Scotland's fiscal outlook: medium-term financial strategy

Foreword by the Cabinet Secretary for Finance and Local Government

Everyone has experienced the impacts of the volatile economic and fiscal environment of recent years. The Scottish Government is not immune to the repercussions of that volatility.

Our public finances have borne the impact of over a decade of Westminster austerity, the loss of billions of pounds in public funding due to the impact on the economy of Brexit, the COVID-19 pandemic and rampant inflation driven in part by the war in Ukraine, all culminating in a cost of living crisis.

Economic threats continue to emerge at a global level, further increasing the uncertainty facing Scotland’s finances, as demographic trends mean the demands on our public services continue to grow.

The UK Spending Review announced on 11 June 2025 delivered a disappointing and challenging settlement for Scotland. Across both resource and capital budgets the Scottish Government’s funding fell substantially short of expectations. Without the full fiscal levers of being a normal independent nation, the budgets for the Scottish Government will continue to be almost entirely dictated by decisions taken in Westminster. That means when Westminster decide to tax jobs or cut support for disabled people there is an automatic and substantial cost to Scotland’s budget. The UK Government’s failure to fully fund their employer National Insurance Contributions increase left Scotland with a £400 million shortfall in funding, undermining investment in our priorities.

Despite these challenges, we in Scottish Government have made the conscious decision to invest in the people of Scotland. We have put more money in people’s pockets by funding free university tuition, prescriptions and concessionary travel along with providing support for older people to heat their homes, help for disabled people to live independent lives, and support for children in need through the game-changing Scottish Child Payment.

I believe working to eradicate child poverty is the greatest investment in Scotland’s future. It is the route to enabling greater participation in Scotland’s economy, raising overall living standards, and securing societal wellbeing. Prioritised investment in Scotland’s public services, in health, education, skills, and in infrastructure, will lead to positive impacts on employment levels, productivity and long-term economic growth. And we must seize the opportunities for our economy to prosper in the transition to an environmentally sustainable economy, with growth in new industries.

Sustainable public finances are fundamental to achieving the Scottish Government’s four central priorities. We must therefore remain resolutely focused on the actions we can take to mitigate fiscal pressures and to prepare for future shocks. I am proud of the progress this Government has already made. We continue to be a fiscally responsible government and balance the budget each year – as we have done every year for 17 years and we will do so again this year.

However, we are determined to go further to make sure the services that people rely upon will always be there for them. That means renewing how we design, develop and deliver public services to ensure they deliver the benefits we all expect. With changing needs and demands, we are conscious our public services must continue to evolve.

This is why the Scottish Government is reinforcing our commitment to ensuring the public finances are on a sustainable trajectory through the 2025 Medium-Term Financial Strategy and accompanying Fiscal Sustainability Delivery Plan. Together, these documents set out a credible plan to ensure we can continue to deliver this Government’s priorities.

Shona Robison MSP

Cabinet Secretary for Finance and Local Government