Submitted by Bill Fernie
9th October 2026
Scotland's next Budget will not be short of money in headline terms.
But that does not mean the Scottish Government will have an easy time deciding where the money goes.
The 3 December 2026 Scottish Budget is already carrying a £720 million problem before Finance Secretary Shona Robison gets to announce what ministers want to spend.
And behind that £720 million sits a second question which may matter even more to people using Scotland's public services:
How much of the £1.5 billion of promised efficiency savings will actually be delivered, and what will those savings mean on the ground?
The Scottish Government has not yet provided a full answer.
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The £720 million hit
The £720 million figure is not a new bill suddenly landing on Scotland's doorstep.
It is a reconciliation arising from the operation of Scotland's tax and funding arrangements.
The final figures for Scottish Income Tax in 2024-25 showed that receipts were £209 million below the forecast used at the time. But the bigger effect came through the calculation of the equivalent tax revenues in the rest of the UK.
Together, these adjustments mean that the Scottish Budget for 2027-28 will be reduced by about £720 million.
The Scottish Government can use borrowing powers to help smooth some reconciliations.
But the Scottish Fiscal Commission estimates that the borrowing limit available to deal with this particular adjustment is around £670 million.
In other words, there is roughly a £50 million gap even after using the available borrowing capacity.
And the latest Scottish Government figures suggest the overall provisional reconciliation affecting 2027-28 could actually be around £761.9 million once other adjustments are included.
So £720 million is an important number, but it isn't necessarily the whole story.
[b]This year's money is looking better
There is an important twist.
The Scottish Government's current financial year, 2026-27, has actually become easier to manage.
The September Autumn Budget Revision increased the Scottish Government's budget by £802.4 million, taking it from £67.655 billion to £68.458 billion.
That sounds like very good news.
But the Scottish Fiscal Commission warns that the improvement does not carry forward into 2027-28.
Instead, it expects resource funding to fall by 1.2% in real terms next year.
That creates an important distinction:
Scotland has more room to manoeuvre this year, but less room to manoeuvre next year.
Then there is the £1.5 billion savings promise
This may ultimately be the more important number for public services.
The Scottish Government's three-year spending plans assume that its portfolios will find £1.5 billion of efficiency savings between 2026-27 and 2028-29.
That includes £563 million in 2026-27 alone.
But there is a problem.
The Scottish Fiscal Commission says the Scottish Government has not yet reported how much progress has actually been made towards achieving those savings.
That leaves a rather obvious question.
If the Budget depends upon savings, how much of those savings have actually happened?
The NHS is carrying a huge part of the burden
Almost half of the planned efficiency savings are expected to come from NHS boards delivering recurring savings of around 3% a year.
That is a very substantial expectation.
And there is evidence that achieving it will be difficult.
Audit Scotland's figures show that in 2024-25 only 15% of territorial NHS boards and 37.5% of special NHS boards delivered the relevant savings target.
Several boards also required substantial additional financial support from the Scottish Government to balance their books.
So the December Budget needs to tell us something more than:
"The NHS will make £X million of efficiency savings."
We need to know how.
Will it come from administration?
Will it come from fewer staff?
Will it come from fewer buildings?
Will it come from fewer treatments?
Will it come from reducing duplication?
Will it come from centralising services?
Or will some of the savings simply be achieved by not providing as much activity as previously planned?
Those are very different things to a patient.
There is also a workforce target
The Scottish Government has committed to reducing the devolved public-sector workforce by an average of 0.5% a year between 2025-26 and 2029-30.
But the workforce actually increased during 2025-26.
That means that, if the overall target remains unchanged, greater reductions will be required in the years ahead.
This does not necessarily mean thousands of compulsory redundancies.
It could involve natural wastage, vacancies not being filled, restructuring and reduced recruitment.
But the Budget should make clear what ministers now expect the public-sector workforce to look like by 2029-30.
Because there is a simple connection between staffing and services:
Fewer staff can mean lower costs. But it can also mean fewer services or longer waits.
And inflation is making the calculation harder
This is particularly important given the recent rise in energy prices.
Higher inflation pushes up the cost of everything the Scottish public sector buys.
It also puts pressure on public-sector pay.
The Scottish Fiscal Commission has already warned that higher inflation could increase the cost of public-sector pay agreements and make the Government's workforce and savings plans more difficult to achieve.
So Scotland faces something of a squeeze.
Funding is becoming tighter in real terms.
Pay and other costs are rising.
The Government has promised large efficiency savings.
And some of the biggest savings depend on NHS boards which have struggled to deliver similar savings in the past.
Reform could cost money before it saves money
The Scottish Government is also planning significant changes to public services, including health-board reform and changes to public bodies.
Reorganisation is frequently presented as a way of making services more efficient.
But restructuring costs money too.
There can be new IT systems, management changes, redundancy costs, consultants, property changes and other transition costs before any savings appear.
The Scottish Fiscal Commission says more information is needed about the up-front costs, timing and size of the expected savings from these reforms.
That is something the December Budget should make much clearer.
So where are the cuts?
This is the awkward part.
At present we don't have a complete list headed:
"These are the services Scotland is cutting."
Instead, we have a series of financial targets.
£720 million reconciliation.
£1.5 billion efficiency programme.
3% annual NHS savings.
0.5% annual workforce reduction.
1.2% real-terms reduction in resource funding.
Each figure can be explained separately.
But put them together and they describe a much tighter financial environment.
The question for the public is therefore not simply:
"How much is the Scottish Budget?"
It is:
"What will the Scottish Government no longer be able to afford to do?"
The December Budget should answer some basic questions
There are several things taxpayers and public-service users should reasonably expect to see.
How much of the £1.5 billion savings target has actually been delivered?
How much more must be found in 2027-28?
Which NHS services will change as a result?
How many public-sector posts are expected to disappear?
How much of the workforce reduction will come through vacancies rather than redundancies?
What will health-board reform cost before it produces savings?
Which capital projects will be delayed or cancelled?
How will the £720 million income-tax reconciliation be absorbed?
And perhaps the most important question:
What will ordinary Scots notice?
Because a government can describe a reduction as an "efficiency".
A patient may experience it as a longer journey to hospital.
A farmer may experience it as a reduced service.
A rural resident may experience it as another service being centralised.
A council may experience it as another difficult settlement.
A public-sector employee may experience it as a vacancy that is never filled.
The Budget behind the Budget
This is why the December announcement could be more interesting than the headline spending figure.
Scotland is not facing a simple £720 million cut.
It is facing a combination of a large reconciliation, tighter real-terms funding, ambitious efficiency targets, workforce reductions, rising costs and major public-service reforms.
And some of the numbers being relied upon are still targets rather than savings that have demonstrably been achieved.
The Scottish Fiscal Commission has effectively asked for greater transparency about how these plans are progressing.
So when the Scottish Budget arrives on 3 December, the interesting question may not be:
"How much is the Scottish Government spending?"
It may be:
"What has it stopped doing, what is it planning to stop doing, and how many of the promised savings are actually real?"
That is where the impact of the Budget will ultimately be felt.
Not in the spreadsheet.
But in the services people use.