Scottish Budget 2024 to 2025: equality and fairer Scotland statement

About the Scottish Budget

This Budget is for the 2024-25 financial year, which runs from 1 April 2024 to 31 March 2025.

After the Scottish Government publishes the Budget, the Scottish Parliament scrutinises it. The Scottish Parliament then votes on whether it should be changed, or created as it has been proposed.

The Scottish Budget in 2024-25 is £59.7 billion (including annually managed expenditure).

The graph below shows that the biggest areas of spend continue to be NHS Recovery, Health and Social Care; Local Government (under Deputy First Minister and Finance), and Social Justice (which includes social security payments).

Much of the Budget goes directly to a range of public bodies, who then decide how to use this funding, considering the impact on equality. The Crown Office and Procurator Fiscal Service and the Scottish Parliament and Audit Scotland have separate budget lines in the Scottish Budget. These are shown in the graph above.

Most public bodies are required to produce a mainstreaming report to show how they use their funding to tackle inequality. The Scottish Government published its latest mainstreaming report in April 2023 and this includes links to the reports of other agencies.

Where does the money in the Scottish Budget come from?

The Scottish Government’s funding comes from a range of sources. For public services that the Scottish Government is responsible for, it receives funding from the UK Government. The amount is calculated using a population share of related UK Government spending increases. The Scottish Budget also includes money collected from taxes that the Scottish Government controls.

Further information can be found in the Scottish Government Budget documents, in particular Annex A.

The context for this Budget

The cost of living crisis continues to present serious economic and social challenges for Scotland and the UK in 2024-25. The crisis is affecting particular households, services and sectors of the economy very differently. The effects of inflation are being felt most acutely by low income households, who are experiencing significantly higher real rates of inflation. Groups such as lone parents, ethnic minorities, women, renters, younger people, families with three or more children and disabled people are disproportionately affected by the cost of living crisis.

For example, analysis recently published by the Scottish Government, (the equality and Fairer Scotland assessments for the Scottish Government’s Cash-First Plan and associated actions) has demonstrated:

• strong evidence that people who experience socioeconomic disadvantage have a higher prevalence of household food insecurity and food bank use. In the financial year 2021-22, levels of food security rose as income levels rose:
  • 17 per cent of households with gross incomes less than £200 per week were least likely to be food secure
  • 2 per cent of households with gross incomes of £1,000 or more per week were most likely to be food secure
• evidence of a higher prevalence of food insecurity and food bank use in certain household groups, (including some with protected characteristics) such as:
  • younger people
  • disabled people
  • minority ethnic households
  • single adults
  • lone parents
  • larger households
  • low income households
  • tenants in the social rented sector

Separately, the Equality and Human Rights Commission (EHRC) recently published its five year review of Scotland’s equality and human rights landscape assessing the state of equality and human rights looking at the nine protected characteristics safeguarded by the Equality Act 2010. The review provided an overview of the progress and challenges in areas such as: education, health, justice and work. The report details areas where progress has been made including:

• outcomes for young people
• representation and participation

However, it also highlighted areas where improvement is needed for people across the protected characteristics, such as on:

• poverty
• education
• employment
• health and access to healthcare

The 2024-25 Budget

The Budget helps deliver positive outcomes for equality and fairness in a number of areas. Despite the tough context, the Scottish Government has made choices in this Budget, and one of those is to tackle poverty, including through support for Scotland’s Social Security system. We have allocated an additional £1 billion investment in Social Security in 2024-25, bringing the total we will invest to around £6.3 billion.

Some other budget choices which will tackle poverty and inequality include:

• Support for the NHS in Scotland
• Prioritised investment in health and social care
• Funding to raise pay to £12 per hour for adult social care workers in commissioned services from April 2024
• Funding to reopen the Independent Living Fund

This Budget has taken place in the face of severe financial constraints, and hard choices have been made. Particularly where budgets are constrained, it is essential that we have an approach to policy making and decision making that addresses inequality, promotes equality, advances human rights and builds a fairer Scotland. As our response to the Government’s Equality and Human Rights Advisory Group report indicated, this means continuing to develop a process that is more transparent, provides more opportunities for public engagement, develops strong equality and human rights leadership and accountability, improves our impact assessments, aligns with the ‘National Performance Framework’, and builds and resources knowledge, capacity and skills.

