan to make savings over the next five years lacks detail on how they will be delivered.

Stephen Boyle, Auditor General for Scotland, said: “Although the Scottish Government reported a £1 billion underspend this year, it did so from a combination of additional funding from the UK Government and one-off savings.

“A forecast gap of nearly £5 billion remains between what ministers want to spend on public services and the funding available to them.

“The Scottish Government needs to prepare more detailed plans setting out how it will close that gap by the end of the decade.”

Scottish business confidence falls in September

  • Business confidence in Scotland fell 20 points to 39% in September 
  • Firms’ optimism in their own trading prospects fell 20 points to 45%, while optimism in the economy dipped 18 points to 34% 
  • Overall UK business confidence dipped 12 points in September to 42%. 

Business confidence in Scotland fell 20 points during September to 39%, according to the latest Business Barometer from Bank of Scotland. 

Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 20 points at 45%. When taken alongside their optimism in the economy, down 18 points to 34%, this gives a headline confidence reading of 39% (vs. 59% in August). 

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as investing in their team, for example through training (44%), evolving their offering, for example by launching new products or services (39%) and introducing new technology (30%).  

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.  

National picture 

Overall, UK business confidence fell 12 points in September to 42%.  

Firms’ confidence in their own trading prospects fell 12 points to 51%, and their optimism in the wider economy fell 11 points to 33%.  

The North East of England was the most confident UK nation or region in September, climbing 13 points to 68%, followed by London (57%).  

Sector insights 

Firms across manufacturing, construction, retail and services all saw confidence fall this month. The biggest change was in manufacturing with a decline of 31 points to 31%, a two-year low. Retail sentiment fell 17 points to 40%, its lowest level in four months.

Similarly, confidence in the service sector fell six points to 47%, the lowest reading since April. Construction continued to decline for the fourth consecutive month, dropping 5 points to 35%. 

Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “Despite a fall in confidence, Scottish firms remain focused on growth – planning to invest in their people, evolve their products and services, and explore new technologies.  

“As we head into the busy festive trading period, we’ll continue to support businesses across Scotland as they take the next steps in their strategies.” 

Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking, said: “While increased market volatility earlier in the month may have impacted confidence,  levels of trading prospects and economic optimism remain above their long-term averages.

“Businesses may find reassurance that the Bank of England is expected to reduce interest rates further in the next six months, while long-term global bond yields have calmed which, if sustained, may have a positive impact on businesses as we move into the last few months of the year.” 

Paul Kempster, Managing Director for Commercial Banking Coverage, Lloyds Business and Commercial said: “While business confidence has returned to levels seen earlier in the year, a range of metrics remain well above the long-term average. 

“Businesses still have opportunities ahead, whether that be upskilling their workforce, evolving their products or exploring new markets.” 

US financial giants boost UK investments and jobs 

UK Government has announced over £1.25 billion of inward investment from US finance companies, creating 1,800 jobs

  • New US investments will create 1,800 jobs from Belfast to Edinburgh and boost benefits for millions of customers.
  • Total of over £1.25 billion of private US investment committed to the UK’s world-leading financial services sector including PayPal, Bank of America, Citi Bank, and S&P.
  • Demonstrates the enduring strength of the UK-US ‘golden corridor’ in financial services, with British banks expanding operations into the US and booming cross-border investment flows reinforcing that working with America is best for Britain.  
  • Deal lines up £20 billion in trade between the two nations – including an expected £7 billion commitment from BlackRock to grow in the UK.

London, Edinburgh, Belfast and Manchester are set to benefit from a wave of new US investment into the financial services sector, reinforcing the strength of the UK-US economic partnership ahead of next week’s Presidential State Visit.

The Westminster government says working with America is best for Britain — and today’s announcement proves it. A total of over £1.25 billion in private sector commitments from leading US firms — including PayPal, Bank of America, Citi Bank, and S&P Global — will support job creation, drive innovation, and deliver improved services for consumers in the UK.

US giants are capitalising on Britain’s leadership in financial services – expanding operations and opening new offices across the nation, with London, Edinburgh, Belfast and Manchester set to gain from a wave of skilled job creation.

Bank of America is set to create up to 1,000 new jobs in Belfast, marking its first-ever operation in Northern Ireland — a major milestone that underscores the region’s growing role in global financial services.

Citi Group today confirms it is investing £1.1 billion across its UK operations, including a further commitment to growing its presence in Northern Ireland where the bank is already one of the top employers in Belfast now employing over 4,000 people — firmly establishing Belfast as a major technology powerhouse.  

