Scottish Budget 2026 to 2027

Chapter 1 Delivery and Opportunity for Scotland

Introduction

This Budget, and the accompanying multi‑year spending plans, build on the significant progress this Government has achieved over the course of the Parliament to deliver for Scotland.

Our 2026‑27 Budget invests almost £68 billion to secure a fair, healthy, safe, prosperous and green society for our citizens today, and for future generations.

It continues to fund the social contract that is at the heart of this Government’s approach: delivering free prescriptions for all; ensuring that no Scottish student pays tuition fees; enabling free bus travel for 2.4 million people; an NHS that remains free at the point of use; and a social security system rooted in treating people with dignity and respect.

In the face of an ongoing cost of living crisis, these measures will help people across Scotland continue to benefit from our policy choices in their everyday lives. This Budget goes further and provides direct support to families across Scotland through a range of new measures designed to remove additional costs from families whilst supporting participation in sport, healthy eating, and enabling parents to work. This includes: delivery of a new universal breakfast club offer for primary school aged children; funding to support activities that wrap around the school day; and delivering a Summer of Sport, enabling all children in Scotland to have free sporting opportunities.

Delivering these ambitions within a constrained funding envelope requires reform and innovation across the public sector. We are committed to delivering the prioritisation, efficiency and reform measures that will maximise the impact of our spending and maintain sustainable public finances, in line with our Medium‑Term Financial Strategy and Fiscal Sustainability Delivery Plan. As set out in the Public Service Reform Strategy, the Scottish Government and public bodies are reviewing service delivery and creating cross‑portfolio clusters to reduce duplication, simplify structures, and achieve corporate cost savings while improving joined‑up services. The Scottish Spending Review (SSR) published alongside this document sets out the planned trajectory for the public finances to 2028‑29 for resource spending, and 2029‑30 for capital spending. As part of this, Portfolio Efficiency and Reform Plans set out details of around £1.5 billion cumulative efficiencies across the Spending Review period, delivering on corporate functions and workforce savings to free up funding for investment in frontline public services.

The Infrastructure Delivery Pipeline sets out the infrastructure projects and programmes that will be funded from the spending decisions made in the SSR, demonstrating the investments we will prioritise to drive growth and support long term resilience in housing, energy, transport and digital connectivity. Scotland’s draft Infrastructure Strategy is also now published for consultation. This sets out a 10‑year framework (2027‑2037) to guide infrastructure planning, investment and delivery across the country.

Together with the Budget, these documents set a clear direction of travel for public sector spending over the medium term, and the investments that this Government will prioritise to strengthen Scotland’s public services and support households.

1. Fiscal and economic context

The fiscal environment is challenging and is forecast to remain so for the foreseeable future. A decade and a half of Westminster imposed austerity, coupled with high inflation, has significantly eroded the value of our Block Grant funding. In addition, an ageing population and strong global economic headwinds have left our public services having to meet growing demand within those increasingly challenging settlements. The Scottish Government has consistently been clear on the extent of the challenges faced, with successive budgets and medium‑term financial strategies highlighting the choices and trade‑offs necessary to deliver a balanced and sustainable position.

The UK Budget did result in some additional consequential funding compared to assumptions in the Medium‑Term Financial Strategy (MTFS) set out in 2025. For resource funding this amounts to £510 million across four years to 2028‑29, an average of just £127.5 million each year – which includes a reduction to planned consequentials for health spending in later years. For capital there is an additional £310 million to 2029‑30, equating to £62 million per year on average across the five year Capital Spending Review period.

These small uplifts need to be seen in the context of the rising pressures faced by the Scottish public sector. For example, the UK Government’s decision not to fully fund the costs of their increase in Employer National Insurance contributions is costing the Scottish public sector an estimated £400 million per annum, or £1.6 billion over the next four years.

The independent Scottish Fiscal Commission (SFC) has also updated its forecasts, published alongside this Budget, with notable impacts on the fiscal position.

