Budget 2025 - What the Scottish Government (and Scotland) gains from the Budget

26th November 2025

A boost to Scotland's block grant ("Barnett consequential").

According to media reporting, the UK Government has allocated £820 million to Scotland via the standard block-grant mechanism (under the Barnett formula) as a result of increased UK spending announced in the Budget.

This additional funding enables the Scottish Government to inject more resources into devolved services — potentially helping with health, education, infrastructure, social support, rural investment, or other public services.

• Removal of the "two-child benefit cap" — alleviating child-poverty burden

The UK Budget abolishes the controversial two-child benefit cap (affecting families with three or more children) from April 2026.

For Scotland, this means fewer families will be affected by the cap; the Scottish Government has committed to using its devolved powers to align with this change.

Removing the cap can reduce child poverty, ease financial pressure on households with more children (including rural families), and reduce demand for other social services in some respects.

• Potential support for local economies and investment — through UK funding commitments

Items in the Budget aimed at regeneration, infrastructure, or low-carbon transition in Scotland were highlighted — for example, some support for industrial transitions (given UK-wide green and energy policies) may benefit Scottish industry or regional economies.

That could help regions like Grangemouth (industry/energy), or other areas where diversification, green investment, or infrastructure upgrades are part of the government's plans.

• Indirect benefit via UK-wide policies that reduce pressure on Scottish public finances

Because the UK Budget raises taxes and duties (on high-income earners, property, certain wealth/assets, etc.), the UK's overall revenue rise can support stable funding commitments to devolved budgets — indirectly helping the Scottish Government’s ability to fund services.

For example, increases in national borrowing, overall tax haul, and the block grant mechanism help ensure the Scottish Government’s “resource budget” remains funded for the near term.

But It’s Not All Gains — There Are Challenges & Trade-offs for Scotland
• The “net contribution” from UK income tax changes may be limited

Because part of Scotland’s budget comes from taxes raised in Scotland (Scottish income tax, etc.), changes at UK level — e.g. freezing thresholds in England only — may distort the fiscal framework. As some analysts note, Scotland may not fully benefit from all UK-wide tax rises or funding boosts.

A recent review showed that although Scottish devolved taxes are rising, growth is weakened by lower earnings/employment growth vs UK average — limiting the net benefit to the Scottish budget.
Audit Scotland
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• Future uncertainty — the positive block-grant “boost” may not last

Some of the block-grant increases reflect temporary UK-wide spending increases; over the medium-term (2028-2030) forecasts suggest that funding may be squeezed again, especially if UK departmental budgets shrink or priorities shift.

For example: a recently published letter from the Scottish Government to the Chancellor notes that future capital block-grant funding may see a 1.1% real-terms reduction between 2025-26 and 2029-30.
Scottish Government

This means the Scottish Government will likely face tighter resource constraints in a few years, especially for capital (investment) spending.

• Devolved social security and public-service pressures remain

While the UK abolishes the two-child cap, implementation in Scotland depends on devolved social security policy — and cost pressures for Scottish Government remain. Analysts warn that reversing the cap will cost tens or hundreds of millions — requiring trade-offs elsewhere.

Given inflation, demographic pressures, and possible flat or reduced funding growth, the Scottish Government will likely still have difficult budgeting choices for health, social care, housing, rural services.

• Fiscal and economic context uncertain — dependence on UK’s macro-economy

The extra block-grant support helps in the short term — but if the UK economy weakens, debt costs rise, or future spending cuts occur, Scotland’s funding (via Barnett or other mechanisms) may be exposed.

Because Scotland has devolved responsibility for many services, but relies partially on UK decisions for funding and fiscal framework, long-term planning remains subject to broader UK-level economic and political decisions.

What This Means for People in Scotland (and Rural Areas)

In the near term, you may see improved services or support — especially for families (benefits), social services, or public spending — because of the extra funding.

For people in regions dependent on UK-level investment (industry, infrastructure, green transition), there may be opportunities as resources flow through the block grant.

But over the next few years, especially toward the end of the decade, there may be tighter budgets, especially for capital/investment work — meaning public services might feel pressure, especially in rural or remote areas.

Devolved authorities (like the Scottish Government) will need to prioritise carefully — balancing social support, public services, investment, and fiscal sustainability.