Scottish Budget: What to expect in SNP's spending plans as Holyrood election looms
Shona Robison will deliver her final Scottish Budget this week.
SNP ministers will focus on alleviating the cost-of-living crisis, eradicating child poverty and boosting the NHS when their final Budget before May’s Holyrood election is published on Tuesday.
Finance Secretary Shona Robison, who is stepping down at the election, will deliver her final draft spending plans against a backdrop of an election campaign already in full swing.
With the drama of whether the Budget will pass taken away after Scottish Labour leader Anas Sarwar confirmed his party would not vote down the spending plans, attention now turns to what could be included in the proposals.
‘Tough choices’
Although SNP ministers will want to give away some pre-election goodies, the lack of fiscal headroom and borrowing limits imposed by Westminster means there is little space for Ms Robison to bring forward ambitious spending plans without cutting in other areas.
Since becoming First Minister in May 2024, John Swinney has stuck to his four priorities - eradicating child poverty, growing the economy, tackling the climate crisis and improving public services. Tuesday’s draft Budget will be no different.
READ MORE: Economists warn SNP 'something will have to give' as capital projects set for axe over £1bn gap
But David Phillips, associate director at the Institute for Fiscal Studies, has warned that “the Scottish Government is going to face some tough choices over the next few years”, adding that “after a few bumper years of funding increases, increases over the next few years are set to be much smaller”.
He added: “It's possible the forecasts the Scottish spending review is based on are too optimistic for later years of the review period.
“That raises the possibility of having to make cut-backs to any plans set out further down the line.
“With this in mind there is a case for the Scottish Government to plan budgets cautiously and hold some money in reserve – which could be allocated further down the line if this downside risk to revenue forecasts does not materialise.”
Income tax
The First Minister has already confirmed his government will not be altering income tax rates and bands, but speculation is mounting that SNP ministers could increase tax thresholds - meaning an essential tax cut for some, particularly for middle or higher earners.
But Mr Phillips warned that he “would expect spending on services other than health to fall on average in real-terms over the next three years”.
He added: “That means finding money for either tax cuts or new spending, e.g. on childcare, will mean even deeper cuts to some areas.
“And the revenue-raised by Scotland’s higher rates of tax, well over £1 billion a year compared to if the rest of the UK rates were applied, is significant.
I can’t see a government with a range of commitments on public spending and benefits finding the revenue to credibly deliver that.”
Stephen Boyd, director of the IPPR Scotland think tank, warned that a move to increase the higher rate income tax threshold “would eat into the roughly £900m revenue that comes from this threshold being lower than its level in the rest of the UK”.
He added: “Such a tax cut would go only to those with incomes above £43,662, including very high earners.”
Cost of living support
Help to tackle the enduring cost-of-living crisis will be the key message from SNP ministers in Tuesday’s draft Budget.
Speaking last week, Mr Swinney said the spending plans will include “a major focus on helping households with the cost of living”.
Ms Robison said: “We will deliver a Budget that focuses resolutely on the people of Scotland’s priorities – driving further improvements in the NHS and supporting people with the cost of living at a time when so many people are struggling to make ends meet.
“We will use this Budget to continue the progress we are delivering in Scotland – bringing down NHS waiting lists, supporting families, reducing child poverty and growing the economy.”
She added: “The Budget measures we take forward will stand in stark contrast to those of the UK government which are holding Scotland back.
“Our Budget will continue the trusted leadership that this government is providing in Scotland and drive progress on the issues people in Scotland care about the most.”
Potential childcare expansion
In December, the UK government announced it was expanding its free childcare offer, to be available when children are nine months old for around 30 hours a week.
In Scotland, all three and four-year-olds are entitled to 1,140 hours of childcare a year - around 30 hours a week if used in term time or 22 hours a week across the entire year.
Michelle Ferguson, Scotland director of the CBI, has called for a level playing field for childcare provision across the UK, with economists concluding it could allow at least 2,200 people north of the Border to return to work and add at least £80m to the economy.
