Scottish Budget 2025-2026: Finance Secretary's statement - 4 December 2024

Presiding Officer,

I am very proud to present a budget that delivers on the priorities of the people of Scotland.

Over recent years, our nation has faced an unprecedented range of challenges: Covid, Inflation, Austerity and Brexit.

Today, we can show that we understand the pressures that people are facing.  

We can choose to come together to bring hope to people, to renew our public services, and deliver a wealth of new opportunities in our economy.

This budget invests in public services, lifts children out of poverty, acts in the face of the climate emergency, and supports jobs and economic growth.

It is a budget filled with hope for Scotland’s future.

Presiding Officer

The UK Budget resulted in an increase in funding through the Barnett formula.

That’s welcome, but let’s be clear.

After inflation, it represents growth in resource spending – that’s day-to-day spending to pay for services - of only around 1% year on year.

Substantial financial pressures therefore persist.

In the face of a cost-of-living crisis, I am proud of the pay deals that give Scotland’s nurses, teachers and public sector workers higher salaries than in the rest of the UK. And I am proud of the increased social security spending that helps keep people out of poverty.

In one way, the UK Government has actually added to the pressures Scotland faces with the increase in employers’ National Insurance Contributions.

This hike will add well over £700 million to the cost of delivering public services.

Despite this, the UK Government seems to be saying they will only reimburse less than half of that cost.

They have accepted they should pay but they plan to short change our public services by hundreds of millions of pounds.

Even now though, the Chancellor has an opportunity to do the right thing. Services in Scotland should not have to suffer. The Chancellor should pay the full price for her own decisions.

Presiding Officer

This Government has had to take difficult decisions to manage financial pressures.

As set out in my statement in September, this included using some or all of the ScotWind revenues.

No-one wanted to do this. This money was meant to be used for long term investment to help transform our economy.

So, I was very clear that I didn’t want us to use that cash to fund day-to-day spending.

And we haven’t.

Members will be pleased to hear that ScotWind has not been used up in this financial year.

Instead, I am able to deploy over £300 million of ScotWind revenues in 2025-26 for exactly the kind of long-term investment it should be spent on.

This £300 million will deliver substantial investment in jobs, and in measures to meet the climate challenge; Presiding Officer, all of it an investment in the long-term success of our nation.

Progress for Scotland, that is our promise.

But we can only deliver progress for the people of Scotland if there is a willingness to work together across this Parliament.

Over 100 proposals have come from members across this Chamber – and I would like to thank the opposition for their constructive engagement.

Others have emerged from the conversations that I and other ministers have had with people, businesses and organisations in communities the length and breadth of our land.

We have listened, we have heard people, and we are acting.  

This is a budget for Scotland, by Scotland.

That is why I would encourage all members to give it their support.

Eradicating child poverty is our top priority.

Policies such as the game-changing Scottish Child Payment.

And, expanded funding for early learning and childcare.

Action in the face of need.

But we want to go further.

This budget will invest almost £800 million more in social security benefits in 2025-26, putting money directly into people’s pockets, and ensuring benefits rise by inflation.

We recognise also that having a warm, safe, affordable place to live is critical to tackling child poverty.

Far too many families are still in temporary accommodation. Social Justice Secretary Shirley-Anne Somerville has told me about the conversations she has had with mums who feel the pain of bringing up their kids in inadequate accommodation.

That is why we are going to ramp up action on housing, investing £768 million in affordable homes.

That enables over 8,000 new properties for social rent, mid-market rent and low-cost home ownership to be built or acquired this coming year.

And it returns spending to a higher level than it was two years ago.

And given the scale of the housing challenge, I will look at all the levers available for me to deliver.

That is why I can confirm today that we will be working with Edinburgh City Council to unlock over 800 new, net zero homes at their Granton development site. 

Housing is, of course, just one strand of our work in tackling poverty.

In education, we will provide £120 million to headteachers to support initiatives designed to address the poverty-related attainment gap.

