CHANCELLOR Rachel Reeves has laid out a Budget which will see the tax burden reach an historic high, while borrowing increases by an average £32.3 billion a year.
These increases will fund additional spending to the tune of around £70bn annually over the next five years.
The Office for Budget Responsibility’s forecast suggested the increase in spending would provide a temporary boost to economic growth. However, Government departments are also being asked to tighten their belts and meet 2% “productivity, efficiency and savings” targets.
Outside the headline figures, there was plenty of news in the Budget for people north of the Border.
Here is everything for Scotland which was declared in the Budget.
Scotland’s funding overall
For 2025/2026, the Scottish block grant is set to be £47.7bn, the UK Government said, adding that it was an increase in real terms. In 2024/2025, the Scottish block grant had a baseline figure of £45.2bn, according to the Treasury data.
The Labour Government said that this increase included an additional £3.4bn through the operation of the Barnett formula – which sees extra resources allocated to Scotland based on spending in devolved areas south of the Border.
The UK Government said that the £3.4bn figure consisted of £2.8bn for day-to-day spending and £610m for capital investments.
Further, Labour announced “£130m targeted funding, with £10m resource and £120m capital, including for city and growth deals” – such as for Argyll and Bute.
House of Commons library research, commissioned by the SNP and published on Monday, found that Scotland’s block grant had been falling as a proportion of UK spending. The party said the value of the funding had dropped by more than £6bn since 2020.
GB Energy and other projects
The UK Government also said that it had “confirmed support for two electrolytic hydrogen projects in Scotland, in Cromarthy and Whitellee”. Presumably, it means Cromarty and Whitelee.
In her speech, the Chancellor also announced funding for “11 green hydrogen producers”, including one in East Renfrewshire. Details as yet are scant, but Reeves said they would “be among the first commercial scale projects anywhere in the world”.
Whisky
The UK Government claimed its Budget was “supporting spirits producers, such as the Scotch whisky industry, by removing mandatory duty stamps for spirits and increasing investment in the Spirit Drinks Verification Scheme, which allows producers to verify the geographic origin of their products”.
However, the Scotch Whisky Association (SWA) disagreed. The industry body said that Labour had “broken the Prime Minister’s commitment to ‘back Scotch producers to the hilt’” – noting that alcohol duty would increase in line with Retail Price Index inflation.
The SWA further raised concerns that spirits had been left out of a cut to duty on draught products in the on-trade by 1.7%, with chief executive Mark Kent saying: “On the back of the 10.1% duty increase last year, which led to a reduction in revenue for HM Treasury, this tax hike serves no economic purpose.
“It will damage the Scotch whisky industry, the Scottish economy, and undermines Labour’s commitment to promote ‘Brand Scotland’.”
Brand Scotland and the Scotland Office
Scottish Secretary Ian Murray’s Scotland Office received a significant funding boost in the Budget, with a baseline for 2024/2025 of £13m rising to a planned baseline of £15.4m for 2025/2026. That represents a budget increase of around 18%.
The UK Government said this was “funding for the Scotland Office to maximise Scotland’s influence by ensuring that the voice of Scotland is heard across Westminster”.
Labour also announced £750,000 to “establish Brand Scotland, a programme run by the Scotland Office to promote Scottish investment opportunities and exports across the globe”.
Other policies
In news which is likely to be the focus of criticism from the business sector, the Chancellor confirmed a raid on employers’ national insurance contributions, with higher rates and a lower starting threshold, raising £25.7bn by 2029-30.
The rate will increase by 1.2 percentage points to 15% from April 2025, with payments starting when an employee earns £5000, down from the current £9100.
The Chancellor also announced a £2.5bn increase in capital gains tax by increasing the lower rate from 10% to 18% and the higher rate from 20% to 24%.
She also confirmed changes to inheritance tax, including bringing pension pots within the tax from April 2027, and reforms to agricultural and business property reliefs, raising a total of £2bn a year.
Labour’s commitment to impose VAT on private schools will raise £1.7bn by 2029-30, while changes to the energy profits levy and air passenger duty rates rake in £3.6bn.
The freeze on fuel duty will continue, including maintaining the existing 5p cut, while a flat rate of duty will be applied on all vaping liquid from October 2026, alongside an additional one-off increase in tobacco duty to encourage people to give up smoking.
