Guide to the SBR 2025-26 - Finance Update for the Finance and Public Administration Committee
Background information provided to the Finance and Public Administration Committee (FPAC) to help with members' scrutiny of the Spring Budget Revision (SBR) 2025 to 2026.
B. Scotland Reserve and Funding Position Details
69. Tables 1.7a to 1.7e of the Budget Revision document sets out the funding position that supports the revised Scottish Budget. The table below breaks this down by the HM Treasury budget classifications of Fiscal Resource, Capital and Financial Transactions.
70. Annexes A and B detail the funding envelopes for each of the three key budget classifications at the Budget Bill along with the changes allocated within the Autumn Budget Revision.
71. The totals reconcile to the breakdown set out above, which in turn reconciles to table 1.7 in the supporting document.
B.1 Fiscal Resource
72. The Fiscal Resource funding position outlined in the SBR shows an overall decrease of £197.3 million since the Autumn Budget Revision was published in September 2025. The key changes are outlined in detail below.
73. Following an agreement with HM Treasury, Police and Fire Pensions have now been reclassified from DEL to AME. This results in a £350 million per annum reduction to the resource block grant from 2025-26 onwards. There is no loss of spending power as a consequence of this change with a corresponding reduction in DEL costs.
74. There has been one UK Government fiscal event between the 2026-27 Autumn Budget Revision and publication of the Spring Budget Revision, the UK Autumn Budget. This resulted in £44.7 million of additional Barnett consequentials which have been allocated as part of the Spring Budget Revision.
75. In addition to the known consequentials, confirmed at the UK Autumn Budget, an assumption of additional funding likely to be received at the UK Supplementary Estimates was also included within the SBR. This assumed c£55 million of further resource consequentials less £34.1 million of ring-fenced resource funding received in 2025-26 for McLeod remedy amounts. The net amount totalled £21.3 million taking the total net funding increase to £66 million less the £350 million transfer to AME.
76. The block grant adjustments for Social Security and for Tax and non-tax income have also been revised. These figures were calculated by the OBR at the UK Autumn Budget and have been included within the revised funding position as provided. The Social Security BGA has increased by £86.7 million to £5,802.8 million. This is primarily due to increases in the BGA for Attendance Allowance (£38 million) and for Disability Living Allowance (£29 million) which is offset by a reduction in Personal Independency Payments (£20 million).
77. £31 million of the increase relates to the Winter Fuel Payments which are being paid on a gross basis as outlined in para 15. This means all pensioners will receive the payment but those whose income exceeds the threshold will have the payment clawed back. Overall the increase in the BGA as a consequence of the change in UK WFP policy is £151 million however £120 million of this was assumed as part of the Autumn Budget Revision
78. The negative BGA for Taxes and Non-Tax Income has increased by £29.1 million. This movement is due to a £21 million increase in the Scottish Landfill Tax BGA and an £8 million increase in the negative LBTT BGA based on latest forecasts.
79. These movements should be considered alongside the revised devolved tax forecasts. Latest forecasts for Scottish Landfill Tax receipts of £23.6 million have been captured as a result of higher than anticipated landfilling of waste. Within LBTT there is a reduction of £7.6 million. The net deterioration in the tax position is therefore £13.1million.
80. As was outlined in the Minister for Public Finance’s statement to Parliament on provisional outturn on 24 June 2025, there was a projected underspend of £500.7 million against the resource budget for 2024-25. Following on going work finalising Final Outturn, an additional £10 million has been brought forward from 2024-25 via the Scotland Reserve, and has been allocated in full within this revision.
81. £15.6 million of budget cover transfer have been received as part of the Main Estimates process. These amounts reconcile to the amounts outlined in the Whitehall transfers section above.
82. Following the publication of the Spring Budget Revision we received confirmation from HM Treasury of the final Supplementary Estimates figures. Final resource consequential were £21.5 million, £33.9 million less than anticipated. The £34.1 million anticipated reduction in funding for McLeod remedy amounts did occur, however this is being treat as a budget cover transfer and covered in a separate line. As a result the overall movement in the resource block grant is just a £0.2 million increase.
83. Alongside the £34.1 million reduction for returned McLeod funding there were £8.4 million of further non-Barnett amounts confirmed at the Supplementary Estimate. The largest of these were £5.5 million to correct a historic Barnett error within the Economic Crime Levy and £1.9 million reconciliation for the Transformation Fund.
84. Latest forecasts of income from the Immigration Health Surcharge (IHS) received from the Home Office indicate the Scottish Government’s allocation in 2025-26 will be £233 million. This is £26 million higher than anticipated at the time the SBR was published. The combination of increased IHS and other non-Barnett funding sources offset the lower than anticipated additional Barnett consequentials meaning the movement in the wider resource funding position since the SBR is negligible.