And we will also work with COSLA to expand free school meals to primary 6 and 7 children from low-income families. But we’re determined to go further still.

I can announce today that we will fund a new initiative that will deliver more breakfast clubs in primary schools across Scotland.

To be called ‘Bright Start Breakfasts’ this will make things that little bit easier for working mums and dads, while also giving more of our kids a better start to their day.

We will help some of the most vulnerable in our society with new funding of £4 million for homelessness and prevention pilots.

And following engagement with disabled people’s organisations we are delivering over two and a half million pounds to support actions within the Disability Equality Action Plan. 

All of these steps will help people.  But I say this to the chamber:

if we want progress on housing, on learning, on free school meals, on breakfast clubs.

This Parliament has got to vote for it.

We know how important public services are to the quality of life and the success of our nation, none more so than our Health Service.

My biggest financial commitment today is, therefore, to our NHS.

Today’s budget provides a record £21 billion for health and social care.

An increase of £2 billion for frontline NHS Boards – a record uplift.

That is money that will make it easier for people to access GP appointments, that will improve A&E and ensure more Scots get the care they need in good time.

There is no public service more important and there is no budget that has delivered a bigger vote of confidence in the NHS than this budget.

Health Secretary Neil Gray has spoken to me about the pressures across the health service. We know that for many people their experience of the NHS is excellent. But for others, their experience falls short of what we would expect.

So I am today investing almost £200 million in our plan to reduce waiting times and improve capacity, to reform the service and make it more efficient, and remove blockages that keep some patients in hospital far too long.

Because of today’s record funding, our health service can reduce waiting times. By March 2026 no one will wait longer than 12 months for a new outpatient appointment, inpatient treatment or day case treatment.

The extra funding we are providing will see over 150,000 extra patients treated as a result.

Our record investment will also deliver additional support for GPs, targeted to address known pressures in relation to waiting times and prevention.

It means we can deliver on our commitment to increase social care spending by 25% over this parliament – a full two years earlier than planned.

And we will expand the Hospital at Home service, with more than 600 extra beds.

We will deliver an extra 20,000 cataract and other optometry procedures in the community.

And, it means over 6,000 additional hip replacements or similar procedures each year.

This record increase in spending will fund:

• more dental training places
• new specialist long covid nurses and clinics and
• more community-based support for teenage mental health

It is not just the day-to-day resource spending that will increase though. We are also increasing health capital spending.

That means I can announce to the chamber today that this Budget will fund:

• the replacement of the Eye Pavilion in Edinburgh,
• the Belford hospital in Fort William, and
• Monklands hospital in Airdrie.

Every single project a priority for the people of Scotland.

Every project something members of this chamber have called for.

Delivered by this Budget and by this government. But I say again:

If members want it – investment in GPs, dentistry, long-covid, young people’s mental health – then of course they have to vote for it.

Many services, from schools to social care, are delivered in partnership with local government.

Here I will set a second record funding settlement.

In 2025-26, the Scottish Government will increase local authority funding by more than £1 billion.

It will take their total funding to over £15 billion, including £289 million to give real terms protection to the General Revenue Grant.

This enables councils to deliver the services people rely upon.

It delivers the pay increases agreed for our teachers, social care workers, refuse collectors and more.

Pay increases that only go ahead, I remind the chamber, if Parliament backs this budget.

And, while it will be for councils to make their own decisions, with record funding, there is no reason for big increases in Council Tax next year.

Scotland will only thrive as a nation, if our youngest people are nurtured.

I am therefore increasing spending on education and skills by 3% over and above inflation, an uplift of £158 million.

Our choices will see staff in early learning and childcare paid at least the real living wage from April.

It will support 1140 hours of early learning and childcare for 3 and 4-year-olds, and eligible 2-year-olds.

In a cost-of-living crisis, this is funding that frees parents to work and earn while giving kids the best start in life.

