Scottish Budget 2025-26: Scrutiny, Challenges, and Key Takeaways
The Scottish Government has published its proposed Budget for 2025-26, setting out its plans for public spending, taxation, and economic strategy. Finance Secretary Shona Robison has called on Parliament to engage “constructively” with the Budget Bill, urging cross-party cooperation to deliver what she describes as “hope and progress” for Scotland.
However, with opposition parties and stakeholders set to scrutinise the details in the coming weeks, the Budget faces inevitable challenges. The proposals will be subject to debate, evidence sessions, and potential amendments before a final vote is held. Key areas for contention are likely to include healthcare funding, local government support, tax policy, and the adequacy of measures aimed at addressing poverty and the climate crisis.
The Budget Bill, which was introduced following Ms Robison's statement on 4 December, outlines how the Scottish Government intends to allocate its resources for the year. Parliamentary committees will now scrutinise the proposals, take evidence from experts and stakeholders, and propose amendments where necessary.
The Finance and Public Administration Committee will play a central role in assessing the Budget’s overall strategy, while sector-specific committees will examine spending in areas such as health, education, and local government. The final stage will see MSPs debate and vote on the Bill, with a separate vote required for the proposed income tax rates and bands, which would take effect from April 2025.
The Scottish Government has highlighted several headline spending commitments, with significant funding boosts in health, local government, and climate action. While these initiatives aim to address Scotland’s pressing social and economic challenges, questions remain over whether they are sufficient or sustainable.
Health and Social Care
What’s proposed? A record £2 billion increase in NHS funding, raising the total health and social care budget to £21 billion. Funding is earmarked to reduce NHS waiting lists, improve GP access, and support capital projects like the Belford Hospital, Monklands Hospital, and Edinburgh Eye Pavilion.
Criticism and concerns: While the Government points to record funding, critics will likely focus on whether it is enough to address long NHS waiting times, GP shortages, and staffing pressures. There are also questions about how effectively previous increases in health spending have been used, particularly given that backlogs remain a major issue.
Local Government Funding
What’s proposed? Local councils are set to receive £15 billion, the highest allocation to date, with £768 million reserved for affordable housing projects to deliver 8,000 new homes.
Criticism and concerns: Local authorities have consistently argued that funding settlements fail to keep pace with rising costs. While the Government highlights the record funding, critics will note that much of it may be ring-fenced for specific purposes, leaving councils with limited flexibility to address local needs. Expect scrutiny from councils and opposition MSPs over how much “discretionary” funding is actually available.
Tackling Child Poverty
What’s proposed? Investment in universal winter heating payments for older Scots and steps to mitigate the controversial two-child benefit cap from 2026.
Criticism and concerns: Critics may question the decision to delay the removal of the two-child cap until 2026, arguing that families need immediate support. Additionally, while winter heating payments provide welcome relief, some will argue that they do not go far enough to tackle the root causes of poverty.
Income Tax and Business Support
What’s proposed? Income tax rates will be frozen, but thresholds for the Basic and Intermediate rates will be raised, offering some relief to low and middle-income earners. Business rates relief will be provided for pubs and restaurants, which have faced growing financial strain.
Criticism and concerns: While tax freezes are politically popular, critics may question whether this approach is sustainable in the context of rising public sector costs. Meanwhile, some business groups may argue that relief for pubs and restaurants is too limited and that other struggling sectors have been overlooked.
Climate Action and Green Investment
What’s proposed? A £4.9 billion allocation to address the climate and nature crises, including support for renewable energy, emission reductions, and job creation in green industries.
Criticism and concerns: The climate package may face scrutiny from environmental groups and opposition MSPs who argue that the funding is insufficient to meet Scotland’s net-zero targets. Critics may also seek clarity on how funds will be spent and whether they are likely to achieve tangible outcomes, especially following previous accusations that climate commitments have lacked follow-through.
Education and Skills
What’s proposed? A real-terms increase of 3% for education spending, supporting teacher numbers, school infrastructure, and expanded access to primary school breakfast clubs.
Criticism and concerns: Unions and educators may question whether the 3% increase will be enough to maintain teacher numbers in the face of inflation and rising wage demands. School infrastructure, which includes building repairs and refurbishments, is another area where the adequacy of funding will likely be scrutinised.
Cultural Sector Funding
What’s proposed? A £34 million increase for culture and the arts.
Criticism and concerns: While any increase in funding for the arts is likely to be welcomed by the cultural sector, some may argue that it fails to address the deep structural challenges facing creative industries, particularly after the impact of COVID-19 and cuts in previous budgets.
One of the more contentious aspects of the Budget is its approach to income tax. The Scottish Government plans to freeze rates while raising thresholds for the Basic and Intermediate bands. This move will allow many low and middle-income earners to retain more of their pay. However, critics will likely question whether this approach is fiscally responsible, given the growing demand for public services and the pressures on the NHS.
Business organisations may welcome the tax freeze, but they are unlikely to be satisfied with the limited scope of business rates relief. Critics may also highlight the risk of over-reliance on short-term measures, with calls for a more comprehensive review of business taxation in Scotland.
The Scottish Government faces a difficult balancing act. On one side, it is under pressure to increase spending to address pressing social issues like child poverty, healthcare backlogs, and climate change. On the other, it must manage the constraints of a fixed budget and limited revenue-raising powers under the current devolution settlement.
Key challenges include:
Affordability: Critics may ask whether the Budget is sustainable in the long term. For example, is it feasible to increase health and social care spending while freezing taxes?
Effectiveness: Questions will be raised about how effectively past funding increases have been spent, particularly in the health sector, where waiting lists remain stubbornly high.
Priorities: Some MSPs may argue that more should have been done to support vulnerable groups, especially given the delayed removal of the two-child cap. Others may criticise the Government for its lack of ambition in tackling the climate crisis.
The Budget will be scrutinised by parliamentary committees and debated in the Scottish Parliament. Key points of contention will likely include healthcare spending, the adequacy of local government funding, and whether tax freezes are the best approach given Scotland’s growing fiscal pressures.
The Finance and Public Administration Committee will take a close look at the details, while other committees will analyse spending plans for their respective areas, such as education and climate action.
Both the Budget Bill and the separate vote on the Scottish Rate Resolution must be passed before the Budget becomes law. Amendments could be proposed along the way, and with the Scottish Government lacking a majority, cooperation with other parties may be required.
The Scottish Budget 2025-26 aims to present a balanced approach, with record investment in health and local government, support for families, and measures to tackle the climate crisis. However, it faces criticism on several fronts, with questions about the sufficiency of the proposed measures, the sustainability of tax freezes, and the effectiveness of previous spending increases.
Parliamentary scrutiny over the coming weeks will be crucial. Will opposition parties push for more radical amendments, or will the Government's proposals survive largely intact? How MSPs navigate these discussions will determine not only the fate of the Budget but also the future direction of Scotland's economy, public services, and social welfare.
