Scottish Budget 2025 to 2026: distributional analysis of the Scottish Budget

Footnotes

1 For the purposes of this analysis, the ‘rest of the UK’ comparator uses the Income Tax system in place in England and Northern Ireland, and the Social Security system in place in England and Wales.

2 Household income refers to household income after tax and accounting for social security benefits, all incomes are before housing costs

3 All charts and figures in this analysis use the distribution of equivalised household income before housing costs. Equivalisation is a process to adjust household income to account for the different needs of households of different sizes; further details are provided in the annex.

4 This comparison excludes differences in Council Tax between Scotland and the rest of the UK, due to the challenge of making direct comparisons between the Council Tax policies in place in Scotland and England, Wales and Northern Ireland.

5 This means that around 51% of Scottish taxpayers will continue to pay slightly less Income Tax than if they lived elsewhere in the UK.

6 In addition to the household types shown, we have explored analysis of households with a minority ethnic member, and households with a mother under 25 years old; but found in both instances that the sample size in the data was too small to allow for reliable analysis.

7 Large families refers to families with three or more children.

8 The household reference person is the person in the household in whose name the accommodation is owned or rented; if it is jointly owned or rented, it is the highest earner; if there are two joint highest earners, it is the oldest person

9 This refers to a proportion increase to thresholds, unlike uprating which applies to the Scottish Income Tax bands.

10 In all instances, uprating with inflation refers to increasing by September 2024 Consumer Price Index inflation rate for the preceding 12 months (1.7%).

11 All analysis considers take-up, see the methodology section for more information.

12 Will Workers Pay The Employer National Insurance Contributions Rise? | Oxford University Centre for Business Taxation

13 We cannot account for the change in the Employer Allowance which will result in some microbusinesses being better off as a result of the change.

14 Capital spending isn’t included as the allocation of spending is significantly more complicated and cannot be adequately captured in a static analysis.

15 Note that this includes all households in each quintile, including those not eligible to receive spending so that spending is presented in a comparable way across areas.

16 Resource spend for ELC and schools is by Local Authorities which may represent more or less than is funded by Scottish Government.

17 Health and Transport come from the Level 4 spending tables that accompany the Scottish Budget. Schools and ELC come from the 2022-23 Local Government Finance Statistics which report all expenditure by Local Authorities in Scotland. Schools and the funded ELC offer are delivered by Local Authorities, so this represents the best data on costs to deliver each year. ELC uses gross expenditure on pre-primary education – this spending is assumed to be fully dedicated to funded ELC.

18 We have opted to use quintiles in this section to avoid overinterpretation of results, reflecting that estimates of public spending are more imprecise and require more assumptions to produce.

19 Although the methodology makes use of the NRAC formula, it has a limited impact upon the results. See the methodological annex for more information about how this is used.

20 The boundary between resource and capital spending is more complicated in transport than for other areas, largely due to rail, road and ferries. If we were to include capital spending in our modelling this would result in a larger allocation of spending to higher income deciles.

21 In all charts, Council Tax Reduction is deducted directly from Council Tax, rather than being included as a separate social security payment.

22 This covers the majority of spend on DHPs in Scotland; other Discretionary Housing Payments are excluded due to not being awarded by fixed criteria.

23 Budget 2019 to 2020: feasibility of distributional analysis - study - gov.scot (www.gov.scot)

24 Distributional analysis of devolved public spending in Wales: December 2023 (gov.wales)

25 Resource Allocation Formula (NRAC) - Target shares for NHS Boards for 2025 to 2026 - Resource Allocation Formula (NRAC) - Publications - Public Health Scotland

26 Local Government Finance Statistics 2022-23

27 Early learning and childcare (ELC) - Summary statistics for schools in Scotland 2023 - gov.scot (www.gov.scot)