SNP takes election fight to Labour with Budget benefit cap vow amid council tax fears

Income tax rates will be frozen next year alongside record funding handed over to the NHS and local government.

From next April, the point where Scots start paying more income tax compared to England will increase from £28,800 to £30,318 - but council tax is poised to rise from April. Analysis from the Scottish Fiscal Commission found that taxpayers earning less than £47,310 will pay slightly less tax in 2025-26 than they do this year.

The finance secretary moved to warn under-pressure local authorities not to hike council tax bills by unprecedented amounts, stressing her Budget “should enable all councils to keep any council tax rises to a minimum", insisting that “common sense will prevail”.

Read more: Scottish Budget: The 8 key announcements and what they mean for you - benefit cap, income tax, NHS

Chief executive of membership body and think tank, the Local Government Information Unit Scotland, Jonathan Carr-West, said the Budget “does not engage with the scale” of the challenge facing councils, accusing Ms Robison of being “too complacent”.

He added: “The truth is that even with the additional funding announced today, local authorities will still need to raise council tax and make cuts to services and will still edge closer to being unable to balance their books.”

The finance secretary’s draft spending plans include a record £21bn of funding for the NHS, a £2bn increase, and local government receiving an extra £1bn.

But she made a bold pledge that could become a key election tussle as she set out that “by March 2026 no one will wait longer than 12 months for a new outpatient appointment, inpatient treatment or day case treatment”.

She also signalled the end of hospital build projects being paused - confirming her government will press ahead with the Edinburgh Eye pavilion project and the Monklands and Belford hospitals. Work to construct new prisons will also be brought forward with plans for replacement facilities for Barlinnie and Inverness.

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Ms Robison also set out a £34m uplift for culture funding and a 3 per cent increase in education spending. She confirmed £768m for affordable homes which will pay for more than 8,000 new properties to be built or acquired next year.

The SNP finance secretary has moved to back Scottish Labour into a corner by using a £3.4 billion cash boost from Rachel Reeves to bring forward plans to mitigate the benefit cap and winter fuel payments - handing Anas Sarwar a headache going into the crunch 2026 Holyrood election.

Ms Robison confirmed that work will begin in the next financial year to prepare the infrastructure and obtain data from Westminster to scrap the two-child cap - ahead of a commitment for payments to start being made to families “as early as we can in 2026” which will “lift 15,000 children out of poverty”.

She told journalists the policy would cost around £100m to deliver, putting her at odds with the Fraser of Allander Institute, which has predicted it could cost up to £200m a year.

Delivering her draft Budget, Ms Robison warned the two-child cap was “a pernicious part of the UK welfare system”, adding it has “caused misery for children and families in Scotland”.

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Ms Robison said: “Many expected an incoming Labour government to abolish the cap. We’ve waited but Labour haven’t delivered. This SNP government will.

“Just as with pension age winter heating payments, we will act. We will mitigate the two-child cap. The detailed work of building the system will start with this Budget, but implementation requires the cooperation of the UK government.”

Speaking to journalists later, Ms Robison added: “We will make sure that if we can start making these payments at the beginning of 2026, the resources will be available to do that.”

She also raised the prospect of a pilot scheme from Social Security Scotland “in maybe three or four local authority areas”.

A Scottish Government source said that there was a “genuine belief” that Sir Keir Starmer’s administration would move to end the benefit cap and insisted the motivation was “doing the right thing and prioritising something we can be proud of”.

The finance secretary also admitted that her government has “gone as far as we could” in hiking income tax.

She said: “This government will not introduce any new bands or increase the rates of Scottish income tax for the remainder of this parliament.

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“While the UK Government has frozen all income tax thresholds, in Scotland the basic and intermediate rate thresholds will increase this year by 3.5 per cent - effectively twice the rate of inflation. That means more of people’s money will be taxed at the starter and basic tax rates.”

Ms Robison claimed she was bringing forward a “fair but flexible approach” to public sector pay, a policy that was a huge contributor to her being forced to cut £500m from this year’s Budget in September.

She confirmed there will be “an above inflation increase of 9 per cent over the next three years”.

Ms Robison said that her government will continue to provide 40 per cent non-domestic rates relief next year for the vast majority of hospitality premises, but business chiefs have raised concerns that small retail and leisure businesses have not been handed support.

Joao Sousa, deputy director of the Fraser of Allander Institute, warned the rates relief announcement was “much narrower” than that in England.

He added: “It only applies to the smallest premises – many of which will get full relief anyway – and retail and leisure premises are excluded.”

The politics of the Budget have put pressure on Scottish Labour, who criticised the spending plans as having a lack of “imagination”.

The party’s finance spokesperson, Michael Marra, claimed “Scotland is going in the wrong direction under the SNP”.

He added: “It is not enough just to try and correct the mistakes made last year by putting back the money that was slashed in the Budget itself or in the cuts chaos of the now annual SNP emergency Budget.

“This Budget amounts to more of the same, sending Scotland ever faster in the wrong direction.”

Scottish Conservative finance spokesperson, Craig Hoy, added: “Workers needed a game-changing tax cut, but the SNP gave them next to nothing.

“Businesses deserved much more than partially passing on some tax relief, but they've once again been short-changed by the SNP.”

The Budget will realistically need the support of either the Greens or the Liberal Democrats to be passed in February.

Ms Robison stressed a red line for the Greens to match this year’s £4.7bn for climate and nature funding has been met - pointing to £4.9bn in her spending plans.

But Greens finance spokesperson Ross Greer said that “big changes will be needed if they expect the Scottish Greens’ support”.

He pointed to a failure from SNP ministers to expand free school meals or agree to his party’s proposed bus fares cap.

Mr Greer added: “We are prepared to work with the SNP to make the big improvements the Budget needs.

“Scotland’s communities and environment needs more from their government than we have seen today.”

That raises the prospects of the Lib Dems either voting in favour of or abstaining from the vote - allowing the spending plans to pass.

Ms Robison announced extra money for island ferries, a potential signal to Lib Dem MSPs who represent Orkney and Shetland - as well as a host of other party priorities including social care, GPs and mental health support.

Lib Dem leader, Alex Cole-Hamilton told journalists the two parties are “still a long way off any kind of agreement”.

Speaking in Holyrood, he said it was “right that the government has listened to us and included spending” on a host of policy areas.

But he added: “Let me be clear: that does not guarantee our support. As with all budgets, the devil will be in the detail, and we will look closely at that.”