Budget Highlights and Sector Impact

8th December 2025

Author: Lynn Williams, Partnerships and Membership Coordinator

Did you watch the UK Autumn Budget and wonder how it affects your organisation?

By the time the Chancellor stood up on 26th November, much of the Autumn Budget was in the public domain.

Nevertheless, there were a few eye-catching and, for the sector, welcome announcements. The removal of the two-child benefit limit and the appalling ‘rape clause’ have come after years of campaigning by anti-poverty charities and community groups – a welcome move.

At the same time, however, the continued rhetoric directed towards benefit claimants and other marginalised groups takes away from the positives. Language matters, and we should expect – and demand – better from politicians and decision makers.

For the voluntary sector, the Budget will create additional costs at a time when many organisations do not have the “fiscal headroom” to meet them (just in case the Chancellor reads this). That will make it harder for charities and community groups to realise Fair Work ambitions, and to retain and recruit staff.

The sector was largely invisible in this Budget. If the UK Government truly valued our contribution to growth and wellbeing, it would demonstrate that through fair and secure funding and our involvement in local and national decision-making.

We are not there yet.

As others have done, we urge the Chancellor to consider how the sector could be better supported, given the cumulative impact of the pandemic, public sector cuts and previous economic shocks. Warm words about the importance of civil society don’t provide enough funding to offer staff a pay increase after years of standstill salaries.

Additional funding for the Scottish Government comes in the form of an increase in the block grant (see below). The removal of the two-child cap may free up funding that the Scottish Government had identified to mitigate its impact. There is an opportunity here to swivel towards prevention and investment in community action and services. Otherwise, the Scottish Budget will be another missed opportunity to collectively improve public services, tackle the cost of living, and build hope.

The latter is sadly lacking for far too many people and communities in Glasgow.

Addressing Poverty and Cost of Living

Removal of the two-child limit – This will be scrapped from next year, freeing up c. £120 million that the Scottish Government had set aside for mitigation. There will be more available if the UK Government also removes the overall benefit cap. This is welcome news after years of campaigning by the sector – and after years of responding to the devastating impact of this policy in communities across Glasgow.

There are still details to be clarified, which may affect the overall impact of this announcement. The Fraser of Allander Institute outlines some of the issues that might arise.

However, it is estimated that this will lift thousands of children out of poverty in Scotland. This sits alongside the recently announced UK Government Child Poverty Strategy.

Young woman in the park with her child who is holding a toy truck

Scrapping of the Rape Clause

The Chancellor announced the removal of the ‘Rape Clause’, a benefit change made during the austerity years. The clause was the common name for the ‘non-consensual conception exemption’ (NCCE), which was an exception to the two-child limit. This exception allowed a parent or carer to receive Universal Credit or tax credits for a third or subsequent child if they could prove the child was conceived non-consensually.

Other Benefit Changes

As previously announced, the Universal Credit Standard Allowance will increase by over 6%. However, the health element will be frozen until 2029/30. New claimants will only receive half of the health allowance in future (£50 instead of £99).

Even with positive changes to the benefits system, Joseph Rowntree Foundation analysis suggests that overall living standards are still set to stall or fall.

Other Developments

There have been changes to tax relief within the Motability scheme, which will act to limit choice for disabled people and increase upfront costs. The Chancellor announced reductions in energy bills of up to £150, explained here by Martin Lewis. However, the actual reduction may be much less, as the costs of recently announced energy infrastructure investments will be passed through to our energy bills.

As always, the details matter; they will shape what these announcements mean for people in Glasgow. Watch out for more information and analysis in the coming months from the likes of Citizens Advice, Disability Rights UK, Benefits and Work, and others.

A package of support for young people out of work has been announced. The Secretary of State, Pat McFadden, suggested in the media that this would be linked to benefits sanctions. The package includes funding for small to medium-sized organisations and subsidised jobs.

Taxation / National Insurance

Freezing personal tax thresholds will affect people in Glasgow and Scotland, because control of the Personal Allowance has not been devolved. It also means that people on low incomes will gradually be drawn into paying tax, even as the cost-of-living crisis continues. This will include part-time workers.

The freeze in National Insurance thresholds for employees will also continue.

The reduced National Insurance threshold for employers (£5,000) will remain in place until April 2031. Our sector survey last year highlighted the challenges this created for the voluntary sector in Glasgow. However, the Employment Allowance can mitigate some of the associated costs. Other changes announced include a new mileage charge/tax on electric cars from 2028. You can find more information on this and other tax and finance changes in a comprehensive summary from Martin Lewis.

Finally, changes to gambling taxes are welcome – the voluntary sector deals with the fallout from gambling harms every day in the city.

GCVS was proud to work with community partners on trying to reduce the damage caused by gambling.

Scottish Public Finances

The later UK Budget has delayed the Scottish Budget, now due on 13 January. This has knock-on effects for local authorities and public bodies – and, in turn, for local voluntary sector funding. This creates further risks and instability for the sector at a time when organisations may be exiting other funding streams, seeking new funding sources, and managing staff issues linked to this.

Wider policy changes, including reforms to the benefits system, will place further stress on these community groups and voluntary organisations.

The Budget provides additional short-term public funding of around £800 million through the Barnett formula, but spending cuts are forecast for 2028/29. However, the Scottish Government Finance Minister recently said that the cost of meeting additional Employer National Insurance contributions over the same period would exceed the additional allocation in the block grant.

Developments around SEND (Special Educational Needs) expenditure in England may also feed through to the Scottish block grant.

The tax changes outlined above could reduce block grant funding to Scotland. However, other capital expenditure may bring benefits in terms of jobs and community investment. There have been several earlier announcements.

Despite these allocations, we are still seeing local cuts to the sector and in our communities, and it is not clear that the UK Budget Barnett allocations will change that significantly.

Shared Prosperity Fund / Local Growth Funds and Pride of Place

The UK Government has now announced a new “local growth fund” that will invest in deprived communities across the UK. The level of Scottish funding will remain “the same overall level in cash terms as under the UK Shared Prosperity Fund in 2025–26”.

Under the heading of “Local Growth Funding”, Scotland may receive £76m per year across four new funds: Pride in Place; the Pride in Place Impact Fund; a new Local Growth Fund; and a Mission Growth Fund.

Funding linked to the Pride of Place initiative will come from the former UKSPF budget, which will be frozen in cash terms – this is not new money. The Scotland Office has confirmed that UKSPF will finish by the end of March 2026, when the Local Growth Fund will be introduced.

A primary concern for the sector is the lack of any clear ‘people and skills’ element within this new Fund, and the focus on capital spend.

The Budget – Sector Impact

Some tax relief will be available for donations of goods to charities by businesses. However, we may see a decrease in donations and giving as people pay more tax.

An increase in the National Minimum and Living Wages will benefit thousands of workers—an important development for our sector, which is committed to Fair Work practice and to campaigning against poverty and inequality.

Any action to tackle the cost of living is welcome. Yet further costs placed on the sector at this difficult time effectively limit our ability to play a full part in economic and social recovery and public service reform.

Our hands are firmly tied behind our backs at a time when charity and community services are needed more than ever. The Scottish Budget and multi-year spending review present an opportunity to address this and guarantee that the sector can continue to combat poverty, support wellbeing, and foster thriving communities.

More ambition and action on Fair Funding is vital.

The ongoing debates and announcements linked to social security and immigration are affecting charities in Glasgow and the families and communities they support. The removal of the two-child cap may help reduce the number of families in desperate need.

Charity Responses

Below are links and analyses from across the voluntary sector on what this Budget means for our work.

This content was written by our team, with AI tools used only to support review and refinement.