Scottish Budget 2025-26 offers a mix of welcome investment and continued uncertainty

Increases to funding for health, social security and housing are positive, but social care and the third sector face continued uncertainty.

Earlier this week (4 December) the Scottish Government published their draft budget for 2025-26, setting out their indicative plans for spending next year. In comparison with recent budgets, the end of the Bute House Agreement with the Greens earlier this year means the Government no longer has a majority in parliament and will need to reach a deal with another party to pass the budget. As such, there could be further changes to the proposals later in the process.

In her statement to the Scottish Parliament, Cabinet Secretary for Finance and Local Government Shona Robison described the budget as “filled with hope for Scotland’s future.” Whilst emphasising increases in funding for areas including health, social care and housing, the Cabinet Secretary also expressed concern about the impact of the UK Government’s increase to employer National Insurance Contributions (NICs).

In our briefing to MSPs in advance of the budget, the ALLIANCE had similarly noted our concern about the impact of increased NICs on the third sector and called for funding uplifts to account for both those increases and inflation. In addition, we urged the Scottish Government to match the UK Government’s changes to Carer’s Allowance, urgently progress social care reform including abolishing non-residential care charges, and offer above-inflation increases to energy related social security payments.

Amongst the measures announced by the Cabinet Secretary were:

• A funding increase of just over £2 billion for health and social care, amounting to around 10% in cash terms,
• Raising the thresholds for the basic and intermediate rates of income tax by 3.5%, whilst committing not to make any further changes to income tax bands during this parliamentary term,
• Increasing all devolved social security payments by the September 2024 CPI inflation rate of 1.7%,
• Delivering the Pension Age Winter Heating Payment as a universal payment next winter, at a rate of £100 for everyone or £200/£300 for people receiving a qualifying payment such as Pension Credit,
• Increasing the affordable housing budget to £768 million, effectively restoring the value prior to a cut in last year’s budget.

Much of the investment laid out in the budget is very welcome, particularly increases in the health and social care budget, the restoration of affordable housing funding, and a fairer approach to supporting older people with their winter energy bills. However, this budget showed limited evidence of progress towards fair funding for the third sector, and the added impact of NIC changes will leave many organisations struggling to plan for the year ahead.

Similarly, whilst the overall allocation for health and social care has increased, the position of social care within that remains uncertain. It is vitally important that social care reform is not put on hold during the recent further delay to the National Care Service Bill. Improving workforce pay and conditions, abolishing care charging, and support for third sector providers that deliver a significant proportion of social care services must be a key budget priority.

You can read a further opinion piece by the ALLIANCE reflecting on the budget, and Scotland’s finances more generally, here: “Scotland’s finances must serve more than the “unpalatable dish” of chasing economic growth.”

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