Pay and Workforce

Pay and workforce is a significant driver of budget spend. There are around 600,000 people employed in the public sector in Scotland, accounting for 22.2 per cent of total employment. A recent report by Audit Scotland (the Scottish Government's workforce challenges) recommended that our financial position necessitates reforming the way in which public bodies deliver services.

We must reform the way in which public bodies deliver services to ensure they can do so more efficiently, as set out in the Public Service Reform chapter of the budget document. It also means that we will have to consider the balance of pay and workforce with some sectors needing to grow to respond to pressures and others reducing in line with reform opportunities and re-prioritisation of our work. This must be done in a way that protects public services and the Government’s priority missions.

Public bodies are empowered to determine locally the target operating model for their workforce and to ensure workforce plans and projections are affordable in 2024-25 and into the medium term. Public bodies must also ensure their policies and practices and systems comply with employment, Fairer Scotland and equality requirements.

Pay Strategy Cohort

The previous ‘2023-24 Pay Strategy’ cohort covered 55 public bodies and over 52,000 FTE (just under 10 per cent of the total devolved public sector workforce).

The ‘Public Sector Pay Strategy’ set the overarching framework in which public bodies can make individual choices on the impact of the strategy on their own circumstances. Public bodies have the flexibility to draw up their own pay proposals to take into account local pay issues such as recruitment and retention, equality, and the impact of the low pay measures on other staff. The pay negotiation principles within the strategy actively encourage employers to take into account their own staffing profile, local evidence, views of staff and unions and equality issues in framing their pay proposals.

The ‘Pay Strategy’ expects employers to take a progressive approach to their pay awards and requires employers to pay at least the ‘Real Living Wage’. This could provide a positive benefit for lower income households and help work towards reducing the inequalities of outcome for those households. It is also noted there is a higher likelihood of employees with a protected characteristic living within a lower income household. Poverty rates tend to be higher among the following groups: youngest adults; households where someone is disabled; single mothers; LGB+; ethnic minorities and particularly Pakistani and Chinese ethnic groups; and/or Muslim adults.

This may also help in working towards reducing the gender pay gap within the public sector as it should increase the overall base levels of pay for lower earners where traditionally women are overly concentrated, particularly if this is further supported by the continued restraint applied to higher earners including senior appointments, where there are higher proportions of men.

The objectives of the ‘Pay Strategy’ are designed to support the Scottish Government’s Purpose on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth and reducing inequalities and giving equal importance to economic, environmental and social progress. The ‘Pay Strategy’ provides the framework for individual employers to set pay increases in a way that are fiscally sustainable and fair while helping to sustain public sector jobs and protect public services within the tight financial position resulting from the continued real terms reduction in the Scottish Government’s resource budget.

What is the distributional impact of the tax and social security measures?

Alongside the budget the Scottish Government has published an analysis of the impact of tax and social security measures included in the 2024-25 Scottish Budget on households of different income levels and characteristics.

Distributional analysis is critical to understanding how Scottish Government policies are reducing inequality and targeting support at those who need it most. The analysis is based on modelling, and only includes policies that directly affect the financial resources available to households – i.e. personal taxes and cash benefits. At this point it does not incorporate in-kind benefits (such as free school meals or free childcare), or the benefits of public services received by households, such as transport, education or healthcare.

The analysis shows:

Comparing Scotland to rest of the UK

• The Scottish tax and social security system is progressive; and remains more progressive than the system in the rest of the UK.
• Around 58 per cent of households – mostly those on lower incomes – are better off under the Scottish tax and social security system than they would be in the rest of the UK.
• The analysis also breaks down the impact of the Scottish tax and benefit system versus the rest of the UK, by household type. Driven by the impact of the Scottish Child Payment, in general, families with children are better off in Scotland, and lone parents (92 per cent of whom are female) gain most. The impact on households with disabled members is smaller (a net positive position compared to all households)
• The impact of differences between Scotland and the UK in income tax policy is greatest in the middle age cohorts (those aged 35 to 54), where lifetime earnings typically peak. The impact of differences in social security payments is greatest in younger age cohorts, due to the effect of the Scottish Child Payment.

Looking at the impact of tax and social security decisions taken in this Budget

• Scottish tax policy decisions taken in this Budget – including both Income Tax policy changes and the freeze in Council Tax – provides a net benefit to around 60 per cent of Scottish households, with 79 per cent of households paying no more tax as a result of these measures.
• The impact of Income Tax policy changes principally falls on the highest earning 20 per cent of households, with the top 10 per cent paying an average of one per cent of their income (£1,041) more in tax a year in Income Tax.
• The greatest negative impacts of the tax policy changes are for those in the middle age cohorts, where earnings typically peak.