The ask, as part of CBI Scotland’s business manifesto for all parties ahead of May’s election, would help Mr Swinney’s mission to reduce child poverty and be consistent with his actions to alleviate the cost-of-living crisis.
Ms Ferguson said: “If we look at childcare as one area, from nine months old in England, you now get 30 hours a week. We believe that if the Scottish Government brought that in, if they doubled down and did exactly the same, that would allow a minimum of 2,200 people back to work. That would make a positive impact on our economy of £80m.
“Business are looking to make sure Scotland is a great place for individuals to come and work.”
She added: “At the moment, it starts from three years old. It’s something for them to review. It’s a big call and one that they can cost and have a positive impact.
“It changes people’s lives and it increases productivity here in Scotland. Let’s look at the opportunities and the levers that we have got so that we can increase that.”
A senior Scottish Government source would not be drawn on speculation about whether the policy was being considered.
Asked about whether it would be affordable, the source said that “it depends what you do and it depends over what timeframe and how you do it”.
They added: “It’s something we do care about. We’ve spent a lot of money on it.”
Child poverty
The SNP government will likely use the Budget to further its progress in alleviating child poverty.
Extra funding will be available to Ms Robison to tackle child poverty after the UK government’s U-turn to scrap the two-child benefit cap limit, which the Scottish Government had already vowed to do itself. Some of that funding has already been earmarked for emergency support.
The Scottish Government has previously ruled out further increases to the flagship Scottish Child Payment, with a belief the weekly payment of £27.15 is the ceiling before putting off parents from obtaining employment.
But campaigners have called for a re-think and are urging SNP ministers to further raise the Scottish Child Payment in Tuesday’s draft Budget.
Poverty Alliance chief executive, Peter Kelly, said: ¨People want a just and compassionate Scotland - not one where one in four of our children are still living in poverty. During the Budget process, every MSP can take responsibility for making sure the Scottish Government invests to give every child a good start in life.
“The Scottish Child Payment is an effective way of protecting and investing in households with children, putting money directly in the pockets of families. It has kept tens of thousands of children from being pushed into poverty, and it has reduced the financial challenges being those faced by those others who have been left below the poverty line.”
He added: “The recent abolition of the two-child limit at UK level frees up significant resources in Scotland. We call on MSPs to channel this funding into the Scottish Child Payment, moving decisively toward a £40 per week rate by the end of this Parliament.
“Scotland's children need that investment. Without it, thousands of children will be left in hardship, and even destitution. Scotland's child poverty targets will likely be unmet - breaking a fundamental promise that MSPs of all parties made to the nation. Our representatives simply can't allow that to happen.”
Affordable housing
The Scottish Government has set a flagship target to deliver 110,000 affordable homes by 2032, but little more than 31,000 have been delivered so far.
Ahead of May’s election, SNP ministers are under pressure to ramp up delivery - having controversially cut funding by £200m in the 2024-25 financial year.
Shelter Scotland director, Alison Watson said: “Ministers promised 110,000 affordable homes by 2032, but just over 31,000 have been delivered so far.
“Independent research tells us that nearly 79,000 social homes are needed by the end of the next Parliament to tackle the housing emergency. This is not some far-off, unachievable goal – it’s comparable to the government’s own policy. What is missing is the commitment to invest at the level required.
“The 2026-27 Scottish budget is a critical opportunity. Failure to act will mean the government’s own 110,000 target is missed, and homelessness continues to rise. Only sustained investment in buying and building social homes where they are most needed will make a real difference on the ground.”
Cuts to infrastructure projects
The Scottish Government has endured consistent cuts to its capital funding from Westminster for several years.
Analysis from the Fraser of Allander Institute at Strathclyde University, has warned that around £1 billion of cuts to its infrastructure pipeline will likely need to be cut.
Alongside the draft Budget, the Scottish Government’s spending review and infrastructure pipeline will be published by Ms Robison.
Although some projects could be delayed, it is possible that key transport and health capital projects could face the axe.
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