Chancellor Rachel Reeves had moved to alleviate fears cuts could be coming to Scotland’s public services by vowing day-to-day and capital funding will be protected.

Chancellor Rachel Reeves has delivered her long-awaited and controversial Spring Statement, confirming cuts to welfare south of the Border, but boosting defence spending and day-to-day public services.

SNP ministers have accused the Labour government at Westminster of continuing the austerity and cuts seen under the Conservative government.

While overall, public spending is going up, some parts of government will very much feel and appear like austerity is in full swing.

Chancellor Rachel Reeves | House of Commons/UK Parliament/PA Wire

The Scotsman takes a look at some of the key points in the Chancellor’s update to the House of Commons.

Chancellor’s context of a ‘uncertain’ global economy

Since Labour came to power last summer, Ms Reeves has repeatedly painted a gloomy economic picture - largely blamed on the previous Conservative government. It could be argued the dire backdrop has made it tough for Labour to convince the public they can turn things around.

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The grim economic outlook looks like going nowhere anytime soon. The Office for Budget Responsibility on Wednesday halved its forecast for growth in gross domestic product in 2025 from 2 per cent to just 1 per cent, due to a “lack of recent momentum and waning domestic confidence”.

Ms Reeves told MPs a Labour government was “restoring stability to our public finances”. She warned “the global economy has become more uncertain” and that “trading patterns become more unstable”.

The Chancellor stressed “this moment demands an active government”, telling MPs that Labour will “step up” to alleviate any pressure.

Impact on Scotland’s public services

A 15 per cent efficiency cut to UK government departments was confirmed by the Chancellor on Sunday.

Scottish Secretary Ian Murray had claimed this would have no impact on Scotland’s frontline services. But analysis produced by the Fraser of Allander Institute in the wake of the Spring Statement said while the Scottish Government would see a small increase of around £28 million in the coming financial year, ministers faced “significant reductions” in future years.

SNP Finance Secretary Shona Robison said she has received confirmation from the Treasury “there will be cuts to our block grant from the welfare cuts from 2026/27 onwards”.

SNP First Minister John Swinney had warned on Monday the strategy would have an impact on the Scottish Government’s future settlement and day-to-day-spending, including on public services such as the NHS.

But Ms Reeves vowed day-to-day spending “will increase in real terms above inflation” every year up to 2029/30. She also pledged that capital infrastructure spending will also increase.

She said: “In the spending review period, apart from the reduction in overseas aid, day-to-day spending across government has been fully protected.”

The Chancellor told the Commons Labour will “significantly reduce the costs of running government” making the state ”leaner and more agile” and allocate ”more resources to the frontline”.

She announced a £3.25m “transformation fund” to “bring down the cost of government” and make it “more efficient” and “more productive”. She said the government would introduce “voluntary exit schemes to reduce the size of the civil service”.

Cuts to welfare funding

We knew cuts to welfare were coming after UK work and pensions secretary Liz Kendall set out controversial plans to restrict funding for those claiming disability benefit by up to £5bn a year. That was a hard sell from a Labour government going further than the Tories ever dared at the peak of their austerity agenda.

But forecasting from the Office for Budget Responsibility (OBR) has warned those cuts will not tally up as much funding as the Chancellor has hoped, meaning even more severe cuts will be needed.

Ms Reeves said Labour “inherited a broken system” on welfare, but confirmed that her original cuts would only generate £3.4bn - meaning some “final adjustments” were needed.

She said the Universal Credit standard allowance will increase from £92 a week in in 2025/26 to £106 a week by 2029/30 while Ms Reeves said the Universal Credit health element will be "cut by 50 per cent and then frozen for new claimants".

Analysis published by the DWP admitted that the changes could pull 250,000 people across the UK into poverty by the end of the decade, including 50,000 children - while 3.2m families will lose money in the overhaul.

Defence spending boosted

Keir Starmer had previously pledged to boost defence pending (Picture: Kirsty Wigglesworth/WPA pool) | Getty Images

This was well-trailed by Sir Keir Starmer and his government in response to the heightened nervousness of Russia’s illegal invasion of Ukraine and the unhelpful attitude of US President Donald Trump.

An extra £2.2bn on defence spending has been paid for with a deeply controversial cut to the international aid budget, which risks creating a vicious circle of instability around the world.

The decision saw the first ministerial resignation of Sir Keir’s government, when Anneliese Dodds warned it undermined her position.

The Chancellor said the extra £2.2bn for the Ministry of Defence would help protect the UK in the “changing world”.

Pandering to Donald Trump to save whisky trade

As well as the UK government’s decision to boost defence spending, a clear nod to the US President’s lukewarm at best attitude to Nato, Labour will face accusations of pandering to Mr Trump’s demands over tech companies.

With the economic climate looking so stormy, the last thing the Chancellor’s growth vision needs is a trade war with the United States, including tariffs on goods such as Scotch whisky.

Any mention of the £1bn-a-year digital services tax was absent from the Spring Statement, with “ongoing” discussions with the US President taking place.

Those talks being successful could protect the Scotch whisky trade from painful tariffs, but politically could come at a huge cost by being seen to cave to the US President.

No decision on Scotland’s carbon capture project

Labour has insisted Scotland is central to the UK government's clean energy plans (Photo: Jeff J Mitchell/PA Wire)

Energy chiefs had called for Ms Reeves to come clean on whether the Acorn carbon capture and storage project, based at Peterhead, will actually get government funding - amid concerns the infrastructure is for the axe.

Ed Miliband, Labour’s energy secretary, suggested a decision would be confirmed at June’s spending review. That would be fine if the project hadn’t been on hold for years and is crucial to Scotland’s net zero strategy and plans to hand Grangemouth a new lease of life.

Spring Statement 2025: What it means for Scotland in 6 points - the economy, public services, welfare cuts