In our schools, I have heard from Education Secretary Jenny Gilruth the challenge many children face with ASN - Additional Support Needs.

I will therefore fund a £29 million ASN plan, delivering measures like training so that more of our teachers can become ASN teachers.

And more widely, the budget can maintain teacher numbers at 2023 levels and continue improvements to our school estate, with new projects from Shetland and Orkney to the Scottish Borders.

We will invest almost £4.2 billion across the justice system in 2025-26.

This will maintain police numbers and continue policies that have seen levels of crime fall by 40% since we came to office.  

And I know from speaking to Justice Secretary Angela Constance that a particular area of concern to retailers at the moment is shoplifting.

Once again, we have listened, and we are acting - that’s why I am making an additional £3 million available to help tackle retail crime.

And on prisons, we will fund replacements for HMP Inverness and Barlinnie through the £355 million capital budget.

As I’ve set out, investment in public services is a priority. But reform goes hand in hand with that.

I am therefore establishing a £30 million fund to ‘invest to save’.

It will fund the costs of reform, drive out efficiencies, improve productivity and ensure longer term sustainability.

I am also intent on putting pay on a sustainable footing.

Our Public Sector Pay Policy – published today – sets out a fair but flexible approach.

It will deliver an above inflation increase of 9% over the next three years. And it will do so flexibly, with management and unions free to agree how that increase is structured.

That delivers progress on pay restoration and fairness to public servants and taxpayers alike.

Scotland’s biggest contribution to tackling the global climate challenge is, of course, our vast renewable energy resources, our innovation and our expertise.

Simply put, we can help the planet while creating new jobs and opportunities here at home, and I saw a great example at Logan Energy this morning.

We will create opportunities for businesses, and jobs for communities, by allocating £25 million to support the creation of new jobs in the green energy supply chain here in Scotland.

And to help people at home and work, £300 million will be invested in upgrading heating and insulation.

This money serves two hugely important purposes: it helps us to reduce our carbon emissions while tackling fuel poverty.

Lower emissions and lower energy bills, that’s an investment worth making.

And just as we are investing in tackling the climate crisis, we must also tackle the nature crisis.

We will invest almost £90 million to protect, maintain and increase our woodlands and peatlands.

We will make it easier for people to walk, wheel or cycle, and invest in resilient, efficient bus services, with almost £190 million of funding; and we will expand our electric vehicle charging network.

I am happy to tell the Chamber today that we will not simply match the calls for £4.7 billion invested in tackling the climate and nature emergencies.

We will exceed it with an investment totalling £4.9 billion.

Eradicating child poverty is this government’s most important priority.

And we will do that by growing the wealth of our nation and sharing that wealth more equally.

A thriving economy is not an afterthought.

It is an essential requirement.  

So when discussing budget priorities with Deputy First Minister Kate Forbes, she told me about the discussions she has had with investors and with employers big and small.

And we have heard their ambition, and we share it.

Today I am able to announce that we will invest £321 million in Scotland’s enterprise agencies supporting emerging tech, including AI and robotics, and programmes like our ambitious Techscaler initiative.

And we know that colleges, universities and the wider skills system make absolute crucial contributions to economic growth, which is why in this coming year we will invest over £2 billion supporting them.

We have listened to universities and are conscious that they must remain financially competitive with institutions in the rest of the UK.

The UK Government increased student fees to pay for a 3.08% increase in university funding in England.

Here, not only will we keep tuition free but we will increase total investment in Higher Education by 3.5%.

Now critical to economic growth is capital spending and investment in infrastructure.

So I can today tell the chamber today that capital spend will total over £7 billion in this budget. 

A green reindustrialisation of Scotland is our ambition.

So, after discussion with Acting Net Zero Secretary Gillian Martin, I can announce that we will use that capital funding to make a significant strategic decision to invest in this nation’s green future.

So I can announce today that we will almost triple our investment in offshore wind to £150 million next year.

