Public sector pay policy 2024 to 2025

Fiscal Context

The Scottish Government is proud to support our public services and are committed to maintaining the high quality services that people in Scotland need.

Our view is that the most valuable and important asset is the public sector workforce. Spending on workforce pay now accounts for over half of the entire Scottish resource budget. That reflects the importance we place on having a highly skilled and remunerated workforce. In Scotland, people in key public sector roles are now paid more than in the rest of the UK.

The introduction of the new Advanced rate of Income Tax has increased the progressivity of our tax system. It is paid only by those earning above £75,000. In return, people in Scotland have access to a range services and social security payments that are not available elsewhere, such as the Scottish Child Payment, free prescriptions, and free higher education. Everyone benefits from our approach to public sector services that are Scottish by nature, design, and delivery.

However, for as long as the Scottish Government operates on a fixed budget, there are limits to what we can achieve. We are now at a point where the Scottish Public Sector Paybill has increased to a record high and is forecast to rise faster than the Block Grant received from the UK Government, which is the main source of funding for the Scottish Government. Audit Scotland published a report in October 2023 entitled “The Scottish Government's workforce challenges” which highlighted the unsustainable nature of the public sector paybill.

The current UK Government Spending Review settlement ends in 2024-25 and there are no detailed department level spending plans beyond that. Consequently, the Scottish Government does not have confirmed figures for the Barnett block grant. However, the Office for Budget Responsibility (OBR) has forecast that the growth in UK resource spending, which determines the size of the Scottish block grant, will grow at around 1% real terms each year over the next three years.

Annual real terms growth in resource spending (RDEL) at UK level

Year : OBR forecast (March)

2024-25 : 0.9%

2025-26 : 0.9%

2026-27 : 1.0%

2024-25 to 2026-27 : 2.9%