A pivotal moment is approaching for Scotland, as Finance Secretary Shona Robison prepares to unveil the budget for the next financial year. This announcement, scheduled for Tuesday, will detail how the SNP-led government plans to allocate approximately £60 billion for the fiscal year 2026-27, along with potential tax adjustments.
This budget revelation comes at a crucial time, just four months ahead of the Holyrood elections, making the stakes even higher.
What can we expect during this significant event? Robison will present her draft budget to the Scottish Parliament shortly after 2 PM on Tuesday. This budget serves as the Scottish Government’s roadmap for its fiscal strategy for the upcoming year, spanning from April 1, 2026, to March 31, 2027. The financial plan encompasses critical decisions regarding taxation and spending across various sectors, including health, education, transportation, and justice, all of which are under the jurisdiction of the Scottish Parliament.
In addition to altering existing taxes, the government may propose new taxes, welfare programs, public services, and infrastructure projects. The finance secretary’s address will be accompanied by a formal Budget bill, which outlines these plans in legal terms. Following the presentation, Members of the Scottish Parliament (MSPs) will engage in discussions about the proposed budget and have the opportunity to submit amendments before casting their final votes on whether to enact it into law.
In light of recent controversies surrounding the UK government's Autumn Budget leaks, Scottish ministers are determined to keep details under wraps until Robison delivers her speech at Holyrood. However, there are known factors at play: the Scottish Government must clarify its intentions for approximately £100 million allocated by the UK government due to the removal of the two-child cap on benefits. First Minister John Swinney has committed to utilizing these funds to combat child poverty, with speculation suggesting a possible increase in the Scottish Child Payment.
The Scottish Conservatives have called upon the government to alleviate the "crippling financial burden" faced by families by reducing income taxes and lowering business rates. Conversely, Labour has urged the SNP administration to prioritize health funding aimed at reducing waiting lists, reforming the NHS, and enhancing employment initiatives.
A significant topic of concern for the Scottish populace will undoubtedly be any proposed changes to income tax. The Scottish Parliament has leveraged its devolved powers to establish a distinct tax system that differs from the rest of the UK. Scotland operates with six income tax bands, unlike England, Wales, and Northern Ireland, which maintain only three. For those earning below approximately £30,000, tax rates in Scotland are slightly lower, with a maximum annual saving of about £28. However, as earnings rise beyond this threshold, the tax burden increases. Although the Scottish Government has the authority to set its own tax rates, the UK government dictates the income level at which individuals begin paying taxes.
Additionally, Holyrood holds full control over several other taxes, including non-domestic rates—commonly referred to as business rates—which are determined by the rental value of commercial properties. The Scottish Government also establishes the Land and Business Transactions Tax, equivalent to stamp duty, applicable to property purchases above £145,000. Both opposition MSPs and business groups have pressed for reductions in these tax levies.
Another important issue for voters is council tax, which is established and managed by local authorities. Recently, the government had effectively instituted a rates freeze by incentivizing local councils to adhere to a cap; however, this freeze ended last year. Robison is not anticipated to reinstate this cap for the 2026-27 period, implying potential tax increases for residents starting in April.
How is Scotland's economy faring overall? Long-standing challenges such as low productivity and health issues have plagued the Scottish economy. Nevertheless, recent months have seen Scotland outperforming the broader UK economy. The Chancellor mentioned in the November UK Budget that an additional £820 million would be allocated to Scotland by the decade's end. Yet, this figure starkly contrasts with an estimated £4.7 billion budget shortfall that Scottish ministers face concerning public service funding. Approximately £2 billion of this deficit is attributed to a growing social security bill, alongside anticipated increases in workforce costs. The Auditor General has criticized the government for not adequately explaining how they plan to address this looming budget deficit.
The Scottish Government's strategies for ensuring fiscal sustainability heavily depend on growth in both tax revenue and the economy itself. However, the Auditor General has cautioned that there is insufficient detail regarding how the government intends to expand its tax base.
So, what happens post-budget announcement? MSPs will initiate discussions on the proposed budget in early February. A decisive vote aimed at passing the budget into law is set for February 25. With the SNP holding a minority position in Parliament, having been reduced to 60 MSPs, the government will require support from five additional MSPs to achieve a majority of 65. Alternatively, they may seek to persuade some MSPs to abstain from voting against the proposal.
Last year's budget successfully passed with backing from Green and Liberal Democrat MSPs, who negotiated specific concessions with the government.
For those interested, BBC Scotland will air a special program focusing on the budget announcement on Tuesday, and live updates will be available on the BBC Scotland News website.