On social security, the difference between social security spending and Block Grant Adjustment (BGA) funding has narrowed compared to the SFC’s June 2025 forecast. This somewhat reduces the pressure on the Scottish Budget from social security spending, and results from a combination of the following factors:

• a narrowing in the disability and carer payments net position because of forecast revisions;
• reversal of PIP eligibility changes at UK level which increases funding received by the Scottish Government through the BGAs; and
• the UK Government’s removal of the two child limit from Universal Credit, and the resulting cancellation of the Scottish Government’s planned Two Child Limit Payment, reducing the forecast of Scottish Government spending on Social Security.

Since the publication of the MTFS, the majority of public sector pay deals have now been agreed for 2025‑26, and most deals agreed also cover 2026‑27.

A number of pay awards (Agenda for Change, Scottish Prison Service and Scottish Police Authority and Scotrail/Caledonian Sleeper) also include clauses which explicitly link pay awards to inflation in 2025 and 2026 as well as a number of awards which include CPI (Consumer Prices Index) reviews in early 2026.

On key economic metrics, the latest forecasts from the SFC and the Office for Budget Responsibility (OBR) show Scotland’s economy outperforming the UK, with GDP per person growing faster on average over the next five years and unemployment remaining lower than the UK, at around 4 per cent in Scotland compared to 4.5 per cent in the UK. In line with the UK, inflation which had remained persistently higher than target through 2025 has started to fall and is forecast to fall to 2.5 per cent in 2026 and return to the Bank of England’s 2 per cent target in early 2027.

Despite this, the economic outlook remains challenging, both domestically and internationally. The SFC forecast the Scottish economy to grow 1.2 per cent in 2025-26, increasing slightly to 1.3 per cent in 2026‑27. However, economic sentiment can change quickly, and growth could be stronger should consumer confidence and household spending pick up more than expected against a backdrop of falling interest rates.

Economic performance remains of central importance to our fiscal position and to support the growth necessary to sustain public services. We will continue to focus our efforts and investments to support a strong economy and fiscal sustainability.

Overall, the Scottish Budget position remains extremely challenging. Resources are highly constrained, with marginal real terms growth in the Block Grant, and rising demand for public services. As outlined in section 3, our choices to maintain a more progressive income tax system than elsewhere in the UK and strategically deploy the other fiscal levers at our disposal – including managing our usage of Scotwind revenues, capital borrowing and the Scotland Reserve – help to mitigate but not eliminate these pressures. Difficult decisions on where to invest and spend – balancing immediate needs against future pressures – remain unavoidable.

2. Delivering for Scotland

Our Budget for 2026‑27 remains anchored in the four central priorities which guide this Government’s agenda: eradicating child poverty, growing the economy, tackling the climate emergency, and improving public services.

The themes are interconnected and require long‑term interventions. The resource and capital spending allocations in this Budget will link to wider activity led by stakeholders across Scotland and collectively support longer term transformational impact across these priorities.

Eradicating child poverty

Eradicating child poverty remains our top priority, and our investment decisions reflect this. Providing support to children and families across Scotland to ensure they thrive will remain at the heart of our approach.

In 2026‑27, we will continue to direct our resources towards the three drivers of poverty reduction: increasing income from employment; increasing income from social security and benefits in kind; and reducing costs of living. This will support the delivery of the Third Tackling Child Poverty Delivery Plan which will be published by the end of March 2026 and will set our ambitious path towards the 2030 statutory Child Poverty targets.

We welcome the UK Government’s long overdue decision to follow our lead and scrap the two child limit. We have consistently opposed the two child limit due to its widely recognised harmful impact on children and families living in poverty. As a result, the Scottish Government will no longer need to spend monies mitigating the impacts of this in Scotland, and instead will reinvest that £126 million in full in anti‑child poverty measures.

That includes providing a £49 million boost to the Tackling Child Poverty Fund, taking it to a total of £61.5 million in 2026‑27.

