The Scottish Budget, 2025-26

9th December 2024

A summary of key announcements

The Scottish Draft Budget was unveiled last week with many announcements likely to impact the voluntary sector – directly or through the work you do with people and communities.

The Budget first has to go through several stages. This guide to The Scottish Budget Process from the Parliament explains more. Because there is no majority in the Scottish Parliament, the Scottish Government will also need to come to an agreement with an Opposition party to get the Budget approved. 

We’ll start to get indications of what local budgets might look like over the next couple of months – but national policy areas like Justice, Health and Care and Education feed through into local voluntary sector work, so what happens nationally is also important.

All relevant documents covering the Draft Budget can be found at gov.scot – Scottish Budget.

We’ve drawn together a summary of the key points within the Budget that are likely to affect the voluntary sector directly or indirectly. You can also read our Budget asks for ‘Valuing the Voluntary Sector’.

The Key Points

Announcements Related to the Third Sector:

• Cost of Employer NI changes to the third sector was acknowledged; the Scottish Government will continue to press the UK Government on this.
• The Scottish Government will provide £21 million to ensure Early Learning and Childcare and Children’s Social Care staff in private and third sector commissioned services are paid at least the Real Living Wage by April 2025.
• £125 million to ensure adult social care staff in private and third sector commissioned services are paid the Real Living Wage by April 2025.
• Third sector funding in justice to receive an increase – over £1m extra.
• There is a small reduction in third sector infrastructure funding.

The Budget says:

““We will continue to work closely with key infrastructure partners in third sector on our commitment to fairer funding. We are working to fully implement the Charities (Regulation and Administration) (Scotland) Act 2023, to update and strengthen regulation for our charities.”

NHS and Social Care

• £21 billion for health and social care, £2bn increase for frontline health boards. How this is spent is important as we see continuing challenges in social care and ongoing pressures on primary, acute and mental health services.
• The Cabinet Secretary for Finance specifically mentioned that additional funding would help support new specialist long Covid nurses and clinics, and more community-based support for teenage mental health.
• Increase in budget directed to social care support – meeting commitment to increase spend by end of this Parliament earlier than planned. Some specific areas mentioned include increasing the living wage for care workers, carer support, dementia and self-directed support.
• Increased funding for short breaks for carers, delivered by voluntary sector organisations – an extra £5 million.
• Increase in capacity and access to Primary Care to move towards preventative and community-based support; there was a strong focus on delayed discharge through work with HSCPs. 
• £200 million focussed on reducing waiting times and people delayed in hospital, but who could be supported at home – developing frailty units linked to A and E, focussing on re-ablement and expanding the Hospital at Home programme.
• Increase in budget line focussed on mental health – with increases in-year and next year.
• Hospices are to receive £4m and support to ensure that pay for hospice staff is linked to NHS Agenda for Change negotiations.
• An additional £250 million for the National Mission on Drugs over the course of this Parliament.

Social Security and Social Justice

• Aim to mitigate ‘as far as possible’ the impact of the two-child benefit cap – no detail in the Budget; the Scottish Fiscal Commission did not receive details until recently, so it is not included in its fiscal assessment. See comments from Fraser of Allander on this.
• Universal winter fuel payment to pensioners from 2025/26 – £100 for older people not eligible for now means tested higher amounts.
• Commit to matching the UK Government increase in earnings threshold for Carer Support Payment and Carer’s Allowance to £196 per week.
• £2.5m to support actions within Disability Equality Plan.

Local Government

• A funding package of over £15bn for local authorities in 2025/26. However, this includes increased funding specifically for Additional Support for Learning, free school meals, and the school workforce etc.
• Strengthening Community Planning Partnerships to support a shift to preventative services and development of whole family approaches, with a commitment to co-design.

Education and Skills

• £3m for Brighter Start Breakfast Club pilots to kickstart more breakfast delivery in schools.
• Expansion of free school meals for Primary 6/7 children in receipt of the Scottish Child Payment.
• £120 million to headteachers to support initiatives which address the poverty-related attainment gap.
• A £29 million Additional Support Needs plan, delivering measures like training to increase ASN teacher numbers.

Net Zero and Climate

• £40 million for a climate emergency fund led by local authorities, funded from Scotwind.
• Funding for woodlands and nature restoration.
• Over £300m for upgrading heating and insulation – homes and business.
• Almost £190m active travel funding.
• Over £5m to support Community Climate Action Hubs.

Housing

• £768 million for affordable homes, enabling over 8000 new properties for social rent, mid-market rent and low-cost home ownership to be built this coming year.
• New funding of £4m for homelessness and homelessness prevention pilots.

Digital

• Digital connectivity has been allocated £100m.

Regeneration

• Funding for regeneration. Possilpark in Glasgow is specifically mentioned in the Budget documents.

Council Tax and Reform

• Council tax freeze effectively ended, with Cabinet Secretary saying that:

“…while it will be for councils to make their own decisions, with record funding, there is no reason for big increases in Council Tax next year.”

• The basic and intermediate tax thresholds will increase by 3.5%; increase in thresholds for the lifetime of this current Parliament.
• Higher, advanced and top-rate tax bands will remain frozen.
• Tax Strategy document published.

Business Rates

• 40% relief for small hospitality businesses – with a rateable value of less than £51,000.
• The Basic Property Rate was frozen at 49.8p.

Culture

• £34 million uplift in culture budget, with the Cabinet Secretary of Finance discussing multi-year funding for cultural organisations.
• Specific support for music venues.

Justice

• An additional £194 million of funding to support frontline justice services; increased funding for victims, including victims of trafficking and witnesses by £5.5 million; a further £11 million invested in community justice

Public Sector Reform

• £30 million fund to ‘invest to save’.

“It will fund the costs of reform, drive out efficiencies, improve productivity and ensure longer term sustainability.” (Cabinet Secretary).

Public Sector Pay

• Pay Policy published alongside the Budget with a commitment to an above-inflation increase of 9% over three years.

Forecasting Scotland’s Economic Outlook:

The Scottish Fiscal Commission provides details of economic and fiscal challenges, and what the Budget might mean for that. These were published on the same day as the Budget speech but will be revised in early January to consider the government’s announcement on mitigating the Two Child Benefit Cap.

You can read more here: Scotland’s Economic and Fiscal Forecasts by the Scottish Fiscal Commission

The Fiscal Commission and others have said that the full cost of employer National Insurance Contributions for public sector employees may not be fully compensated – but we won’t know anything for sure until February of next year.
 
You can read the initial Budget response from the Fraser of Allander Institute. And the Institute for Fiscal Studies digs into the detail in their response here.

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Third sector reactions include these remarks from the Scottish Women’s Budget Group, the Poverty Alliance and Inclusion Scotland.

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GCVS recently laid out our Budget asks. We recently conducted a short survey to learn how the changes to Employer National Insurance could affect charities and community organisations in Glasgow.

We can support and work with your charity or community group. Learn about the benefits of being a GCVS member here. Or contact the team for support at sectordev@gcvs.org.uk