What is the Equality and Fairer Scotland Budget Statement?

The ‘Equality and Fairer Scotland Budget Statement’ looks at the impact that the Scottish Budget might have on people in Scotland.

It assesses what the Scottish Government is proposing to spend public money on and how this is changing. It considers if these decisions are likely to benefit some types of people more than others, and how it might help reduce inequality between different groups of people.

The ‘Equality and Fairer Scotland Budget Statement’ is published alongside the Scottish Budget every year.

What is inequality?

Equality is about ensuring everyone has equal status, rights and opportunity. It is also the belief that no one should have fewer or poorer chances in life due to:

• protected characteristics
• the resources they or their family have

We know in Scotland this is not always the case and we want to use the money allocated by the budget to address inequality. Inequality means that for some groups of people parts of their lives are harder or worse than for other groups of people due to the barriers they face in trying to improve their circumstances. This could involve their access to things like health, education or income. For example, certain groups of people may find it harder to gain employment, be more likely to attain lower exam scores in school or be more likely to be victims of crime compared to other groups. They also may not see themselves represented in positions of power or may be discriminated against.

What groups of people are we talking about?

We have laws that say we must consider the differences between people according to certain characteristics. These are:

• Age (e.g. children, older people)
• Disability (disabled people)
• Gender reassignment (trans people)
• Pregnancy and maternity (mothers)
• Race (e.g. Black Scottish, White Gypsy/Traveller)
• Religion or belief (e.g. Christians, Muslims, Sikhs)
• Sex (men, women)
• Sexual orientation (e.g. lesbian, gay and bisexual people)

We have a duty to eliminate discrimination, advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic and persons who do not share it. We also have a legal duty to reduce inequality for adults and children who are socioeconomically disadvantaged, in that they:

• experience low income or wealth
• experience deprivation, or
• come from a disadvantaged background

These duties also mean we must consider how inequalities are compounded for people with more than one of these characteristics. For example, a minority ethnic disabled renter on income-related benefits, an asylum-seeking woman, or a low income, lone parent household headed by a mother with caring responsibilities.

We recognise for these groups of individuals that the intersection of disadvantage compounds structural inequality and this is especially evident in this cost of living crisis.

What is in this year’s Equality and Fairer Scotland Budget Statement?

The Budget is a complex and interconnected document, so assessing all potential impacts on equality and socioeconomic characteristics, and their intersections, represents a huge challenge. This document attempts to shine a light on some of the analysis and thinking within the government as difficult budget choices have been made.

Annex A provides some more detail on the overall process followed to develop this statement and provides further updates on our progress on equality, fairer Scotland and Human Rights budgeting.

The most detailed analysis is that found in Annex B. These are the returns provided by each portfolio, setting out their assessment of some of the issues, and how the Budget tackles them. There is clearly a huge amount of material in Annex B, and so the next two sections in the main document aim to draw out a selection of the key points from Annex B in summary form – firstly by portfolio, and then looking across the whole of government by different equality and socioeconomic characteristics.

A key aim of the EFSBS is to set out clearly how equality and Fairer Scotland issues have been taken into account as decisions have been made. There are over 200 ‘Level 3’ budget lines (the most detailed breakdown in the budget document itself). We have used a sample of eight Level 3 / Level 4 budget lines as case studies in Annex C. They come from different parts of government, and include different types of budget.

For each of the eight case studies, we have answered six key questions. These six questions were developed in collaboration with the Equality and Human Rights Advisory Group:

1. What outcome is the policy and associated budget decision aiming to achieve?

2. What do you know about existing inequalities of outcome in relation to the budget area?

3. How will your budget decisions impact upon different people and places?

4. How will your budget decisions contribute to the realisation of human rights?

5. Could the budget be used differently to better address existing inequalities of outcome and advance human rights?

6. How will the impact of the budget decisions be evaluated?

This ‘Equality and Fairer Scotland Budget Statement’ document is one of a number of budget publications. Further details are available at gov.scot/budget.

As in previous years, an easy read version of the Budget will be published. This year, an easy read version of the Equality and Fairer Scotland Budget Statement is also planned.