Scotland’s Finance Secretary Shona Robison faces increasing pressure to implement broad reforms as she prepares to deliver the draft Budget for 2025/26. The Scottish government’s finances are under scrutiny, with challenges ranging from unsustainable NHS funding to calls for education reforms and council tax overhauls.
NHS Funding Crisis and Public Service Pressures
Audit Scotland has raised alarms about the NHS’s sustainability, citing ongoing financial issues and declining performance. Health services consume a substantial portion of Scotland’s budget—around 40%—but face persistent challenges. Union leaders, especially in education, have warned of a looming crisis due to teacher shortages, while local authorities are calling for greater financial autonomy to meet rising costs.
Robison has pledged that her Budget will prioritize tackling child poverty, addressing the climate emergency, and improving public services, while striving to stimulate economic growth. However, with the Scottish government constrained by limited borrowing powers, Robison faces a delicate balancing act to meet these ambitious goals.
Increased Funding, Limited Flexibility
The UK government has allocated an additional £3.4 billion to the Scottish government for the upcoming budget cycle, resulting from decisions made by Chancellor Rachel Reeves in her October Budget. However, much of this funding increase has been absorbed by wage increases for public sector workers, particularly in Scotland, where public employees are more numerous and generally paid higher than elsewhere in the UK. The Fraser of Allander Institute has warned that despite the funding boost, the overall fiscal situation remains challenging for Robison, who has little room for maneuver.
Calls for Tax and Welfare Reforms
The Budget also faces calls for significant reform, including replacing the council tax system and limiting state-funded benefits, such as university tuition, which remain free for Scottish students. Many critics, including the think tank Reform Scotland, argue that Scotland’s wide-ranging state-funded services, such as personal care for the elderly, free prescriptions, and subsidized bus travel, are not sustainable with the current financial constraints.
Meanwhile, businesses are urging the government to provide support similar to the English relief for retail, hospitality, and leisure businesses, especially given the losses among small firms in Scotland in 2023.
Social Security and Tax Policy Shifts
Since devolution, Scotland has diverged from Westminster on several social security and tax policies. The Scottish Child Payment, introduced in 2021, is one example of Scotland’s distinct welfare approach, providing £26.70 per week for low-income families. This policy is popular, but advocates argue for further investment in social housing, social care, and childcare.
Robison also faces questions about Scotland’s income tax system, which is more complex than elsewhere in the UK. While those earning more than £29,000 pay higher rates, lower earners benefit from reduced taxes. This system, while progressive, has faced criticism for its complexity and potential negative impact on higher earners.
Political Tensions Over Budget Proposals
The Budget will be subject to scrutiny in the Scottish Parliament over the winter, and Robison will need support from opposition parties to pass it, as the SNP does not hold an overall majority. Scottish Labour and the Conservatives have already criticized the SNP for poor management, while the Scottish Greens have emphasized the need for a “progressive” budget that invests in tackling climate change and poverty. The Alba Party, led by Alex Salmond, has warned against proposals that would undermine the social contract, particularly regarding social benefits.
Local authorities have also expressed frustration, with many calling for a resolution to the council tax freeze and more autonomy in managing their finances. Robison’s decision on whether to extend the freeze will likely be a key point of contention, given the dissatisfaction from councils over their funding levels.
The Road Ahead
Shona Robison and Deputy First Minister John Swinney, who has promised to lead Scotland out of its current economic and social struggles, will have to navigate these competing pressures in the run-up to the Budget vote in February. The outcome of this Budget could have significant implications for Scotland’s public services, welfare system, and overall economic stability, especially as the country faces ongoing challenges related to healthcare funding, teacher shortages, and local government needs.