BlackRock are celebrating the opening of their new Edinburgh office this week, which will see their 800-strong footprint nearly double, as part of their multi-billion dollar investment into the UK.

In Manchester, S&P Global are investing over £4 million into their Manchester offices which will support 200 permanent jobs to boost their nearly 3,000-strong UK workforce.

Business and Trade Secretary Peter Kyle said: “Today’s announcements reinforce the UK’s position as the world’s leading investment destination. Our financial services sector is at the heart of a modern, dynamic Industrial Strategy.

“Strengthening ties with the US boosts our economy, creates jobs, and secures our role in global finance, delivering on our Plan for Change.

“These investments reflect the strength of our enduring ‘golden corridor’ with one of our closest trading partners, ahead of the US Presidential State Visit.”

This marks a significant vote of confidence in the UK’s position as a global financial hub and in the government’s plan to make Britain the best place in the world to invest — a vision underpinned by the UK’s Modern Industrial Strategy, which is driving investment into priority sectors like financial services.

These investments highlight the enduring value of the transatlantic relationship — a cornerstone of shared prosperity that supports millions of jobs and drives growth in every region.

Chancellor of the Exchequer Rachel Reeves said: “This commitment from America’s leading financial institutions demonstrates the immense potential of the UK economy, our strong relationship with the US and the confidence global investors have in our Plan for Change, which is making the UK the best place in the world to invest and do business.

“These investments will create thousands of high-skilled jobs from Belfast to Edinburgh, kickstarting the growth that is essential to putting money in working people’s pockets across every part of the United Kingdom.”

Broadridge is making major investments into their new London office, further strengthening its UK presence and deepening transatlantic ties in financial services.

As part of the UK’s expanding fintech and digital innovation sector, PayPal is announcing a £150m investment in product innovations and growth that will benefit customers throughout the UK, reinforcing Britain’s position as a key market for the brand globally.

Jane Fraser, Citi Group CEO said: “Citi’s commitment to the UK runs deep. This is home to many of our most senior leaders and nearly 14,000 colleagues across London, Belfast, Edinburgh and Jersey.

“We’re proud to be serving 85% of the FTSE 100 and to have stood beside UK companies through every market cycle, raising capital, financing growth and helping them compete on the world stage.

“The UK isn’t simply one of our largest markets; it is core to Citi’s foundation as a truly global bank.”

The UK-US investment relationship has never been stronger, with over £1.2 trillion invested in each other’s countries at the end of 2023.

These new investment announcements are accompanied by new significant commitments by financial companies to ramp up their commercial activity and capital flows between our two economies in the coming years.

Blackrock is expecting to allocate over £7 billion to the UK market next year on behalf of clients, and is investing £500 million into enterprise data centres across the country.

Rothesay is planning to double its investment in the US (by £7 billion) over the next few years, and OakNorth is committing to increased capital and lending of over £3.5 billion to support its US operations.

British banks are expanding their US footprint; Barclays alone has deployed over $2 trillion in capital across the US in 2024 and continues to play a pivotal role in strengthening UK-US investment ties. The bank has an ambition to double this amount over the next decade, expanding its footprint and supporting growth across sectors.

All in all, that will see investment and capital commitments of over £8 billion coming to the UK, and over £12 billion going the other way, creating jobs and opportunity in both countries.

Earlier this year, the Chancellor launched the Financial Services Growth and Competitiveness Strategy, which included financial services as a high growth sector, signifying the UK’s commitment improving financial regulations and driving investment and skilled jobs into the UK.

The UK and US agreed an Economic Prosperity Deal which secured major tariff reductions for key sectors and protected jobs in the automotive and aerospace sector. Discussions continue with the US on a wider UK-US Economic Deal which will look at increasing digital trade, strengthen supply chains and boost access for our world-leading services companies.

BlackRock will open their new Edinburgh offices on 18 September, which shows their ongoing commitment to the area – this new home will allow Blackrock to grow from 800 to 1,400. Once complete, two of the top five largest BlackRock offices will be in the UK.

Larry Fink, Chairman and CEO of BlackRock, said: “As the largest asset manager in the UK, BlackRock is proud to serve over 13 million British people who are saving for retirement. Today we are announcing an investment of half a billion pounds into enterprise data centres across the country, advancing digital infrastructure for British-based businesses.

“In addition, over the last year our clients around the world invested over £7bn into UK public equity and fixed income securities. We expect this trend to continue, supporting jobs, growth and innovation across a wide range of British industries.”

Delivering for Scotland?

Balanced budget ‘funds key priorities’

More than £52 billion in spending last year has funded the delivery of vital public services for the people of Scotland.

