Scottish Budget 2025 to 2026: consumer duty assessment

Scottish Budget 2025-26: Consumer Duty Assessment

This statement sets out the steps taken by the Scottish Ministers to comply with the consumer duty imposed under section 21 of the Consumer Scotland Act 2020 (“the 2020 Act”) when preparing the Scottish Budget 2025-26.

Application of the Consumer Duty

Under section 21 of the 2020 Act, a relevant public authority must, when making decisions of a strategic nature about how to exercise its functions, have regard to—

(a) the impact of those decisions on consumers in Scotland, and

(b) the desirability of reducing harm to consumers in Scotland.

This duty is referred to in this document as the Consumer Duty.

The Scottish Ministers are a relevant public authority under the Consumer Scotland Act 2020 (Relevant Public Authorities) Regulations 2024. This means that the Scottish Government must meet the four requirements of the 2020 Act:

• When making decisions of a strategic nature, have regard to the impact those decisions have on consumers;
• When making decisions of a strategic nature, have regard to the desirability of reducing harm to consumers;
• Publication of information about the steps taken to meet the duty;
• Having regard to the Consumer Scotland guidance on how to meet the consumer duty.

The Consumer Duty ensures consumers are at the heart of all strategic decisions within the Scottish Government.

In this context “consumer” includes individuals and small businesses who buy, use or receive goods and/or services which are supplied in the course of a business, and “business” includes the activities of any government department, local or public authority or other public body. Accordingly, the Scottish Government must have regard to the impact on users of public services, as well as consumers more generally, when making decisions of a strategic nature.

As the annual process by which spending limits are set for all ministerial portfolios within the Scottish Government for the coming financial year, and in which tax decisions are set, the decision to take this complete set of measures in the Scottish Budget 2025-26 collectively constitutes a “strategic decision”. The Scottish Government has complied with the Consumer Duty when deciding on the Budget’s measures.

The following steps have been taken.

Stage 1 – Planning:

1. Is this a decision of a strategic nature? Yes

The Scottish Budget is the annual process by which spending limits are set for all ministerial portfolios within the Scottish Government for the coming financial year. The Budget Statement is made ahead of the Budget Bill’s introduction to parliament in the weeks that follow. The statement sets out the proposed spend within each Ministerial portfolio, and outlines tax decisions, and will then be authorised through the Budget Bill, if it is passed and proceeds to become an Act of the Scottish Parliament. The Budget itself represents a decision of a strategic nature, and, as agreed with policy officials, consumer leads and legal teams earlier in the process, a consumer impact assessment was undertaken.

2. Is the strategic decision likely to have an impact on any/all consumers? Yes

Consideration has been given as to whether the Scottish Budget is likely to have an impact on any and all consumers. As the Budget sets both spending allocations by Scottish Government portfolio, and tax decisions, it is likely to have an impact on both taxpayers and the users of public services.

Stage 2 – Evidence Gathering:

3. What is the proposal trying to achieve?

The Scottish Budget 2025-26 sets out the spending allocations for all ministerial portfolios within the Scottish Government over the coming financial year, in addition to any changes to taxation.

4. What are the impacts on consumers?

Overview

The Scottish Budget redistributes money paid through taxation (whether direct to the Scottish Government, or indirectly through the UK Government), and allocates this money to public spending. Therefore, any net impact on prices or consumption will be captured through this overall redistributive effect, and is likely to be small. Whilst individual policies within the budget may affect the price of the good or service provided, these should be considered in the round, and against the offsetting effects of taxation.

Therefore, the most appropriate analysis of the overall impact of the budget on consumers is the Scottish Government’s distributional analysis document. This document now includes new analysis showing the distributional impact of public services spending^[1].

The analysis shows that the overall distribution of public spending on health, schools, transport and funded early learning and childcare is similar in cash terms across income groups. Although when considered with the progressivity of the tax system, the overall tax and spending system, as set out in the budget, is redistributive.