This money will help leverage private investment of £1.5 billion in the infrastructure and manufacturing facilities critical to growing the sector.

Capital funding of £150 million will accelerate our investment to support the offshore wind sector, underlining our commitment to invest up to £500 million over five years.

Aberdeen is perfectly placed to become a global hub for green energy. And to support this, we will establish a Scottish Government hub for offshore wind in the North-East to provide an additional route for industry to engage with our teams.

More broadly, we will provide £100 million for digital connectivity, accelerating access to full-fibre broadband.

And we will provide almost £1.1 billion to maintain and renew our rail infrastructure.

£237 million will be invested to maintain and improve our ports, and deliver a more resilient and effective ferry fleet.

New rail rolling stock, new ferries and the electrification of the East Kilbride line: investment to keep Scotland moving.

And, to ensure our trunk road network is safe, Presiding Officer, resilient and efficient, we will invest £1 billion – including money to continue the dualling of the A9, something that is a central priority for Transport Secretary Fiona Hyslop, and for all of us on these benches.

Our capital programme allows us to tackle another issue we have heard raised with us.

I know that many people want to see their local high street thrive.

So today, I can announce that I will expand regeneration funding to £62 million, investing in towns and communities like Dundee, Arbroath, Possilpark, Pilton, Drumnadrochit and Stranraer town centre.  

But out rural communities are also important, over £660 million will support the crucial contribution of Scotland’s farmers, crofters and the wider rural economy.

Rural Affairs Secretary Mairi Gougeon has told me about the discussions that she has had with the farming community and their concerns about recent decisions by the UK government.

As asked for by farmers, we are returning in full the savings that were used in previous Scottish budgets, through a new capital transformation scheme with £20 million in 2025-26 and the remainder in 2026-27.

This budget also increases the dedicated funding available to the four councils operating their own ferry services to £50.3 million.

Alongside this is £20 million of capital funding for Orkney Islands Council and Shetland Islands Council.

This one-off investment will enable them to sustain and improve inter-island connections.

Whether that means flights, ferries or – and I know members for the Northern Isles will be pleased to hear this – tunnels between islands, it will be for those communities to decide.

This budget will support businesses and communities through the non-domestic rates system.

We have listened to concerns in business, particularly hospitality, about significant financial pressures as a result of staff shortages, high energy prices and the UK Government’s National Insurance hike.

And I can confirm today that we will help.

The Small Business Bonus Scheme – the most generous small business rates relief in the UK – will be protected.

In addition, the budget will provide for 40% non-domestic rates relief in 2025-26 for the 92% of hospitality premises liable for the Basic Property Rate, capped at £110,000 per business.

In our islands, that relief will be 100%. 

And, outside of hospitality, I will also help by freezing the Basic Property Rate at 49.8p - the lowest such rate in the UK for the seventh year in a row.  

Thanks to this budget, over 95% of non-domestic properties will pay lower property tax than anywhere else in the UK, with over 100,000 taken out of rates altogether.

The latest Scottish Fiscal Commission forecasts show that Scottish taxes will raise £24.6 billion in 2025-26.

That is £777 million more than had been forecast in December 2023, due mainly to an increase in forecast income tax revenue.

I’m sure Members will be pleased to hear the good news that this increase is in part due to average earnings growing faster than in the rest of the UK.

Overall, the tax decisions that we have taken have delivered £1.7 billion more in 2025-26 than if we had followed UK policies.  

So let me say a ‘thank you’ to those with the broadest shoulders who are paying a little bit more.

Because they are enabling Scotland to spend more on the things that matter most, protecting and improving our NHS, growing the economy and lifting children out of poverty.

The new UK government has increased employers’ national insurance contributions, a policy that the OBR has told this parliament will fall mainly on employees’ wages.

It is estimated that this will take over £2 billion out of the Scottish economy next year.

So in the light of that, I can confirm today that this government will not introduce any new bands or increase the rates of Scottish Income Tax for the remainder of this Parliament.

