Scottish Budget 2025 to 2026: Equality and Fairer Scotland Budget Statement

Executive Summary

The Equality and Fairer Scotland Budget Statement (EFSBS) considers the impact that the Scottish Budget is likely to have on people in Scotland, in line with the Public Sector Equality and Fairer Scotland (PSED and FSD) duties. 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 people more than others, and how it might help reduce inequality between different groups of people.

This year’s publication introduces new analysis showing the distributional impact of public services spending, and illustrates the impact of a number of selected key decisions. Further information on the impacts of the Scottish Budget by characteristic and portfolio are presented in the annexes.

The analysis and evidence collected shows that the Scottish Budget redistributes from high income households to those further down the income distribution, through both the Tax and Social Security system, and through the delivery of public services.

Key findings include:

• 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 is redistributive.
• Increases to the Basic and Intermediate rate 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.
• Scottish Child Payment is the largest single contributor to the improved financial resources of low-income households relative to the rest of the UK, while the impact on higher income households is driven by changes to the Income Tax system.

Key decisions assessed in the document, and their impact across protected and socio-economically disadvantaged groups are summarised in the table below.

Policy

Eradicating Child Poverty

Decision

Cross-portfolio package of investment.

Illustrative Impact

No single policy intervention will end child poverty, however, the interventions described will result in a wide range of positive impacts relating to different equality characteristics.

Policy

Taxation

Decision

Maintain Scotland’s progressive tax system.

Illustrative Impact

Almost half (47%) of Scottish households are better off, with over three-quarters (76%) of households either better off or unaffected as a result of the changes to Scottish Income Tax in this Budget.

Policy

Benefits

Decision

Universal support through the introduction of Pension Age Winter Heating Payments and an increase to Carer Support payment.

Illustrative Impact

Extending winter heating payments will have a positive impact on vulnerable pensioners who are not eligible for Pension Credit, or who do not take up their entitlement.

The increase to Carer Support payment will disproportionally benefit women and those on lower incomes.

Policy

Pay and Workforce

Decision

The policy set pay metrics as a pay envelope of 9 per cent over 2025-26, 2026-27 and 2027-28.

Illustrative Impact

The policy expects employers to take a progressive approach. This will support those on low incomes; benefit many protected groups such as disabled workers, women, and young people; and contribute towards closing the gender pay gap.

Policy

Social Security

Decision

In addition to the benefit changes set out above, uprate all benefits in line with inflation, as measured by the Consumer Prices Index (CPI).

Illustrative Impact

On average, households in the lower half of the income distribution are around £450 better off a year than they would be under UK Government tax and social security policies.

Policy

Affordable Housing Supply Programme

Decision

Increase spending in cash terms.

Illustrative Impact

Housing costs are an important factor related to income inequality and poverty. Research evidence suggests that poverty is one of the core drivers of homelessness in the UK, and Scotland specifically.

Policy

Concessionary Fares

Decision

Fund the Network Support Grant and concessionary travel schemes by £464 million.

Illustrative Impact

The scheme tackles a number of inequalities, for example supporting people on lower incomes who have less access to private modes of transport, people aged under 22, disabled adults, and particular minority ethnic groups who are more likely to be reliant on bus travel.

Policy

Employability

Decision

Maintain spending in cash terms.

Illustrative Impact

The Budget will deliver this support through the No One Left Behind approach, prioritising those who face complex barriers to accessing the labour market.

Policy

Alcohol and Drugs Policy

Decision

Broadly maintain spending in cash terms.

Illustrative Impact

Drug and alcohol death rates are closely linked to deprivation. Around 7 in 10 people starting specialist drug or alcohol treatment in Scotland are male, whilst drug misuse and alcohol-specific deaths are more common among men than women.

Policy

International Development

Decision

Increase spending in cash terms.

Illustrative Impact

Countries which will benefit include Malawi, Rwanda, Zambia and Pakistan. These are lower-income or lower-middle income countries with significant social and economic inequalities.