Scotland’s Upcoming Budget Poses Significant Challenges for the SNP

Scotland’s Finance Secretary, Shona Robison, faces calls for extensive reforms as she prepares to unveil her preliminary Budget for the upcoming year. The spending watchdog, Audit Scotland, has issued a warning that the National Health Service (NHS) is unsustainable in its current form. Concurrently, local authorities are seeking increased funding and greater independence, while unions contend that education is jeopardized by a shortage of teachers. Additionally, there are demands for the Scottish National Party (SNP) to substitute the council tax with an alternative system and to limit access to benefits like state-funded university tuition, referred to as “freebies.” Robison stated that the forthcoming Budget would prioritize the elimination of child poverty and “tackling the climate emergency,” alongside enhancing public services and fostering economic growth. The proposed tax and spending legislation will undergo scrutiny in the Scottish Parliament throughout the winter months, culminating in a vote in February. For the bill to be enacted, support will be required from parties beyond the SNP’s minority administration. The UK government indicates that an additional £3.4 billion is accessible to Robison for this Budget, which pertains to the 2025/26 fiscal year. This availability stems from decisions made by Chancellor Rachel Reeves in her October Budget presented at Westminster. The majority of Scottish government funding is provided as an annual lump sum from the Treasury, termed the block grant, which is determined by a formula devised in the 1970s by Labour politician Joel Barnett. However, a significant portion of this increase has already been absorbed by the Scottish government’s choices to increase salaries for public sector employees. According to the Fraser of Allander Institute at Strathclyde University, these workers are both more numerous per capita and, “on average, paid more in Scotland,” compared to their counterparts elsewhere in the UK. The institute’s yearly budget report indicates that, notwithstanding the augmented funding, the allocation for 2025/26 “is still tricky,” and the finance secretary “will have limited room for manoeuvre.” Additional pressures encompass the SNP’s choice to finance a partial reversal of Reeves’ limitations on winter fuel payments for pensioners, as well as the repercussions of Labour’s decision to raise employers’ national insurance contributions. Furthermore, there are appeals for Robison to allocate approximately £220 million to mirror the business rates relief – a type of property tax – that the chancellor announced for retail, hospitality, and leisure businesses in England. Stacey Dingwall, head of policy and external affairs for the Federation of Small Businesses Scotland, stated: “Given that there’s no difference in the challenges being faced either side of the border, we think it’s really incumbent on the Scottish government to pass on that 40% rates relief.” Ms Dingwall also asserted that the Scottish government must uphold its commitment to re-establish its relationship with businesses, following a net reduction of 20,000 small Scottish firms in 2023. Scotland’s overall budget for the previous year totaled approximately £60 billion. The UK government projects the block grant for 2025/26 to be £47.7 billion. Ms Robison is required to ensure financial balance annually, given that the devolved administration possesses only restricted authority to borrow funds. The remaining portion of her budget is generated through taxes managed in Edinburgh, including income tax, land and buildings transaction tax (previously known as stamp duty), and business rates. Since the advent of devolution in 1999, the Scottish government has held responsibility for a broad spectrum of public services, such as health, education, policing, justice, and housing. Authority over defence, foreign affairs, currency, and immigration continues to reside with the UK government. Nevertheless, over the past twenty-five years since the modern Scottish Parliament was established, additional powers concerning welfare and taxation have been delegated from London to Edinburgh. This has resulted in a significant increase in devolved social security expenditure, rising from £192 million in 2018/19 to £5.1 billion in 2023/24, as reported by the Fraser of Allander Institute. The most notable departure from Westminster’s welfare policy occurred with the 2021 introduction of the Scottish Child Payment, a weekly benefit for low-income families, currently set at £26.70 per child. Chris Birt, associate director of the Joseph Rowntree Foundation, commented, “It is definitely making an impact,” and expressed a desire for the budget to incorporate increased investment in social housing, enhanced funding for social care and childcare, and reform of the council tax. Mr Birt remarked, “Most people don’t give a monkey’s if services are provided by UK government, Scottish government, health board, council, whatever, they just want that support to be there.” He added, “We definitely need to have a much more radical discussion about how we support people, not how we worry about our institutions.” In addition to the divergence from Westminster regarding welfare, a change in tax policy has also been observed. Currently, individuals earning over approximately £29,000 annually in Scotland incur a higher income tax liability than their counterparts in England. Conversely, those earning below this threshold pay marginally less, within a system that has become more intricate than any other in the UK. Ms Robison is also tasked with determining the future of council tax, following last year’s unexpected decision by then-First Minister Humza Yousaf to reinstate a freeze on the levy. Extending that freeze in the current year’s Budget would be an even greater surprise, potentially leading to a contentious dispute between Yousaf’s successor, John Swinney, and local authority leaders. Consequently, this outcome is deemed improbable. During their 17-year tenure in power at Holyrood, the SNP has also sustained and broadened the provision of numerous state-funded benefits, such as personal care for the elderly, university tuition, prescriptions, and bus travel for Scotland’s youngest and oldest citizens. Certain critics, including Alison Payne, research director at the think tank Reform Scotland, contend that this represents an inefficient allocation of finite financial resources. Ms Payne stated: “Where budgets are tight and you have dwindling resources, you need to have a conversation about whether it is better to target what support you have to those who need it most.” However, the National Health Service (NHS) poses the most significant challenge for Robison, as it not only constitutes 40% of her Budget but is also experiencing immense pressure. Audit Scotland, the public spending watchdog, asserts that the nation’s existing healthcare delivery model is unsustainable, citing a “worsening financial position” and “ongoing performance issues.” In this area, there is also a demand not merely for greater funding or minor policy adjustments, but for fundamental reform, potentially extending to the cessation of certain services. Prior to the budget announcement, Scottish Labour commented that “every institution in Scotland” had “been left weaker by SNP mismanagement and waste.” The Scottish Conservatives accused the SNP of having “failed Scotland by making people pay more while getting less.” Alex Cole-Hamilton, leader of the Scottish Liberal Democrats, stated that the SNP “would have to pull out all the stops” to convince his party to endorse the budget. The Scottish Greens expressed their desire for “a progressive budget that invests in tackling the climate crisis and lifting children out of poverty.” The Alba Party called upon Swinney to decline any proposals from parties “that want to rip up the social contract that Alex Salmond delivered whilst in office.” Collectively, these factors present a substantial challenge for Robison and her superior, John Swinney, who has pledged to lead Scotland from “a long, dark winter” into the “warmth of spring.”