In particular, in 2025-26:

• Health resource spending, including spending on NHS boards, community health and mental health services, is relatively flat in cash terms, albeit with less spending going to the bottom quintile. This is because the shape of the distribution is driven by the position of households with older people, where service usage is higher, and there are more younger people in the lowest quintile.
• Resource spending on schools (excluding free school meals or the school clothing grant) is focused on lower income households, both in cash terms and as a share of income, because households with children of school age tend to be more prevalent in lower income quintiles.
• Resource spend on Early Learning and Childcare (ELC) is driven by the position of households with 3 and 4 year olds and eligible 2 year olds in the income distribution. Average spend on households in the lower half of the income distribution is higher than spending in the upper half, both in cash terms and as a share of household income.
• Overall transport spending (including spending on concessionary fares, bus, rail and road) is higher for high income households than for low income households. Resource spending on bus services and concessionary travel is more focused on lower income households.

Increases to the Basic and Intermediate rate Income Tax thresholds have a small positive impact in the bottom half of the income distribution. The negative impact of frozen thresholds principally falls on the highest earning 20 per cent of households, with the top 10 per cent paying an average of 0.1 per cent of their income (around £130) more.

Pre-Budget Fiscal Statement

On the 3^rd September 2024, the Scottish Government delivered a pre-Budget Fiscal Statement, following the Chancellor of the Exchequer’s statement to the UK Parliament outlining a shortfall in the public finances.

These were a mix of non-recurring and recurring measures, with recurring measures linking directly to some of the decisions taken in this Scottish Budget, i.e. the support available to help pensioners with winter fuel. The impact of these measures are set out below.

As above, if these savings were not taken in the portfolios affected, they would need to be taken elsewhere, as the Scottish Government cannot significantly adjust its funding in-year.

Across portfolios, there was only a limited number of instances where impacts on the Consumer Duty was identified by portfolios. Information provided was at a high level. The returns are summarised below

• No quantifiable or expected impacts were identified from Education and Skills
• No quantifiable impacts were anticipated from measures focusing on health and social care, which are expected to not have a direct impact, or to only have a minimal impact on the consumer duty. For example, some savings are from efficiencies and underspends, or come from demand led budget lines.
• None of the savings options offered by the Justice and Home Affairs Portfolio has resulted in any cuts to service provision or are believed to have created a direct impact on the consumer duty
• Under Net Zero, Energy and Transport, the vast majority of savings identify no impact on the Consumer duty. The one (£0.8m) exception arises from deferring some marketing activity for energy efficiency and decarbonisation, which will push out timescales for raising public awareness.
• No quantifiable impacts were identified from the savings in Rural Affairs, Land Reform and Islands
• The majority of Social Justice measures identify no impacts on the consumer duty.

5. Is it likely that harm will be experienced by consumers as a result of this proposal?

No.

6. What alternative proposals are there that can improve outcomes for consumers and/or reduce harm to consumers?

The Scottish Budget is the strategic decision to set spending limits across portfolios or set taxation levels accordingly. Individual policy areas are responsible for reviewing potential harms to consumers and are considering alternative options to reduce the likelihood of harm being experienced.

7. How do these alternative proposals compare to the original proposal?

Not applicable – although this assessment represents the proposals within the Scottish Budget as presented, and amendments to the Budget Bill may result in changes through the Parliamentary process.

Stage 3 – Assessment and Improvement of Proposal:

8. What is the expected impact of a strategic decision on consumers in Scotland?

The analysis suggests that the impact of the Scottish Budget on consumers will be neutral overall, but with significant redistribution from higher income to lower income households.

9. Has SG had due regard to the desirability of reducing harm to consumers in Scotland?

Yes

10. Is there a need for further engagement with consumers?

Further engagement will be needed as part of standard policy development. Individual policy areas are responsible for engaging with consumers in relation to their specific policy areas and commitments in the Scottish Budget.

Stage 4 – Decision:

11. Has SG met the Consumer Duty for this decision? Yes

12. If yes to above, explain how?

In the process of carrying out this impact assessment, the cumulative package of commitments included in the Scottish Budget has been examined for potential impacts on consumers in Scotland.

This means that we have put consumer outcomes at the heart of our strategic decision making by having regard to the impact those decisions have on consumers and to the desirability of reducing harm to consumers.

Stage 5 – Publication and Review:

13. Section 23 of the 2020 Act requires public authorities to publish information about the steps which they have taken to meet the duty. The authority must publish the information no later than 12 months after the end of period to which it relates.

This statement will be published on Gov.Scot on 11 December.

14. How will the process carried out be reviewed and evaluated?

The process by which the consumer duty was considered in the context of the Scottish Budget will be reviewed, with potential improvements considered for future budgets. This will ensure robust processes are in place to ensure consumer consideration when making strategic decisions as part of this process.