Scottish Budget 2024 to 2025: Your Scotland, Your Finances - a guide

Scottish Budget 2023 to 2024: guide

Each year the Scottish Government publishes a balanced Budget that sets out the spending plans for the new financial year. The annual Scottish Budget covers each financial year, which runs from 1 April until 31 March, with annual spending amounting to over £50 billion.

The Scottish Budget for 2023 to 2024 has been set at £59.7 billion and a detailed breakdown of spending plans is available on the Scottish Government web site.

This Budget comes at a critical point for Scotland. It seeks to balance the immediate pressures of our continued recovery from the pandemic along with supporting our three strategic priorities –

• to eradicate child poverty
• to enable the economy to transition to Net Zero
• to create sustainable public services that support the needs of our people

The Budget is developed and delivered in partnership with the Scottish Green Party, delivering on commitments made as part of the Bute House Agreement.

This is a summary of how the Scottish Budget is funded, and the key spending commitments for the year ahead.

How the Scottish Budget is funded

The Scottish Budget is funded mainly through annual funding from the UK Government, known as the Scottish block grant, and devolved tax revenues. The block grant is calculated with reference to changes in spending on equivalent public services in England. The Scottish Budget is allocated a population share of changes in funding using the Barnett formula, which is added to baseline funding to give the revised Scottish block grant for each year. This funding is added to the devolved tax income raised in Scotland to fund spending on devolved public services in Scotland.

There are rules that govern how Scotland receives and manages its funding and these are set out in the UK Government’s Statement of Funding Policy and in the Fiscal Framework. The Fiscal Framework is an agreement between the Scottish and United Kingdom governments, which details how Scotland must manage its funding. This includes limits on borrowing powers and on the use of a reserve to transfer funding between financial years. The agreement also details the arrangements for the adjustments made to the Scottish block grant, to account for the devolution of certain tax and social security powers – these are called ‘Block Grant Adjustments’.

An updated Fiscal Framework was recently agreed by the Scottish and UK Government. Read more on the Fiscal Framework.

What the Scottish Budget funds

Ultimately the Scottish Government is accountable to the Scottish Parliament and to the people of Scotland for its use of public money. Each year, Scottish Ministers develop spending proposals ahead of the new financial year. These proposals are published and presented to the Scottish Parliament with draft legislation (the annual Budget Bill) for scrutiny and approval by the Parliament.

Devolution allows the Scottish Parliament to decide how much money to spend on different policy areas, including schools, hospitals, policing, certain social security benefits, the economy, climate change and the environment. Delivery in these areas involves a range of partners including local government, public bodies and the third sector.

The UK Government is responsible for spending on areas that are reserved, including immigration, certain social security benefits, foreign policy and defence.

Scottish tax – raised in Scotland, spent in Scotland

The Scottish Parliament has the power to set the rates and bands of Income Tax paid by Scottish taxpayers on non-savings and non-dividend income. This is income earned through employment, self-employment, pensions or property.

Scottish Income Tax is collected by HMRC and the money raised through the tax is then transferred to the Scottish Government.

There are three taxes that are fully devolved and are set by the Scottish Parliament. These are:

• Non-Domestic Rates (NDR), often referred to as ‘business rates’, are a tax paid on non-residential property. Current NDR rates
• Land and Buildings Transaction Tax (LBTT) is a tax payable on land and property transactions in Scotland over a certain value. Current LBTT rates
• Scottish Landfill Tax (SLfT) is a tax on the disposal of waste to landfill. The tax provides a financial incentive to reduce the amount of waste going to landfill. Current SLfT rates

Our animated video, ‘Raised in Scotland. Spent in Scotland.’ summarises how tax revenues contribute to the Scottish Budget.

Approach to taxation

Our approach to taxation is set out in the Framework for Tax. This document sets out the purpose, principles and policy objectives that underpin that approach.

It provides the foundation for design and delivery of tax policies that support our national outcomes and our pursuit of a fairer, greener and more prosperous Scotland for everyone.

Our progressive tax policies are designed to support those on lower and middle incomes, and our approach to taxation will continue to be guided by the strategic objectives and principles set out in our Framework for Tax, which underpins our fair and progressive approach. 

Our approach to taxation is also founded upon engagement with stakeholders. This allows us to understand and consider a wide range of views, including from the general public, when designing tax policy.

Our decisions on tax policies will raise the revenues needed to support Scotland’s economy, invest in vital public services, including the NHS and tackling child poverty.

Scottish Income Tax rates and bands for 2023 to 2024

* assumes individuals are in receipt of the Standard UK Personal Allowance.

** Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

Total spending plans for 2023 to 2024 - at a glance

The table below shows the approximate planned expenditure for each group of policy areas (known as portfolios) across the Scottish Government. Each portfolio supports Scottish Ministers in the delivery of our Programme for Government, and national outcomes for Scotland as set out in the National Performance Framework.

* Figures are rounded

** The Scottish Budget also includes funding for the Scottish Parliament and for Audit Scotland, which total around £146 million.

The 2023-24 Scottish Budget Bill was passed by Parliament following the Stage 3 debate on 21 February 2023, where it was announced that in 2023-24:

• an additional £223 million will be provided to local authorities to support pay awards for staff. This comprises of £100 million for non-teaching staff and £123 million to support a new pay offer for teachers
• Creative Scotland will be provided with an additional £6.6 million for 2023-24
• the Government will continue to fully fund inter-island ferries

This additional funding will be added to the 2023-24 Scottish Budget in-year and the Budget will be formally updated through the normal in-year revision process. It was not possible to add this funding formally during the Budget Bill process as changes in UK Government funding were confirmed after the Parliament’s deadline for lodging Stage 3 amendments.

Autumn Budget Review

The 2023 to 2024 Autumn Budget Review is part of the normal in-year revision process and was published on 28 September 2023.

Following his appointment in March 2023 the First Minister announced a restructured cabinet with a number of changes to portfolio responsibilities. The Autumn Budget Revision presents the budgets based on the new portfolios.

Following the completion of the 2023 to 2024 Scottish Budget additional funding has become available and the Autumn Budget Revision provides the opportunity to apply this funding.

Reprioritisation of budgets have been necessary due to continued inflationary pressures, including on public sector pay, and to support priority areas, such as supporting Ukrainian displaced people.

The key changes applied are:

• at Stage 3 of the 2023 to 2024 Scottish Budget, the Deputy First Minister announced the provision of £100 million of additional support for local authorities. This funding has been allocated as part of the £155 million package of funding designed to assist councils in making a meaningful pay offer for non-teaching staff, recognising the critical role that those staff play in delivering front line services
• in addition to the funding for non-teaching staff, £109.5 million has been provided to Local Government as part of the Scottish Government’s commitment to help fund teacher’s pay settlements.
• £44 million of additional funding has been provided to the Justice and Home Affairs portfolio for Police Pensions. This is a volatile, demand-led budget for which pressures have historically been managed in-year
• £50 million of capital funding is being provided to the NHS Recovery, Health and Social Care portfolio to support services
• the Social Justice portfolio is receiving an additional £30 million of resource budget for Ukrainian Resettlement costs as part of the Scottish Government’s ongoing commitment to the displaced people of Ukraine
• within the Education budget, £52.5 million of managed savings have been taken forward to allow Learning to contribute towards the teacher’s pay pressures.
• Rural Affairs, Land Reform and Islands have identified £31 million of budget savings to support the overall financial position

*Table 2 – Figures may not sum due to rounding

Spring budget revision

The 2023-2024 Spring Budget Revision is part of the normal in-year revision process and was published on 1 February 2024.

Following the completion of the 2023-24 Autumn Budget Revision, additional funding has become available, and the Spring Budget Revision provides the opportunity to apply this funding.

It has been necessary to reprioritise budgets due to continued inflationary pressures, including on public sector pay, and to support priority areas such as Health and Social Care and supporting Ukrainian displaced people.

The key changes applied are:

• £514 million of resource funding and £235m of capital funding is being provided to the NHS Recovery, Health and Social Care portfolio to support services
• £134.2 million of additional funding has been provided to the Justice and Home Affairs portfolio for Police and Fire Pensions following the allocation of £44 million at Autumn Budget Revision. This is a volatile, demand-led budget for which pressures have historically been managed in-year
• the Social Justice portfolio is receiving an additional £51.8 million of resource budget, which relates to funding being provided to Social Security to fund increases in demand-led benefit expenditure following revised forecasts.
• the Social Justice portfolio is also receiving an additional £41.2 million of resource budget for Ukrainian Resettlement costs as part of the Scottish Government’s ongoing commitment to the displaced people of Ukraine.
• the Transport, Net Zero and Just Transition portfolio have provided £299.5 million of funding as part of the process of active management and reprioritisation of funding, to support the overall financial position.
• the decrease in overall budget is due to large technical adjustments in respect of the Student Loan RAB charge, Student loan fair value adjustments and for NHS and Teachers Pensions costs - however these movements do not impact discretionary spending by the Scottish Government.

*Table 3 – Figures may not sum due to rounding