85. Final decisions on any resource borrowing and ScotWind utilisation will be made in March as the financial year concludes. The exact amounts for devolved tax receipts will be reported as part of the outturn process.
B.2 Capital
87. Changes to the capital position since the Autumn Budget Revision was published in September 2025 have also been reflected in the Spring Budget Revision. These changes decrease overall capital funding by £235.2 million.
88. As the 2025-26 budget position has evolved, it is now possible to release £188 million of the planned draw down of ScotWind funding in-year to support the 2026-27 Scottish Budget and future years of the Spending Review. The capital borrowing requirement has also been reduced by £42 million, creating headroom for utilisation in future years.
89. The position set out in the Spring Budget Revision for both ScotWind utilisation and capital borrowing is consistent with the recently published 2026-27 Scottish Budget. Decisions on ScotWind draw down and borrowing are finalised at the end of the financial year to optimise budget management.
90. £47.8 million in City Deals funding is being returned to HM Treasury. This will be reprofiled into future years with no loss of funding for the overall City Deal programme.
91. The Provisional Outturn statement in June noted that there were capital underspends of £30.9 million in 2024-25. Upon ongoing work to finalise the 2024-25 Final Outturn, an additional £4 million underspend has been realised and has been brought forward in the Scotland Reserve and allocated in full within this revision.
92. £37.8 million of non-Barnett budget cover transfers are also applied at the SBR, the largest of which are amounts totalling £9.9 million for the Voluntary Scheme for Branded Medicines Pricing and Access, £9.6 million for GB Energy projects, £8 million following the CMA Housebuilding Investigation and £7.1 million in respect of Investment Zones.
93. At the time of publication there was unallocated capital funding of £23.5 million included within the SBR. This was felt to be an appropriate level to hold ahead of the Supplementary Estimates given the risk of potential negative consequentials. It also allowed for the small over-allocation in Financial transactions, covered in section B.3, to be covered.
94. Following the conclusion of the UK Government Supplementary Estimates process we have been advised of £36 million of additional capital Barnett consequentials and a net £2 million of non-Barnett consequentials. This increases the levels of unallocated capital funding to £61.5 million. The impact of these additional funds will be considered as part of the year-end decisions on borrowing and ScotWind usage.
B.3 Financial Transactions
95. At the time of producing the Spring Budget Revision there were no adjustments to the Financial Transactions funding envelope since the Autumn Budget Revision had been published in September 2025. A small over-allocation of £2.2 million was presented in the SBR on the expectation that underspends or receipt of additional income was likely to emerge by the end of the financial year. This over-allocation was also offset by the larger under-allocation of capital budget noted above.
96. Following the conclusion of the UK Government Supplementary Estimates process we have been advised that there will be £10.2 million of negative consequentials. This will increase the over-allocation of FTs. This increased over-allocation is still covered by unallocated capital budget. An update will be provided as part of the Provisional Outturn process.
B.4 Scotland Reserve
98. The current forecast Scotland Reserve following the provisional outturn is detailed below.
| Scotland Reserve Forecast | Resource £m | Capital £m | FT £m | Total £m |
|---|---|---|---|---|
| 2024-25 Opening balance | (264.6) | (142.8) | (4.2) | (411.5) |
| 2024-25 Drawdowns | 264.6 | 142.8 | 4.2 | 411.5 |
| 2024-25 Provisional Additions | (510.7) | (35.0) | (25.0) | (570.7) |
| 2024-25 Closing balance | (510.7) | (35.0) | (25.0) | (570.7) |
| 2025-26 Opening balance | (510.7) | (35.0) | (25.0) | (570.7) |
| 2025-26 Drawdowns | 510.7 | 35.0 | 25.0 | 570.7 |
| 2025-26 Provisional Additions | 0.0 | 0.0 | 0.0 | 0.0 |
| 2025-26 Closing balance | 0.0 | 0.0 | 0.0 | 0.0 |
99. In general terms the Scottish Government will always plan to drawdown any Scotland Reserve availability in full each financial year, with up to £200 million being required to be held annually to cover year-end and audit adjustments post 31st March. As previous iterations of the Medium-Term Financial Strategy have set out, this ensures that maximum fiscal flexibility is maintained without compromising the Scotland Reserve’s capacity to absorb any volatility in spending late in the financial year.
100. Following the conclusion of the Fiscal Framework Review, the Scotland Reserve cap now grows in line with the inflation (as measured by the GDP deflator) from its 2023-24 threshold of £700 million. The limit for 2025-26 is £734 million.