The Scottish Government’s 2024-25 Provisional Outturn, which compares actual spending with overall funding, included:

  • Investing more than £19.5 billion in health and social care, protecting existing critical delivery in the face of unprecedented fiscal pressure and enabling frontline services to continue to evolve to deliver the best care and treatment for our diverse population.
  • Supporting fair and affordable pay deals for workers who provide our essential public services.
  • Investing more than £5.9 billion for 2024-25 in social security, directly supporting more than 1.4 million people across Scotland. This includes £456 million allocated to the Child Payment. As of 31 March 2025, 326,225 children aged 15 and under were actively benefiting from Scottish Child Payment.
  • Supporting economic growth despite global uncertainty. Scotland’s economy grew 1.2% in 2024, compared to 1.1% in the UK as a whole, having strengthened from 0.5% growth in 2023.

The remaining £557 million of available funding – representing 1% of the total Scottish Government budget – has been carried over to support costs in 2025-26, with no loss of spending power to the Scottish Government.

Public Finance Minister Ivan McKee said yesterday: “The provisional outturn demonstrates once again this Government is prudently and competently managing Scotland’s finances while protecting our priorities and ensuring we can deliver effective public services.

“Managing the financial position for 2024-25 was a challenge once again. The continued impact of inflation, pressure on public sector pay, and wider geopolitical instability meant careful consideration had to be given to balancing the Scottish Budget.

“What’s more, under the UK Spending Review the Scottish Government’s day-to-day spending is set to grow by 0.8% over the next three years, considerably lower than the 1.2% average growth for UK Government departments. 

“The impact of these challenges on our financial planning will be set out in the Medium-Term Financial Strategy tomorrow (i.e. Wednesday (today)) in Parliament, but the growing future year pressures mean we must act prudently and responsibly to remain fiscally sustainable.”

2024-25 Provisional Outturn Briefing Note 24 June 2025 – gov.scot

Delivering sustainable finances

Strategy to be published after ‘disappointing’ UK Spending Review settlement

A Medium Term Financial Strategy will be set out next week in the aftermath of a “disappointing” UK Spending Review and welfare reforms that will reduce Scotland’s budget.

Finance Secretary Shona Robison will outline the five-year strategy and accompanying action plan to ensure public money is focused on Scottish Government priorities.

The Finance Secretary said: “This government has delivered a balanced budget every year while taking steps to improve the overall sustainability of our finances. This is despite a deeply challenging financial situation caused by rising global instability, persistent higher inflation and over a decade of UK austerity.

“Our disappointing settlement at the recent UK Spending Review has made the situation worse, short-changing the Scottish Government by £1.1 billion in our day-to-day funding compared with UK Government departments.

“This comes on top of reductions in our funding worth hundreds of millions of pounds as a result of the UK Government’s proposed welfare reforms and failure to fully fund its employer National Insurance increase.

“In this context, it is important that we take action to maximise funding targeted at frontline services such as our NHS.” 

The Medium Term Financial Strategy (MTFS) will outline the approach to ensuring Scotland’s finances remain on a sustainable footing.

It will be accompanied by a Fiscal Sustainability Delivery Plan, setting out the actions being taken in support of the MTFS.

Both documents will be presented by the Finance Secretary in a statement to Parliament on Wednesday 25 June.

Spending Review: £ Billions to back Scottish jobs

UK Government’s Plan for Change delivers record settlement for Scottish Government with an extra £9.1 billion over the SR period to deliver public services

Working people across Scotland will benefit from significant investment in clean energy and innovation, creating thousands of high-skilled jobs and strengthening Scotland’s position as the home of the United Kingdom’s clean energy revolution.  

The UK Government has confirmed £8.3 billion in funding for GB Energy-Nuclear and GB Energy in Aberdeen. This is alongside an increased commitment to the Acorn Carbon Capture, Usage and Storage project, which will receive development funding.

The Spending Review, outlined yesterday, Wednesday 11 June, announces targeted investment in Scotland’s most promising sectors to grow the economy and put more money in working people’s pockets.  It delivers an extra £9.1 billion over Phase 2 of the Spending Review, through the Barnett formula.

The government also confirmed £25 million for the Inverness and Cromarty Firth Freeport.   

These investments are part of a wider package, with funding for hydrogen production projects at Cromarty and Whitelee.

Secretary of State for Scotland, Ian Murray, said:  “Putting more money in the pockets of working Scots by investing in the country’s renewal is at the heart of this Spending Review and our Plan for Change.

“The Chancellor has unleashed a new era of growth for Scotland, confirming billions of pounds of investment in clean energy – including new development funding for Acorn – creating thousands of high-skilled jobs.

