Over £2.5 billion of new finance can be available to businesses across Scotland in 2026, helping them grow, invest and create new jobs.
This forms part of Lloyds Banking Group’s plan to make over £35 billion of new finance available to companies operating and investing across the UK in 2026.
Businesses look to invest and grow in 2026
New research from Bank of Scotland’s Business Barometer reveals Scottish businesses identified their top target areas for growth as introducing new technology such as AI, automation or digitalisation (51%), investing in their team such as training (35%) and entering new markets (32%) in the next six months.
Martyn Kendrick, Scotland Director at Bank of Scotland Commercial Banking, said:“Bank of Scotland is proud to make £2.5 billion of new finance available to local firms in Scotland, helping them grow their businesses, invest in innovation and create new jobs.
“Whether it’s supporting a small company taking its first step into exporting, or a larger firm scaling up to meet growing demand, we’re committed to helping businesses turn their potential into growth.”
This comes as Lloyds and CBI convene business leaders, policymakers and experts from across the financial services sector in Scotland to explore how to drive sustainable growth under the UK’s Industrial Strategy.
Backing ambitious businesses across Scotland
Organisations across Scotland are already benefiting from Bank of Scotland’s support. Albyn Housing Society, one of the largest housing associations in the Highlands, has received a £10 million funding package.
The business has begun work on the first 125 homes as part of its mission to build 600 affordable homes over the next five years.
The development responds directly to Highland Council’s 2024 Housing Challenge, which calls for 24,000 new homes to be built across the region by the end of the decade.
Andrew Martin, Executive Director at Albyn Housing Society, said: “Albyn was established over 50 years ago to provide housing for workers at the Invergordon smelter.
“While the challenges have changed, our purpose hasn’t. We’re here to make sure people across the Highlands have access to good, affordable homes in the communities they live in.
“Our five-year plan is ambitious, and it reflects what local people have told us they need. Support from Bank of Scotland means we can start right away – putting plans into action and delivering the kinds of places people want to live.”
Concerns have been raised about whether the cost to monitor and repair the Cairngorm Funicular could outweigh the benefits to the local and national economy.This stark warning comes from a new report issued today by the Scottish Parliament’s Public Audit Committee.
The report follows the Committee’s look at the funding and operation of the troubled funicular.
Opened in 2001 at a cost of £19.5 million, the funicular was closed for four years from September 2018 due to issues with the track. It briefly opened again in 2023 before closing once more for further repairs. It finally reopened in February 2025.
During this time, ownership of the funicular has moved into public hands with Cairngorm Mountain Ltd, a company owned by Highlands and Islands Enterprise (HIE).
Now, with costs of over £16 million to reinstate the funicular and a reliance on public finance, the Committee has raised concerns about whether the costs of regular monitoring and maintenance may become disproportionate to its benefit.
The Committee has also called on the Scottish Government to be more transparent about its plans for the funicular and to ensure that the project remains value for money.
During the Committee’s consideration, there was also frustration about the level of information available to the Committee to take a judgment on HIE’s decision-making on the future of the funicular.
The report now calls on HIE to make significant improvement in this area as well as ensuring that the governance arrangements in place for the funicular are be simplified and made more transparent.
Speaking as the report launched, Committee Convener Richard Leonard MSP said:“It is safe to say that the Cairngorm Funicular has had a somewhat troubled history, with repeated and lengthy closures and requiring significant public investment.
“This Committee has heard from those in charge of the funicular, the public bodies supporting it, those living and working in the area and nature conservation activists. We have heard both optimism and scepticism about what comes next. And it presents a picture of concern for us that the future benefits are not as clear as they ought to be.
“There also needs to be a much more transparent governance structure in place for the running of the funicular. A simplified structure would allow for better public scrutiny of public money and decisions on the future plans for the Cairngorm Mountain resort.”
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.
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.
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.”
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:
Increased Scottish Government investment in culture has had a “positive impact” on confidence and stability in the sector but extra funding may to some degree be being used to help meet ongoing financial pressures, rather than necessarily generating improved cultural outcomes, according to a new report from Scottish Parliament’s Constitution, Europe, External Affairs and Culture Committee.
In a report published yesterday, the Committee recognises that “despite this welcome investment” the sector continues to face significant financial pressures, including increased employment costs such as employer National Insurance contributions, the Scottish Government’s Public Sector Pay Policy and Fair Work commitments.