In 2026‑27, we will invest a total of £7.2 billion in social security assistance, an increase of £0.6 billion against 2025‑26. This will ensure that around 2 million people continue to benefit from our system, with the families of around 330,000 children set to receive the Scottish Child Payment (SCP) in 2026 ‑27.

We will uprate the SCP in line with inflation to £28.20 per week per child. We will also begin the necessary work in 2026‑27 to introduce a new SCP Premium for under ones in 2027‑28. This will result in a total payment of £40 per week in respect of every child in the household under one. The additional payment is estimated to benefit the families of around 12,000 children.

The best and most sustainable way to keep children out of poverty is to ensure their parents have access to high‑quality, stable and fulfilling employment. With families at the centre of our approach, we will invest a total of £50 million in a Whole Family Support package to support parents into sustainable employment. With final details to be confirmed in the Tackling Child Poverty Delivery Plan, measures to be funded include: a dedicated fund of £20 million for Third Sector partners to deliver the support that people need in their communities to get into and stay in work; and, through the RISE initiative (Raising Income through Skills and Education), giving colleges access to a projected £8 million of funding to deliver new or expanded initiatives to help adult learners get the skills and qualifications needed to secure new employment opportunities.

This Budget will continue to invest £90 million in employability services, including £39 million for our No One Left Behind approach and £ 40 million to provide Parental Employability Support. We estimate that over 24,000 individuals will benefit from these services in 2026‑27.

Access to high quality childcare can both support parents to look for or prioritise employment opportunities while giving children the best start in life. Our childcare provision will continue to support families both in and out of work. The 2026–27 Budget safeguards 1,140 hours of funded childcare for all three and four year olds and provides targeted support for eligible two year olds, ensuring help reaches those who need it most.

The provision of activities which wrap around the school day, or are delivered during the holidays supports many parents to sustain employment. It can also provide improved health outcomes for children who may not otherwise be able to access such services. The Budget will therefore provide additional funding of £2.5 million for wraparound activities provision building on the success of the Scottish Football Association Extra Time programme, to expand reach to services in areas where capacity is required from families most in need.

This Budget also includes transformational investment in sport and physical activity with £40 million of new funding that will help deliver a Summer of Sport for Scotland’s children. Delivering an activity programme with local and national partners to provide sporting opportunities for young people the length and breadth of the country. We will also begin a universal learn to swim offer, providing access to school swimming tuition so that every primary school child in Scotland can learn vital aquatic and water safety skills.

In 2025‑26 we provided the £3 million ‘Bright Start Breakfast Fund’ that has supported almost 500 breakfast clubs across Scotland. In 2026‑27 we are going further and providing additional funding of £15 million to build on existing delivery – including Bright Start Breakfast clubs and breakfast services already offered by some local authorities – leading to the roll out of a national offer by August 2027 .

The offer includes the cost of providing up to one hour of supervision, to enable parents to drop children at primary school early. This ensures that we are increasing the childcare options available to parents for whom cost and availability of childcare presents a barrier to employment whilst also addressing issues of food insecurity for children.

In addition, we will continue to fund school age childcare services for around 7,000 children and families most at risk of living in poverty through our school age childcare programme.

Affordable and accessible public transport reduces barriers to work, education, training and community services for families across Scotland. This Budget maintains the removal of peak rail fares and free bus travel for older and disabled people, and for all young people under 22 years of age, investing £473 million in 2026‑27 into the concessionary travel scheme. In total, our concessionary travel programme will support more than 2.4 million people and enable around 209 million journeys. This year we’re going further and removing peak fares for islanders from Northern Isles ferry services.

For many children growing up in poverty, their parents are already in work. Our Fair Work policy supports payment of at least the Real Living Wage across the public sector, its contractors and supply chains. This helps reduce the number of people living in poverty, by raising living standards for lower earners, and encouraging people to enter and remain in work. Scotland remains the best performing of all four UK countries with the highest proportion of employees (18+) paid the Real Living Wage or more (88.7 per cent).

