8th September 2026
The Scottish Government is facing a difficult financial year. But the real question for councils, NHS boards and other public bodies is simple who will absorb the pressure?
The latest Scottish Fiscal Commission report contains an important warning for Scotland's public services.
The Scottish Government's day-to-day funding is expected to fall by 1.2% in real terms in 2027-28. At the same time, the Government has to absorb a £720 million Income Tax reconciliation, deal with rising costs and deliver hundreds of millions of pounds in promised efficiency savings.
The Government may be able to manage some of this through reserves, Crown Estate revenues and additional funding available in 2026-27.
But ultimately, the pressure has to go somewhere.
And that raises a question which deserves much more attention:
What does this mean for the organisations actually delivering Scotland's public services?
Health may get more money but still face cuts
Health and Social Care is one of the Government's priorities, and its share of the Scottish budget is expected to increase.
That might suggest NHS boards are protected.
But the reality is more complicated.
The Government has built substantial efficiency savings into its NHS budgets. Almost half of the planned savings in the three-year Spending Review are expected to come from NHS boards.
The SFC has serious doubts about whether these savings can be delivered. In 2024-25, only 15% of territorial NHS boards achieved comparable recurring savings targets.
So NHS boards could receive more money in cash terms while still being expected to provide more services, absorb inflation and pay increases, and make substantial efficiency savings.
That is not necessarily a cut in the traditional sense.
But to patients and staff, the result can look very similar: fewer staff, delayed investment, reduced services or longer waiting times.
Councils look even more exposed
Local government may have less protection.
The SFC's earlier analysis of the Scottish Government's Spending Review showed that local government was expected to experience a £472 million real-terms reduction in spending between 2025-26 and 2028-29.
Councils have already been trying to compensate through efficiency savings, reserves and substantial Council Tax increases.
But there is a limit to how far that can go.
Council Tax cannot continually rise faster than inflation without becoming politically and financially difficult for households.
Reserves eventually run out.
And "efficiency savings" eventually become service reductions if the same service is expected from fewer people with less money.
The cumulative effect of several years of below-inflation settlements is therefore much more serious than any individual year's settlement suggests.
Who else is vulnerable?
The pressure doesn't stop with councils and the NHS.
Universities, colleges, transport bodies, cultural organisations and other public bodies also face the same basic problem.
A settlement that rises by 2% when costs are rising by 4% is, in real terms, a cut.
That is why the headline figure for a public body's allocation can be misleading.
The important question isn't simply:
"Did they get more money?"
It is:
"Can they still provide the same services with the money they received?"
The squeeze is becoming cumulative
This is perhaps the most important point.
One year of below-inflation funding can often be absorbed.
An organisation can use reserves, postpone maintenance, leave vacancies unfilled or find one-off savings.
But after several years, those options disappear.
The organisation begins to change.
Vacancies become permanent reductions in staffing. Investment is postponed. Buildings deteriorate. Services are redesigned or withdrawn.
At that point, what began as a "real-terms funding reduction" becomes a visible reduction in public services.
That is why the SFC's warning about the 2027-28 Scottish Budget matters beyond Holyrood.
The uncomfortable choice
The Scottish Government has choices.
It could increase taxation, reduce spending elsewhere, use some of its reserves and assets, or demand greater efficiency from public bodies.
But there is no indication that all of these options together will be sufficient to avoid difficult decisions.
And if Health and Social Care continues to receive priority, other parts of the public sector may find themselves carrying more of the adjustment.
That could mean another year of settlements which rise in cash terms but fall in real terms.
For councils, NHS boards and other public bodies already operating under years of financial pressure, that may be the point at which "efficiency savings" become increasingly difficult to distinguish from cuts.
The question Scotland needs to answer
The debate about the Scottish Budget often concentrates on the size of the settlement from Westminster.
That is important.
But there is another question which is just as important:
How much can Scotland's public services continue to absorb before the financial squeeze becomes a reduction in the services people actually receive?
The SFC's latest report suggests that 2027-28 could provide part of the answer.
For councils, NHS boards and other public bodies, the next Scottish Budget may therefore be about much more than pounds and percentages.
It may determine what survives, what gets reduced—and what eventually disappears.