In its report, published ahead of the Budget announcement in January, the Committee also shares concerns raised by arts and culture organisations that the Scottish Government funding increase may be being offset by funding reductions by local government.
Reiterating concerns
Throughout its pre-budget scrutiny, the Committee has considered evidence and the response of the Scottish Government, over the whole period of this session of Parliament, in order to build a longer-term view of culture funding decisions.
In its report, MSPs ask the Scottish Government to explain why it has not delivered 3-year funding settlements for the organisations it funds directly, despite a commitment in 2021 to do so.
That is one of a number of areas where the Committee is seeking clarity from the Scottish Government on the progress made in the last five years. Others include; a lack of strategic clarity in funding decisions and progress on collaboration with other Cabinet Secretaries to move forward on cross-portfolio working on funding for culture.
It also calls for details on progress made on a recommendation first given in 2022, that the Scottish Government urgently works towards alternative funding models for the sector, as well as for an urgent update on the establishment of a ‘Percentage for the Arts’ scheme and details as to what it would look like in practice.
The initiative was confirmed to be in its “initial stages” in 2022, but despite commitments to do so, the Scottish Government has not provided any further details to the Committee on the establishment of the scheme.
“Acute” skills shortage and infrastructure challenges
Further concerns raised in the report include a lack of skilled staff to maintain Scotland’s historic environment sector, with the Committee asking the Scottish Government how it is responding to this “acute” skills shortage.
It also asks key questions about whether the upcoming Spending Review will include plans to support the refurbishment, retrofitting and upkeep of cultural assets, as well as how the “substantial capital investment” required in the culture and heritage sector will be addressed to meet climate change and net zero ambitions.
Committee convener Clare Adamson said:“The Committee acknowledges the encouraging effect of the government’s pledge to boost funding for the culture sector, which has helped foster greater confidence and stability.
“Nonetheless, persistent financial challenges continue to pose serious difficulties for heritage and cultural organisations.
“We have listened carefully to the voices of those shaping and supporting Scotland’s cultural life and are mindful of the challenging economic context in which increased support has been made available.
“Our report outlines a series of recommendations for the Scottish Government.”
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
Option
Raising the Scottish Child Payment to…
…and…
… would reduce child poverty by about…
1
£35
–
1ppt
2
£31
extending Scottish Child Payment from children under 16 to include dependents aged 16-19
1ppt
3
£34
increasing Best Start Grants and Best Start Foods by the same proportion
1ppt
4
£30
extending universal Free School Meals from P1-P5 to include P6-P7
–
5
£34
increasing the maximum discount on water and sewerage charges from 35% to 100% for families with children
1ppt
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!
The Scottish Government is on track to issue its first bonds in 2026/27, First Minister John Swinney has announced after international ratings agencies set a credit rating matching the UK and better than other major industrial nations.
The issuance will be the first in a £1.5 billion bond programme over the life of the next parliament, subject to the outcome of the Scottish Parliament election, in-year borrowing requirements and market conditions.
Credit rating agencies Moody’s and S&P Global have each rated the Scottish Government the same level as the UK Government – and above several major European and global economies such as Spain, Italy and Japan.
First Minister John Swinney said: “The Scottish Government’s high credit ratings are testament to Scotland’s strong institutions, track record of responsible fiscal management and pro-business environment.
“We are therefore now on track to commence the bond programme from 2026/27, with the proceeds used to fund capital investment in key infrastructure.
“This is about using the powers we have to borrow better – not more – and reflects the maturity of Scotland’s public finances after more than 25 years of devolution.
“And, it is the latest step in building the institutions and tools Scotland needs for a prosperous future where our country takes responsibility for its own decisions.
“Whilst specific issuance plans will be subject to market conditions closer to the time, we will shortly commence engagement with banks to act as joint lead managers to enable the next Scottish Government to proceed without delay.”
In 2023 the Scottish Government’s Investor Panel recommended making bonds available to market as a means of raising Scotland’s profile and attracting investment.
Angus Macpherson, Chairman of financial advisory firm Noble and Co, and former co-chair of the Investor Panel, said: “I am greatly encouraged by the progress the Scottish Government is making in achieving a credit rating to raise Scotland’s profile in the international capital markets.
“This is a positive step forward and demonstrates they are serious about becoming a more investor friendly destination.”
