New UK Government publishes first budget

The Chancellor set out her tax and spend plans, which include further changes to social security and some funding for Scotland.

Earlier this week (30 October), Chancellor of the Exchequer Rachel Reeves set out the UK Government’s budget for 2025-26. This is the first budget under the new Labour government elected in July, and gave the Chancellor and her party the opportunity to set the direction for the next five years.

The budget set out a mixture of tax and spend proposals including:

• Increasing employers National Insurance Contributions (NICs) from 13.8% to 15.0%,
• Increasing levies and duties on alcohol, tobacco and soft drinks,
• Increasing the National Living Wage by 6.7% and the National Minimum Wage by 16.3%,
• Uprating working age social security payments in line with inflation at 1.7%,
• Taking forward the previous UK Government’s Work Capability Assessment reform and driving forward a crackdown on fraud in the social security system,
• Increasing the earnings limit for Carer’s Allowance to the equivalent of 16 hours per week on the National Living Wage (devolved),
• Increased funding for health and social care, including via Local Government funding of around £600 million specifically for social care (devolved),
• Total claimed funding increase of £3.4 billion for the Scottish Government as a result of spending consequentials.

The Health and Social Care Alliance Scotland (the ALLIANCE) are one of many organisations to have called for an end to austerity policies. We published a statement earlier this year that called for taking a human rights based approach to economic policy and financial decision making. Whilst much of our work relates to devolved policy areas, sufficient and sustainable funding for those areas in England by the UK Government is a precondition for public service delivery in Scotland.

As such, we welcome a number of the measures in this budget, including the decisions to increase revenues rather than further cut services. In particular, we hope that funding consequentials arising from changes to Carer’s Allowance at UK level will allow the Scottish Government to accelerate their plans to increase the earnings limit for the Carer Support Payment.

Increases in the levies for alcohol, tobacco and soft drinks are also positive in the context of the contribution these products make towards health inequalities. Similarly the increase in the Energy Profits Levy is welcome, given that energy bills remain significantly higher than before the cost of living crisis, and we would encourage the funds raised from this measure to be invested in renewables and targeted energy efficiency schemes.

We also noted the explicit framing by the Chancellor that good quality education, healthcare and welfare systems were necessary for a healthy economy and businesses. This is a highly positive step forward in framing taxation and revenue raising as an essential part of a fair and just society, rather than the negative presentation as a burden.

However, the ALLIANCE is disappointed that some of the rhetoric in relation to the social security system continues to be highly charged. A continued focus on “cracking down” on fraud whilst allowing the Department for Work and Pensions to directly access people’s bank accounts is worrying, and will inevitably lead to punishing people who have done nothing wrong. In addition, the direct additional funding for social care in England relative to health is unlikely to address longstanding inequalities between these two essential services.

We are also concerned by the implications of the increases to employer NICs for third sector employers. The sector is already stretched to the limit, and we have joined calls from organisations across the UK for the Chancellor to ensure support is available to help manage these costs.

Whilst the full consequences for the upcoming Scottish budget are yet to be fully determined, the ALLIANCE believe that any additional funds must be distributed on a human rights basis. We will further set out our position on the Scottish budget in the coming weeks, in line with our responses to pre-budget scrutiny which included a focus on sustainable funding for the third sector.

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