But Presiding Officer I want to go further.

The UK Government has hit the pay packets of working people in Scotland.

I have decided to provide tax support for low- and medium-income earners.

So while the UK Government has frozen all income tax thresholds, in Scotland, the basic and intermediate rate thresholds will increase this year by 3.5%, effectively twice the rate of inflation.

That means more of people’s money will be taxed at the starter and basic tax rates.

So also means that the majority of taxpayers in Scotland will continue to pay less income tax than in the rest of the UK.

And I can commit today that this will remain true until at least the end of this Parliament while, as with the UK, thresholds for Higher, Advanced, and Top rates will be maintained at their current levels.

Taking our tax and social security choices together, including on pension age winter fuel payments, 60% of Scots will be better off because they live in Scotland.

That is what delivering for the people of Scotland looks like.

Finally, on tax, the Additional Dwelling Supplement rate next year will increase from 6% to 8% with effect from tomorrow, unless legal missives have been signed on or before today.

And will match England by legislating to increase the standard rate of Scottish Landfill Tax to £126.15 per tonne and the lower rate of £4.05 per tonne from 1 April 2025.

Presiding Officer, we have listened to people in communities across our land, we have heard them, and we have acted.

We have heard, in particular, the concerns of the culture sector. They rightly are flagging the threat of the cost of living crisis, inflation, and the UK Government’s national insurance hike pose to their future.

This government will help.

Earlier this week, the UK Government called on me to deliver a £25 million increase in the culture budget and to exempt music venues from non-domestic rates.

I can announce today that, yes, we will provide NDR support to music venues.

But I will not increase the culture budget by £25 million.

No, presiding officer.

Instead, I will increase the culture budget by £34 million next year – another record increase.

We are committed to increase arts and culture funding by £100 million.

After just two years, we are halfway there. Next year - subject to the normal budget processes – I aim to deliver a further £20 million increase.

Taken with this year’s rise, multi-year funding can be provided to cultural organisations across Scotland - something Culture Secretary Angus Robertson has told me will be transformational for the sector.

That includes our world-class Scottish Festivals – whose budget we are doubling – and thousands of grassroots artists who will also benefit from this support.

I have one final announcement to make in this budget.

Our first priority is tackling child poverty.

The two-child cap is a pernicious part of the UK welfare system, it has caused misery for children and families in Scotland.

Many expected an incoming UK Government to abolish the cap.

We have waited but the UK Government have not delivered.

This Government will.

Just as with pension age winter heating payments, we will act.

Presiding officer, we will mitigate the two-child cap.

The detailed work of building the system will start with this budget.

But implementation requires the cooperation of the UK Government. They control the Department for Work & Pensions.

Which means they control the data. We don’t.

But we have a year. And we will work as hard as possible in 2025 so we can start paying families as early as we can in 2026. That is more than reasonable. But be in no doubt – the cap will be scrapped.

My challenge to the UK Government is to work with us.

Join us in ending the cap in Scotland. Give us the information that we need.

But, either way, let me be crystal clear.

This government is ending the 2-child cap and in doing so we will lift over 15,000 Scottish children out of poverty.

Presiding Officer,

Let me summarise the measures this Government sets out today.

• Record NHS investment – money to reduce waiting lists and make it easier for people to see their GP
• Tax choices that put money in the pockets of low- and middle-income earners and help out hard-pressed local pubs and restaurants
• Winter heating payments for older Scots
• More affordable homes
• Investment in childcare and nursery education, in more jobs and business growth
• More breakfast clubs in our schools
• £4.9 billion of positive climate action
• A record increase in funding for local services
• Transformational increases in culture spending
• And, presiding officer, an end to the two-child cap, lifting 15,000 children out of poverty.

This is what the people of Scotland want and will vote for. The question is whether opposition parties will too.

Presiding Officer, this is a budget that delivers progress for Scotland.

It is a budget that delivers hope for Scotland.

And I urge Parliament to support it.