The Scottish Budget outlook: Why Shona Robison's job has been 'made slightly easier' by Rachel Reeves

The Scottish Government got an extra £820 million, people are getting £150 off their energy bills and the two-child benefit cap was scrapped.

The Chancellor said the money had been given to Scotland “because [Scottish Labour leader] Anas Sarwar asked us to”.

But the Scottish Labour leader isn’t the only one who will have some reason to be happy about the UK Budget.

SNP Finance Secretary Shona Robison, who will announce the Scottish Budget on January 13, has also benefited.

The Fraser of Allander Institute (FAI) has said Ms Robison’s job has been “made slightly easier” by the UK Budget.

She now has more money at her disposal due to extra Barnett consequentials and no longer having to mitigate the two-child limit.

But she is also facing issues of her own. Firms have called for business rates to be reduced and eyes are on the Scottish Government to see whether it will copy England’s ‘mansion tax’.

Joao Sousa, deputy director at the FAI, said: “Our assessment is that the broad contours of the Scottish Budget for 2026-27 haven’t changed that much, if anything have been made slightly easier.

“The mitigation of the two-child limit will no longer need to happen, which even after accounting for second-order effects, should release around £120 million for the Scottish Government to spend on other priorities. There are also £300m for next year in Barnett consequentials, which again make the Finance Secretary’s job a little bit easier.

“Shona Robison and John Swinney both said there would be no changes to income tax rates or new bands added, but we wait to see what exactly will happen with thresholds.

“Those were already frozen for the rest of the UK and we expect that the top three thresholds will remain frozen in Scotland as well. But the Scottish Government has in recent years made small adjustments to the lower ones in order to maintain the policy of roughly half of taxpayers having a lower liability than at the same income in the rest of the UK – even if it’s by less than £30 a year.

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“The Scottish Budget will coincide with the Scottish Spending Review and the first budgeted actions to implement the Fiscal Sustainability Delivery Plan. But we expect that tougher decisions might be postponed beyond the election.

“The new rUK property tax rate, which in the absence of any Scottish Government action will increase the block grant adjustment slightly, doesn’t kick in until April 2027, and some of the planned spending restraint is beyond the Spending Review period.

“It will be interesting to see if the Scottish Government says anything about its intentions or otherwise in replicating something like the so-called ‘mansion tax’ announced this week for England. But again, we’re obviously too close to 2026-27 for that to apply in time.”

The Scottish Government had initially intended to spend money mitigating the two-child benefit cap, but no longer has to after Labour pledged to scrap it on Wednesday.

Business groups said this freed up money that could be used to lower business rates.

Guy Hinks, Scotland chair of the Federation of Small Businesses, said: “What is essential after Wednesday’s statement is the UK and Scottish governments bring forward concrete measures to support growth and give Scotland’s small businesses the confidence they need to grow, invest and hire.

“All eyes will be on the Scottish Government’s own Budget in January and how they invest the extra £820m they are set to receive as a result of today’s decisions by the Chancellor. In addition, with the removal of the two-child benefit cap, the Scottish Government no longer needs to set aside additional funds for their planned mitigations.

“That gives them a golden opportunity to breathe life into our high streets and town centres by lowering business rates for particularly hard-pressed sectors.

“Scotland’s struggling retail, hospitality and leisure sectors face exactly the same pressures as their counterparts south of the Border, from spiralling costs to the impact of rising retail crime.

“Pubs, restaurants and shops north of the Border deserve nothing less than a level playing field. After all, the cost of serving a pint of lager or selling a pint of milk doesn’t change when you cross the border from England to Scotland.”

David Lonsdale, director at the Scottish Retail Consortium, said the Scottish Government should copy Labour introducing permanently lower taxes for retail.

He warned that failing to do so meant there was “a clear risk Scotland’s retail destinations will become a substantially less attractive option for commercial investment” and the money would be invested in other parts of the UK.

Mr Lonsdale said: “After last year’s Budget battering, which included a colossal hike in employers’ National Insurance contributions, Scottish retailers breathed a sigh of relief that there were no new disproportionate taxes on retail and little which will immediately make trading harder.

“That said, it’s clear the economy remains in something of a funk with economic growth forecasts for the new few years underwhelming and household consumption faring little better. With Scottish retail sales growth over the last 12 months pretty flat at around 0.7 per cent, there seems little sign that consumer spending will bounce back soon.

“The significant announcement from a retail perspective was of a permanently lower business rate for most English shops. Stores down south will see significant reductions of ten or 20 per cent in their business rate. Welsh ministers are also reducing the business rate for stores.

“If Scotland fails to act, there is now a clear risk Scotland’s retail destinations will become a substantially less attractive option for commercial investment from April. The onus is on the Finance Secretary to seize the moment to reduce rates for all retailers in Scotland in her January Budget.

“If she fumbles that opportunity, then Scotland’s retailers’ and high streets are likely to face the unwelcome consequences with a loss of investment to other parts of the UK.”

Dr Liz Cameron, director and chief executive at the Scottish Chambers of Commerce (SCC), said: “Tinkering around the edges of the economy is not enough. This Budget was a missed opportunity for the Treasury to set out a coherent, long-term narrative for business growth. Instead, we have been left with a trade-off budget that will do little to rebuild confidence on shop floors and in boardrooms across the country.

“SCC set out practical, business-friendly asks: reversing the damaging employer NIC contributions and scrapping the punitive energy profits levy among them. It is deeply disappointing that these did not make it into the Chancellor’s red box on Wednesday.

“The rise in the minimum and living wage will support many workers. But for businesses already facing sustained cost pressures, it represents another material increase that will be difficult to absorb.

“Looking ahead to the Scottish Budget on 13 January, our asks are clear: reduce the cost burden on firms, deliver a sustainable funding model for colleges and universities that help us meet skills needs, and work with the business community to develop a credible, long-term plan for growth.

“Scotland has tremendous potential, but we need leadership in Holyrood and Westminster that creates the conditions for firms to invest, grow and create opportunity.”

David Hilferty, director of impact at Citizens Advice Scotland, welcomed the scrapping of the two-child benefit cap in the Budget. But he called for more measures to tackle poverty in the future.

He said: “In the context of what is an increasingly entrenched and permanent cost-of-living crisis, it was important that we had a Budget this week that prioritised the harm. Scrapping the two-child limit was a key part of that – it will be transformational for around 20,000 children in Scotland.

“That will also have a multiplier effect – because the Scottish Government has committed to invest the £155m set aside to mitigate the two-child limit in measures to tackle child poverty.

“Investing in advice is a key part of tackling poverty and boosting living standards. The Citizens Advice network is a core part of Scotland’s anti-poverty infrastructure, returning almost £170m into people's pockets last year alone. That is advice that changes lives and boosts living standards.

“Yet we wanted to see more action from UK government on the essentials that all of us need. On energy, we’ve seen a normalisation and even an acceptance on the part of government and the regulator of unaffordable energy bills.

“That means people worried about being able to have the heating on for the kids coming home from school - people sitting in the dark, rationing energy costs or being cut off altogether.

“To meet the scale of the cost-of-living crisis, we need solutions to match that. That’s why we need to see an extensive debt write-off scheme, and a new affordable tariff that keeps bills down now and into the future.”