Scottish Budget 2026: Funding gap so wide there was next to nothing in giveaways - despite election year
Totemic, cynical politics and hollow child poverty eradication claim
It was always going to be a challenging Budget for the Scottish Government (SG) and so it proved. The delivery was, as usual, dire. Once the numbers became available it was obvious to see why. Even in an election year the funding gap yawned so wide that that there was next to nothing in terms of giveaways. And while the Budget figures for next year were bad enough, those for the Spending Review (SR) years were even worse.
Between 2026-27 and 2028-29 the overall Scottish Budget will rise by just 0.6 per cent, in real terms (i.e. after adjusting for inflation). But that, already miserable, total hides a split across spending portfolios. For Health and Social Security - which amounts to half the total Budget - the increase across these two years is over seven per cent, a decent, but not generous, hike. However, that means that for the other half of the Budget there is, on average, a fall of six per cent in real spending power. Ouch.
And if you’re really unlucky, like the Prisons budget, then the cut is 40 per cent, in cash terms. You might think the Wind Power budget would be safe. Nope, a real terms cut of 50 per cent. What about the Enterprise budget, essential to get the economy growing again. Nope, down over 10 per cent in real terms. Another victim is Local Government, almost inevitable given that its Budget is the second biggest and it is not a priority spending area.
With respect to the Governments grand project of ‘eradicating’ child poverty its difficult to see how much, if any, progress can be made given these figures. But the shift to increasing Social Security (SS) payments - including the Scottish Child Payment (SCP) - to levels above those seen in England is crucial to understanding why times are quite so tough.
In 2026-27 the extra SS spending will be over £1 billion. This highlights a growing divergence in Westminster vs Holyrood policy. The SG spends considerably, and growing, more money on devolved benefits. Part of meeting the cost of such extra benefits comes from higher income tax payments in Scotland but only part. The rest comes from a relative underspend in frontline services, including health and education. It is for this reason that health spending per person in Scotland and England are now roughly on a par with each other - lower in Scotland once relative needs are taken into account - a far cry from the position even a decade ago.
It is impossible to tell whether this is a good choice or a bad choice, even in term of whether it improves the chances and outcomes for children living in poverty. It would however, be more honest and more open if the SG were to acknowledge this strategic decision and outline the basis for its being made. Otherwise, it looks more like change for the sake of it and to differentiate Scottish from UK/English policies.
It is also worth repeating how hollow the claim to eradicate child poverty is. John Swinney offers no measure of what this means or how much it will cost, because he knows it is not going to be achieved. It is totemic politics and cynical.
This is not to deny that the SG is well ahead of the UK Government on this matter, it is, largely through the SCP. But that is very different from claiming you will end child poverty. No country has and the Scottish Governments makes only baby steps in that direction.
Discussion of such trade offs in the Scottish Parliament is virtually non-existent and yet it is coming to define the difference between the two sets of government.
Another costly difference is the relatively higher number of Scottish public service workers and the higher pay they receive than in England. All fair and well if they are more incentivised and deliver more and better quality services but the evidence for this is scant and, according to yesterdays polling, the public don’t believe it either. Again, we have an important SG policy position based on ‘fair compensation for hard working public servants’ but not backed up by a system that ensures that such generosity delivers equal ‘fairness’ to public service users.
At present the SG is also using non-recurring sources of funding and borrowing to help pay for such costs - as the Fraser of Allander has recently highlighted - but that’s not a valid, long term, strategy.
All of this leads to the conclusion that, going forwards, and well past the SR years, unless you are the Health or SS budgets then you are in for repeated, tough, budget settlements. The only hope for them seems to be an economic revival or higher taxes. The first is not in the SG’s hands, the second may be political poison.
While it is fair to claim that, at the UK level, Keir Starmer and Rachel Reeves may be scrambling around and unclear of their direction of travel, such a claim would be equally valid in terms of what John Swinney and Shona Robison think they are up to. Piecemeal rather than synchronised, political rather than principled, it is a budget strategy that simply staggers from one set piece to the next.
This will not be the last word on the budgets for the next four years, far from it, but if we cant get some form of coherence at the time of a Spending Review then when can we? Post election? Regardless of who wins, or shares power, the prospects seem equally as poor then too.
John McLaren is a political economist
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