What Surprises Await in the Upcoming Scottish Budget's Tax and Spending Plans?

The Scottish government is poised to announce its draft Budget for 2026-27, detailing crucial funding for health, education, and public services amid challenging fiscal conditions. Finance Secretary Shona Robison has warned of "tough" decisions necessary to balance tax and spending plans, especially as the SNP seeks re-election just months ahead of the Holyrood elections.

Last updated: 27 October 2023 (BST)

What’s happening now

The Scottish government is preparing to unveil its draft Budget for 2026-27, a significant announcement that will set the financial framework for vital public services over the next fiscal year. This development comes at a critical time, with the SNP aiming to maintain its governance in the upcoming elections, necessitating a careful balance between public spending and tax policies.

Key takeaways

Finance Secretary Shona Robison faces a £1bn shortfall in the capital budget, impacting long-term infrastructure projects.
The SNP requires support from opposition parties to pass the Budget, as they do not hold a majority in parliament.
Robison will prioritise investment in public services, particularly the NHS, while addressing the cost of living and climate issues.
The Budget announcement will follow "constructive" talks with various parties, though opposition expectations vary.
A final vote on the Budget is anticipated in late February 2024.

Timeline: how we got here

Here's a brief timeline of key events leading to the upcoming Budget announcement:

October 2022: Initial discussions about fiscal policy begin, highlighting the need for sustainable budgeting amid rising costs.
September 2023: The Fraser of Allander Institute forecasts an additional £750m in Budget for 2026-27 due to UK government spending decisions.
October 2023: Finance Secretary Shona Robison warns of a £1bn shortfall in the capital budget, complicating the Budget planning process.
27 October 2023: Draft Budget announcement scheduled, with a final parliamentary vote expected in late February 2024.

What’s new vs what’s known

New today/this week

As the Scottish government prepares to announce its Budget, Shona Robison has indicated that the decisions made will involve significant sacrifices and prioritisation of essential services like the NHS. The government anticipates an extra £750m but faces a substantial £1bn shortfall in capital funding.

What was already established

Previously established concerns include the need for funding across Scotland's public services, with increasing pressures from rising costs of living and economic challenges. The SNP's reliance on opposition support has been a consistent theme, especially as they lack a parliamentary majority.

Impact for the UK

Consumers and households

The Budget will directly affect funding for essential services like health and education, impacting households across Scotland. As the government seeks to balance financial pressures, potential cuts or adjustments to services could arise, influencing the cost of living for many families.

Businesses and jobs

For businesses, the Budget's focus on tax policies will be critical. The Scottish Conservatives have called for cuts to income tax and business rates to alleviate pressure on struggling businesses. A failure to address these concerns could lead to stagnation in job creation and business growth.

Policy and regulation

The upcoming Budget will also frame important regulatory decisions. With the SNP needing to negotiate with opposition parties, the potential for new taxes or funding cuts will be a significant factor in shaping policies that may affect various sectors, including education and healthcare.

Numbers that matter

£60bn: The total Scottish Budget in recent years.
£750m: Expected additional funding for 2026-27 from UK government spending decisions.
£1bn: Shortfall in the capital budget affecting infrastructure and services.
14: The number of weeks until the Scottish Parliament's final vote on the Budget.
22 weeks: Potential waiting period for families to access childcare entitlement due to council policies.

Definitions and jargon buster

Scottish Parliament: The devolved national legislature of Scotland, responsible for making decisions on various domestic issues.
SNP: Scottish National Party, the ruling political party in Scotland advocating for independence.
NHS: National Health Service, the publicly funded healthcare system in the UK.
MSP: Member of the Scottish Parliament, elected representatives in Scotland's legislature.
Capital budget: Funds allocated for long-term investments, such as infrastructure projects.

How to think about the next steps

Near term (0–4 weeks)

As the Budget announcement approaches, immediate attention will focus on the details of funding allocations and potential tax changes. Observers should watch for responses from opposition parties after the announcement, which could indicate future negotiations.

Medium term (1–6 months)

In the months following the announcement, the Budget will undergo parliamentary scrutiny and amendments based on opposition feedback. The outcome will shape Scotland's fiscal landscape well into 2024.

Signals to watch

Responses from opposition parties regarding their support or opposition to the Budget.
Public and media reactions to proposed funding changes, especially in critical areas like health and education.
Any emerging consensus or disagreements within the Scottish Parliament that could affect the passing of the Budget.

Practical guidance

Do

Stay informed about the Budget announcement and its implications for public services.
Engage with local MSPs to express concerns or support for specific funding priorities.
Monitor the outcomes of parliamentary discussions and how they may affect individual communities.

Don’t

Assume that proposed changes will not affect your local services; budget decisions can have wide-ranging impacts.
Ignore the opportunity to provide feedback to your elected representatives regarding the Budget.
Miss out on community meetings or discussions about the Budget's implications.

Checklist

Review the draft Budget details once announced.
Identify key areas of concern or interest related to local services.
Engage with community groups to discuss the potential impacts of the Budget.
Follow up with your MSP after the Budget is announced for their stance and plans.
Keep informed about any amendments or changes proposed during parliamentary scrutiny.

Risks, caveats, and uncertainties

As the draft Budget is set to be announced, uncertainties remain regarding the actual financial landscape of Scotland. The £1bn shortfall in the capital budget poses a significant risk, limiting the government's ability to invest in long-term infrastructure projects. Furthermore, the reliance on opposition parties for support raises questions about the Budget's viability, particularly if dissenting voices emerge. Economic conditions, including inflation and public sentiment, could also influence the effectiveness of the proposed measures.

Bottom line

The upcoming draft Budget for 2026-27 is a pivotal moment for the Scottish government, as it seeks to navigate fiscal challenges while prioritising essential services. As the process unfolds, the need for collaboration across party lines will be crucial to ensure the Budget's passage and support for the public services that many depend on. Observers should remain attentive to negotiations and public reactions, as they will significantly shape Scotland's fiscal future.

FAQs

What is the Scottish government’s draft Budget for 2026-27?

The draft Budget outlines the financial plan for funding essential services in Scotland, including health, education, and transport, while addressing potential tax changes.

Why is the Budget announcement important?

The Budget is crucial as it determines funding allocations and tax policies that will affect public services and the economic landscape in Scotland.

How will the Budget be passed into law?

The Budget must go through three stages of parliamentary scrutiny and requires support from opposition parties, as the SNP does not hold a majority.