Submitted by Bill Fernie
28th September 2026
When governments announce extra money for public services, the headline figure can be impressive.
An additional £100 million for councils and another £500 million for the NHS or millions more for universities but....
The natural reaction is to assume that the organisations receiving the money have more resources with which to provide services.
But there is a question that is often much less prominent in the announcement.
How much more does it actually cost to provide those services?
That is the difference between a cash increase and a real-terms increase.
If an organisation receives 3% more funding but its wages, energy, buildings, contracts and other costs have increased by 5%, it has received more pounds but has less purchasing power.
And if demand for the service has increased at the same time, the pressure can be greater still.
This is particularly important in Scotland, where councils, health boards and universities have all been facing difficult financial decisions.
The Scottish Government's 2026-27 budget provides an interesting example.
The Government says the local-government settlement includes a real-terms uplift for 2026-27. It also says that health and social-care spending will receive above-inflation increases across the spending-review period.
For NHS Scotland, the Government says health boards will receive more than £17.6 billion in 2026-27, representing a 1.8% real-terms increase in baseline funding.
But in the same document it says NHS boards are expected to deliver at least 3% recurrent savings and acknowledges that significant financial and operational challenges remain.
So what does an ordinary member of the public make of that?
The NHS is getting more money, but it is also being told to make substantial recurring savings.
Both statements can be true.
The problem is that the first one makes the better headline.
This isn't necessarily evidence that the Scottish Government is deliberately misleading people. Governments have to explain complicated budgets in ways that can be communicated to the public.
But there is a genuine problem when the size of a funding increase receives much more attention than the real resources available after rising costs and demand are taken into account.
Audit Scotland has highlighted this problem over a much longer period.
Its analysis of Scottish local government found that between 2013/14 and 2022/23, local-government spending was relatively static in real terms while total Scottish Government spending increased by 37%. The proportion of the Scottish Budget going to local government fell from 30% to 23% over that period.
That doesn't mean councils simply received less money every year.
It means that, after allowing for inflation, their spending power did not grow in the same way as the overall Scottish Government budget.
And councils have another problem that central government does not face in quite the same way.
They have to provide services locally.
An ageing population can increase demand for social care.
More people needing support can increase demand for social work.
Pay awards increase the cost of employing staff.
Energy prices affect buildings, schools, care facilities and vehicles.
Construction inflation increases the cost of maintaining roads and buildings.
None of these pressures disappear because the council receives an additional percentage of funding.
The same principle applies to universities.
A university can receive a funding increase while simultaneously facing higher wages, energy bills, pension costs, maintenance costs and other expenses.
If costs rise faster than funding, the university may still have to reduce staff, close courses or find other savings.
This is one reason why the current university disputes are about more than pay.
Students can eventually feel the effects of a funding squeeze through fewer courses, fewer lecturers, larger classes and changes to the services universities provide.
There is an important lesson here for anyone reading a government funding announcement.
Instead of asking only "How much extra money is being provided?", perhaps we should ask three questions.
How much has the funding increased in cash terms?
How much have the costs of providing the service increased?
And most importantly:
After allowing for inflation, pay and increased demand, how much additional spending power is actually left?
That final figure is often the one that matters most to the public.
A £200 million increase sounds substantial.
But if the cost of maintaining existing services has increased by £250 million, it isn't an increase in the resources available to improve services. It represents a £50 million shortfall against the cost of maintaining the existing position.
There is another complication.
Demand matters just as much as inflation.
Suppose a council receives 4% more money and its costs also rise by 4%. On paper it has maintained its purchasing power.
But if the number of people requiring social care has increased by 6%, the council still faces a problem.
It has enough money to pay the higher price for the same amount of service, but not necessarily enough to meet the additional demand.
This is why the phrase "funding increase" can be technically correct while giving the public an incomplete picture.
The Scottish Government itself acknowledges that difficult choices are required because resources are constrained and demand for public services is rising. Its 2026-27 spending review says some areas have funding that has not kept pace with inflation or service demand.
That is arguably the more important message than the headline pound figure.
Scotland's public services are not necessarily facing a simple choice between "more money" and "less money".
They are facing a more complicated question:
Is the money increasing faster than the cost and demand for the services it is supposed to provide?
For councils, NHS boards, universities and other public bodies, that can make the difference between expanding services, maintaining them, redesigning them or cutting them.
And for the public, perhaps every major funding announcement should come with one additional figure:
the change in real spending power per service user.
That would tell people considerably more than the size of the cheque.