MSPs are set to give their nod to the Scottish Government's 2025-26 Budget.
The minority SNP administration’s spending blueprint has won the backing of the Greens, Liberal Democrats and Alba, while Labour MSPs have opted to abstain during the third stage of voting.
According to the Government, the £63bn Budget will secure a record settlement for the NHS and local councils, provide pensioners with a winter fuel payment and address child poverty.
The Conservatives, the sole party opposing the proposals, labelled them “dire and damaging”.
Once approved by MSPs, the Budget bill will undergo the formal procedure of receiving Royal Assent before it becomes law.
The new tax and spending arrangements will come into force at the start of the financial year in April.
Not long ago, there was speculation that this year’s budget process might bring down the Scottish Government.
After the SNP administration lost its parliamentary majority by ending a power-sharing deal with the Greens, First Minister Humza Yousaf resigned.
His successor, John Swinney, found himself dependent on the support of opposition MSPs to secure his proposals.
Gaining such backing carried significant political risks, even hinting at the unlikely chance of a snap election.
That prospect was ruled out in January when Scottish Labour leader Anas Sarwar announced his party would not block the bill, ensuring the SNP secured the necessary votes.
It was soon confirmed that Swinney, an experienced negotiator on Budget matters, had won over the Greens, Liberal Democrats and Alba.
Nonetheless, he raised eyebrows by suggesting that opposing his plans would be akin to endorsing Elon Musk’s “populist” agenda.
Parliament has already set the income tax rates for 2025-26 before the final Budget debate and vote.
MSPs agreed to adjust the thresholds on the lower tax bands in line with inflation.
This means that the threshold for the basic band – taxed at 20% on earnings between £14,876 and £26,561 – and the intermediate band – taxed at 21% on earnings between £26,562 and £43,662 – will increase by 3.5%.
Although most of the bands remain unchanged, a growing number of people will end up paying a higher rate due to “fiscal drag”. This occurs when the bands are not adjusted to keep pace with rising incomes, effectively “dragging” more individuals into higher tax brackets.
For those earning below £30,300, income tax in Scotland will be slightly lower than elsewhere in the UK – approximately £28 less per year for most in this group.
However, individuals earning around £50,000 will face an extra tax bill of about £1,500 per year compared to their counterparts in other parts of the UK.
The Conservatives maintained that there was “no case” for Scotland to have a more intricate income tax system than the rest of the UK.
Finance Secretary Shona Robison claimed that Scotland’s tax system would generate a record £25bn in the upcoming financial year.
The Scottish Fiscal Commission forecasts that Scotland will be £838m better off than if it were to adopt the rest of the UK’s tax system.
What Does the Budget Contain?
The standout announcement in Robison’s Budget speech in December was a proposal to effectively abolish the two-child benefit cap implemented by the UK Government in Scotland.
Ministers have pledged to remove the cap from April 2026 – or sooner if possible – although no specific funds have been earmarked yet, as negotiations continue with the UK Government over the necessary data to support affected families.
Additionally, ministers have promised an extra £2bn for the NHS and £1bn for local authorities compared with the 2024-25 Budget.
The Government also unveiled nearly £800m more for social security benefits, ensuring that every pensioner household receives a winter fuel payment.
The Scottish Parliament Information Centre, analysing the Budget, noted that the Government had clearly prioritised support for low earners, pensioners and measures to tackle child poverty, albeit at the expense of other areas.
To secure the support of the Greens and Lib Dems, ministers had to make concessions. These included widening free school meals eligibility in eight council areas and increasing funds for drug services and neonatal care.
The Budget also provides for a 12% real terms boost in capital funding for infrastructure projects, alongside a £30m “invest to save” scheme aimed at funding reforms and improving efficiency.
However, the Budget is not expected to deliver the sweeping public sector reforms long advocated by ministers and bodies such as Audit Scotland.
Financial pressures at Holyrood have been somewhat alleviated by a record funding settlement announced by UK Chancellor Rachel Reeves for the coming financial year.
Nevertheless, the situation is further complicated by the UK Government’s plan to raise employers’ National Insurance contributions from April.
Holyrood ministers estimate they will require around £550m to offset the increased costs for public sector workers, rising to £750m when indirect employees – such as those in childcare, higher education or social care – are included.
They have been advised to expect approximately £300m in compensation from the Treasury – a sum Robison has described as unsatisfactory.
The UK Government has pointed out that the Scottish Government chooses to maintain a larger, better-paid public sector compared to the rest of the UK.
To assist cash-strapped councils, Robison has committed an extra £144m to cover 60% of the National Insurance costs.
Local authorities warn this will still leave them with a £100m deficit, with several already announcing the largest council tax rises in 20 years as the nationwide freeze ends.
The Government has surpassed some expectations by securing enough parliamentary support to pass its Budget.
Yet, with an election slated for May 2026, any temporary alliances may vanish as quickly as they were forged.
Scottish Conservative finance spokesperson Craig Hoy insisted that his party was the only one “showing common sense” by opposing what he called the “dire and damaging SNP budget”.
Scottish Labour finance spokesperson Michael Marra remarked that his party would “not stand in the way” of the UK Labour Government’s record funding reaching Scotland’s frontline public services, though he criticised the Scottish Government for missing an opportunity to reform and modernise public services.
Scottish Green finance spokesperson Ross Greer stated that his party’s support for the Budget meant “more children will be fed and lifted out of poverty, buses will be more affordable and nature will be protected”.
Alex Cole-Hamilton, leader of the Scottish Lib Dems, confirmed their backing of the Budget, noting it encapsulated “a wide range of Liberal Democrat priorities backed by millions of pounds worth of government investment”.
Ahead of the parliamentary debate, Finance Secretary Robison declared the Budget would “deliver progress for the people of Scotland”, with investments in public services, measures to reduce child poverty, decisive action on the climate emergency and support for job creation and economic growth.
She further emphasised that the Budget includes a £21.7bn investment in health and social care, record funding for local authorities, additional support for affordable housing, and measures to ensure every pensioner receives a universal winter heating payment.
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