What the Scottish Budget Didn't Address and Why It Matters

14th January 2026

While the Scottish Budget 2026‑27 was widely covered for its headline spending and tax measures, several important areas were omitted or inadequately addressed. These omissions matter because they could shape Scotland's economic performance, public services and fiscal sustainability in the years ahead beyond the immediate budget cycle.

Long‑Term Tax Strategy and Fiscal Planning

One of the most significant criticisms of the Budget is its lack of a coherent long‑term tax strategy. Independent commentators have argued that the Budget tweaks thresholds and introduces modest tax changes, but fails to set out a credible fiscal path for Scotland’s future needs, especially given projected funding pressures and the limited borrowing powers of the Scottish Government.

Critics at think tanks have described this absence as a missed opportunity to develop a sustainable, multi‑year tax strategy for raising revenue in a way that supports economic growth and public services.

Without such a strategy, Scotland risks continuing with short‑term adjustments that leave underlying funding gaps unaddressed over the medium and longer term.

Capital Investment Gap and Infrastructure Planning

Although the Budget sets out capital spending plans, there was little strategic detail on how to fill projected investment gaps in infrastructure beyond the immediate year. Independent analysts have pointed out that forecasts for capital funding indicate a flat or declining path after 2026‑27, meaning that long‑term investment in transport, housing and economic infrastructure could be constrained.

The absence of a clear plan to expand or safeguard capital investment beyond the current year may slow future productivity growth and limit the government’s ability to support economic development.

Comprehensive Strategy for Business Competitiveness

Many business groups in Scotland responded to the Budget by saying that support for hospitality, retail and other sectors was underwhelming. Transitional business rates relief and small business bonuses were offered, but critics argue these measures are too limited and temporary to address deeper structural issues such as volatility from business revaluation, rising costs and fragile profitability in key sectors.

The Budget did not contain a more comprehensive industrial or competitiveness strategy to support long‑term business resilience, innovation and job creation across the Scottish economy — a gap that may matter if broader economic weakness persists.

Local Government Funding and Service Sustainability

Responding to the Budget, trade union and local government voices highlighted that real investment in communities remains lacking. While headline allocations to councils were maintained, projections indicate that local authority spending may fall in real terms in future years, leading to pressure on frontline services.

The Budget’s failure to set out a multi‑year plan for stable local government funding — particularly in social care, housing and community services — could have significant implications for service delivery and inequality.

Missing Explicit Costing of Emerging Policy Commitments

Some policy changes, such as plans to mitigate the UK government’s two‑child limit in Universal Credit, were introduced but not fully costed or included in official forecasts at the time of the Budget. This means that future social security spending could be higher than assumed, placing further pressure on the Scottish fiscal position.

This omission highlights a broader issue: the Budget did not comprehensively integrate new policy commitments into its medium‑term spending projections, making accurate forecasting more difficult.

Broader Structural Issues: Council Tax Reform and Wealth Taxation

While the Budget did introduce new council tax bands for high‑value properties, it did not address deeper structural issues with the council tax system — such as a full revaluation or replacement of an outdated tax regime — which many analysts regard as a long‑overdue reform.

Similarly, although discussions about wealth taxation (e.g. mansion tax, private jet levy) have arisen, the Budget stopped short of a comprehensive review of wealth taxes or other forms of progressive revenue raising that could support long‑term fiscal sustainability.

Beyond the Headlines

In summary, the Scottish Budget 2026‑27 delivered a range of spending and tax measures, but several key strategic gaps remain:

Lack of a long‑term tax and fiscal strategy to underpin sustainable public finances.

Limited forward planning for capital investment and infrastructure growth.

Missed potential for a comprehensive support framework for business competitiveness.

Omission of fully costed projections for emerging social security policies.

Failure to reform structurally outdated tax regimes like council tax.

No multi‑year plan for stable local government financing.

These omissions may not immediately derail Scotland’s finances, but they raise critical questions about how resilient and forward‑looking the budget framework truly is in addressing the economic and social challenges facing Scotland in the coming years.