Our tax policy decisions in this Budget continue the progressive approach we have taken over previous years, while raising substantial revenues to support the delivery of our public services.

Whilst the UK Government has chosen to freeze all Income Tax thresholds, we have chosen to support those with lower incomes by raising the Basic and Intermediate rate thresholds by 7.4 per cent, significantly more than inflation. This will help ensure we meet our commitment that more than half of taxpayers are expected to pay less Income Tax than they would in the rest of the UK. Scottish Government analysis based on independent SFC forecasts suggests that 55 per cent of taxpayers will be expected to pay less in 2026-27.

Whilst we will take these steps to maximise incomes, the cost of living continues to be too high for many, and we remain committed to reducing pressures wherever possible. Many of the measures we are delivering will help families with everyday costs and ensure support is provided for as many children and families as possible, with targeting where needed.

We will continue to prioritise help for families with everyday costs, by offering universal free school meals for children in primary 1‑5, and for primary 6‑7 children of families in receipt of the Scottish Child Payment. We will continue our work with local government to deliver on our commitment and expand free school meals provision to include children from families in receipt of Pension Credit, or who have been impacted by the increase in the Administrative Earnings Threshold for Universal Credit. We estimate these measures will enable a further 5,500 pupils to access nutritious and healthy food, backed by investment of £3 million in 2026‑27, saving eligible families around £450 per child.

A further £21.8 million is provided across all 32 Local Authorities to support the provision of holiday free school meal alternatives for eligible families, providing more than 9 million holiday meal alternatives. We will also be providing £14.4 million in funding to support the Scottish Milk and Healthy Snack scheme which provides milk and fruit or vegetables to all children enrolled in a registered preschool day care provider or childminder settings.

Children need safe, secure and warm homes to grow up in. A stable home provides the foundation for health, education, and wellbeing. Access to affordable, quality housing, enables families to better manage household costs, reduce financial stress, and create an environment where children can learn and grow. Our investment of £926 million in 2026‑27 is part of a wider commitment of up to £4.9 billion investment in affordable housing over the spending review period, of which £4.1 billion will be public investment. We will work with partners including the Scottish National Investment Bank to leverage additional private investment. This total investment will support the delivery of 36,000 affordable homes and is estimated to provide a warm, safe home for up to 24,000 children over the next four years – a significant contribution to our child poverty mission and helping avoid use of unsuitable temporary accommodation.

Our 2026‑27 Budget also includes:

• Continuing to fund Discretionary Housing Payments to mitigate the impacts of the bedroom tax, the benefit cap, and other UK Government welfare cuts, including shortfalls in Local Housing Allowance rates. Our investment of £106 million includes £7 million for families who will receive limited, or no additional support, from the removal of the two‑child limit because of the benefit cap.
• £1.3 million towards Scottish Empty Homes Partnership, ensuring that empty homes are brought back into use . Our investment expands the core service, boosting empty homes officer capacity and funding a number of new, small‑scale projects. In 2024‑25 a record 2,066 privately‑owned empty homes were returned to active use as a result of our investment in the Partnership.
• £11.5 million towards the multi ‑year ending homelessness together fund, which aims to transform the homelessness system in line with ambitions in our homelessness strategy . This will be directed to a range of measures, including rapid rehousing to reduce time spent in temporary accommodation and the fund‑to‑leave, which supports women and children affected by domestic abuse to leave an abusive relationship and remain safe.
• £20 million in 2026‑27 in Best Start Grant payments to help low‑income families with the costs of pregnancy, early learning, and starting school.
• Funding of up to £35 million for the costs associated with peak fares removal and an additional £7 million to deliver the bus fare cap pilot.
• Continuing the Scottish Government’s commitment to closing the poverty‑related attainment gap through the Scottish Attainment Challenge with funding of up to £200 million in 2026‑27. This includes Pupil Equity Funding allocated to schools for headteachers to implement local approaches to meet the specific needs of pupils, young people and families.