Bonds are a standard form of borrowing for governments around the world and support spending including on major infrastructure projects, with buyers owed the value of the bond plus interest over a specific period of time.
The Scotland Act 2016 devolved powers to Scotland to allow the issuing of government bonds for capital investment.
All proceeds from a future bond issuance would be used exclusively for capital investment in line with the capital borrowing powers outlined in the Fiscal Framework agreement between the Scottish and UK Governments.
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.”
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 …
The Chancellor is today [WEDNESDAY 11 JUNE] expected to announce the biggest boost to social and affordable housing investment in a generation.
As part of the Spending Review Rachel Reeves is expected to confirm £39 billion for a new Affordable Homes Programme over 10 years. This will turbocharge the Plan for Change commitment to get Britain building and deliver the 1.5 million homes this country needs.
This investment will be significantly higher than what the previous government spent on affordable housing. The last five year 2021-26 programme was only £11.5bn, averaging £2.3bn per year.
This means the government will be spending almost double this on affordable housing investment by the end of this Parliament (£4bn in 2029/30).
This is the first time in living memory that the government has set out a programme that provides ten years of certainty. This provides the sector with the confidence to deliver for now and the future, making it easier for those on low incomes to access a safe, high-quality home.
This comes on top of a ten-year social rent settlement that will set a rent policy for social housing from 2026 that enables providers to borrow and invest in new and existing homes, while also protecting social housing tenants. This ten year settlement will see rents rise at CPI+1% from 2026, alongside a consultation to follow shortly on how to implement social rent convergence.
It also builds on ambitious reforms to the planning system that the Government has already announced, which were judged by the OBR to add £6.8bn to the economy and boost housebuilding to its highest level in 40 years by 2029/30.
A government spokesperson said: “The Government is investing in Britain’s renewal, so working people are better off.
“We’re turning the tide against the unacceptable housing crisis in this country with the biggest boost to social and affordable housing investment in a generation, delivering on our Plan for Change commitment to get Britain building.”
RACHEL REEVES: “WE ARE INVESTING IN BRITAIN’S RENEWAL”
Chancellor vows to ‘invest in Britain’s renewal’ as she lays out the Government’s Spending Review.
Reeves to announce the Government’s plans to invest in Britain’s security, health and economy to make working people better off.
Billions of pounds of new capital investment will boost British business and create British jobs to kickstart economic growth and drive up living standards in line with the Plan for Change, including the biggest ever local transport investment in England’s city regions outside of London and the South East.
The Chancellor will today publish the Government’s Spending Review to ‘invest in Britain’s renewal’ as she vows to make all parts of the country better off.
Rachel Reeves will announce plans for billions of pounds of investment in projects across the United Kingdom that will create jobs, prosperity, and put more money in people’s pockets.
The Chancellor will say detailed spending plans come after the Autumn Budget and Spring Statement fixed the foundations of our economy to deliver stability, outlining: “The choices in this Spending Review are possible only because of the stability I have introduced and the choices I took in the Autumn.”
The Chancellor will confirm the Government’s commitment to delivering for every part of Britain, by announcing reforms that will guarantee towns and cities outside London and the South East can benefit from new investment. This will include the biggest ever local transport infrastructure investment in England’s city regions, which will truly connect people to opportunities that improve their quality of life, a key objective of the Government’s Plan for Change.
Ms Reeves is also expected to spell out the Government’s plans to invest in the British people’s priorities of security, health and economy.
The Spending Review comes on the back of the Government’s announcements in recent days to invest £15.6 billion in local transport projects, £86 billion to boost science and technology, and create ten thousand jobs by building Sizewell C Nuclear Power Station – which will drive forward Britain’s status as a clean energy superpower, as outlined in the Plan for Change.
Speaking in the House of Commons, the Chancellor is expected to say:“This Government is renewing Britain. But I know too many people in too many parts of the country are yet to feel it.
“This Government’s task – my task – and the purpose of this Spending Review – is to change that. To ensure that renewal is felt in people’s everyday lives, their jobs, their communities.
“So that people can see a doctor when when they need one. Know that they are secure at work. And feel safe on their local high street.
“The priorities in this Spending Review are the priorities of working people. To invest in our country’s security, health and economy so working people all over our country are better off. That is what this Spending Review will deliver.”
She will add:“I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal.
“These are my choices. These are this Government’s choices. These are the British people’s choices.”