“Scotland’s leading role at the heart of UK defence policy has been strengthened and there is also significant investment in our trailblazing innovation, research and development sectors.

“And the Scotland Office will work with local partners to ensure hundreds of millions of pounds of new targeted support for Scottish communities and businesses goes to projects that matter to local people. This means that the UK Government is now investing almost £1.7 billion in dozens of important growth schemes across Scotland over 10 years.

“To maximise the benefit of recent trade deals with India, US and the EU we are continuing the Brand Scotland programme to promote inward investment opportunities boosting Scottish exports of our globally celebrated products.

“And we are delivering a record real-terms funding settlement for the Scottish Government with an extra £9.1 billion over the Spending Review period through the Barnett formula. That’s more money than ever before for them to invest in Scottish public services like our NHS, police, housing and schools.

“This is a historic Spending Review for Scotland that chooses investment over decline and delivers on the promise that there would be no return to austerity.”

Investment in Scotland to strengthen UK defence  

Speaking in the House of Commons yesterday, the Chancellor reaffirmed the government’s commitment to increase defence spending to 2.6% of GDP by April 2027, backing our Armed Forces, creating British jobs in British industries, and prioritising the security of Britain when it is most needed.  

The long-term future of the Clyde is secured through an initial £250 million investment over three years which will begin a multi-decade, multi-billion pound redevelopment of HM Naval Base Clyde through the ‘Clyde 2070’ programme.   

Investing in innovation and R&D  

Scotland will also become home to the UK’s largest and most powerful supercomputer, with up to £750 million committed to its development at Edinburgh University. This world-class facility will give scientists across all UK universities access to extraordinary computer power, further strengthening Scotland’s research and innovation capability.   

The UK Government is backing Scottish industry with a share of increased UK-wide R&D spending set to grow from £20.4 billion in 2025-26 to over £22.6 billion per year by 2029-30. Scotland will also benefit from a £410 million UK-wide Local Innovation Partnerships Fund.  

Targeted support for Scottish communities   

The government is also investing £160 million over 10 years for Investment Zones in the North East of Scotland and in Glasgow City Region, and confirming £452 million over four years for City and Growth Deals across Scotland.  

A £100 million joint investment for the Falkirk and Grangemouth Growth deal with the Scottish Government (£50 million from UK Government and £50 million from Scottish Government), demonstrating the UK Government’s continued commitment to the Grangemouth industrial area.  

A new local growth fund, and investments in up to 350 deprived communities across the UK, will maintain the same cash level as in 2025-26 under the Shared Prosperity Fund. The Ministry of Housing, Communities and Local Government and the Scotland Office, will work with local partners and the Scottish Government, to ensure money goes to projects that matter to local people. This investment will help drive growth and improve communities across Scotland.  

Supporting Scottish businesses  

The National Wealth Fund (NWF) is trialling a Strategic Partnership with Glasgow City Region to provide enhanced, hands-on support to help it develop and finance long term investment opportunities. The NWF has already made its first investment in Scotland with £43.5 million in direct equity for a sustainable packaging company, which is to build its first commercial-scale manufacturing facility near Glasgow.  

Through its Nations and Regions Investment programme the British Business Bank is delivering £150 million across Scotland to break down access to finance barriers and drive economic growth.  

The settlement also allocates £0.75 million each year to champion our ‘Brand Scotland’ trade missions to promote Scotland’s goods and services on the world stage and to encourage further growth and investment.

A record settlement for Scottish public services   

The Government has been clear that local decision-making against local priorities is central to delivering growth.   

The Scottish Government will receive the largest real terms settlement since devolution began in 1998, with an average £50.9 billion per year between 2026-27 and 2028-29, enabling the Scottish Government to deliver for working people in Scotland.  This includes £2.9 billion per year on average through the operation of the Barnett formula, with £2.4 billion resource between 2026-27 and 2028-29 and £510 million capital between 2026-27 and 2029-30. 

This investment and record settlement is made possible by the ‘tough but necessary’ decisions taken in the October Budget.

Edinburgh North and Leith Labour MP Tracy Gilbert has welcomed the statement. She said: “The Comprehensive Spending Review is good for Scotland’s economy and public Services.

“After several meetings with the Secretary of States for Science, Innovation and Technology and Scotland I’m so pleased to see the announcement of funding for the new Supercomputer to be based at EdinburghUniversity.

“This major investment in Edinburgh positions us at the forefront of computing, and technological innovation, not just in the UK, but globally.”

Not unsurprisingly, the Holyrood SNP Government has a number of issues with the likely impact of the Spending Review on Scotland. Post to follow …