A fair, green, growing economy

Growing the economy is a priority for this Government. We are acting to harness Scotland’s strengths and opportunities to drive long‑term prosperity across rural communities, islands, towns, and cities.

Attracting private investment is a critical driver of growth. Scotland remains the best‑performing part of the United Kingdom for inward investment outside of London for the 10th year in a row. This achievement is underscored by confirmation that the Scottish Government has been rated high investment grade by two global credit agencies, matching the UK and surpassing several advanced economies.

We have listened to businesses and understand the cost pressures which they continue to face. On Non-Domestic Rates, we will support businesses by reducing the Basic, Intermediate and Higher Property Rates in 2026‑27, given the forthcoming revaluation on 1 April 2026. We will provide transitional reliefs, and will continue the Small Business Bonus Scheme for the next three years, to remove 100,000 properties from rates altogether.

We will also offer 15 per cent Non-Domestic Rates relief for the next three years for retail, hospitality and leisure premises liable for the Basic or Intermediate Property Rates (with a rateable value up to and including £100,000), capped at £110,000 per business per year.

Additionally, we will offer 100 per cent Non-Domestic Rates relief for the next three years for retail, hospitality and leisure premises located on islands, as defined by the Islands (Scotland) Act 2018, as well as specified remote areas, capped at £110,000 per business per year. As a result of the decisions in the Budget, the revenues raised from Non-Domestic Rates will be 6 per cent lower in real terms than pre‑COVID and comparable in real terms with the revenues collected in 2010‑11. *

* Real-terms historic Non-Domestic Rates income calculations use the Consumer Prices Index in line with the inflation measure used to baseline forecast annual changes to Non-Domestic Rates.

Wider tax policies for 2026‑27 are set out section 3 of this chapter and in chapter 2.

Scotland’s economic strategy prioritises creating an environment where businesses can start‑up, scale‑up, and thrive. To deliver this ambition, we are investing over £45 million in this Budget to drive innovation, enterprise, and entrepreneurship, positioning Scotland as a leading start‑up economy, supporting high‑value businesses, and scaling advanced manufacturing in areas of potential comparative advantage.

Building on Scotland’s success in attracting inward investment, together with our sustained investment in Enterprise Agencies of £326 million and commitment to a further £200 million for the Scottish National Investment Bank, we are also increasing support for international trade.

Supporting the foundational economy is as important. We want all communities to benefit from economic opportunities and through our wider investment of £47 million we will support the regeneration of communities and town centres to strengthen local economies. This includes increased investment to scale Business Improvement Districts and our Scotland Loves Local initiative.

As our national tourism and events organisation, VisitScotland has a key strategic role in driving a vibrant and dynamic visitor economy. We are investing nearly £40 million in 2026‑27 to enable activity to promote Scotland as a quality destination and grow international connectivity in a competitive global market.

Major cultural and sporting events will deliver significant economic stimulus to retail and hospitality businesses. We are investing over £9 million in 2026–27, to prepare for flagship events such as the 2026 Commonwealth Games, our international golf competitions, the 2027 Tour de France Grand Depart and UEFA EURO 2028.

We will provide £20 million uplift to the culture budget in support of multi‑year funding to Creative Scotland. This brings the cumulative increase in the culture budget to £70 million per year compared to 2023‑24, another step towards the planned additional annual £100 million by 2028‑29, ensuring Scotland offers a vibrant economy for culture and creativity.

This includes an additional £800,000 for Screen Scotland, taking its funding to £12 million, to support its distinct operations that have helped successfully bolster the cultural and economic impact of screen production in Scotland.

Investments in business growth are complemented by continued investment of £90 million in employability services and skills development, ensuring Scotland’s workforce is equipped to seize the opportunities created by a dynamic economy.

Our investment of over £2.4 billion in the post-school system reinforces our commitment to free education and includes significant new investment in Scotland’s College and University sectors so that people of all ages have the opportunity to fulfil their potential, while ensuring priority workforce needs are met.

This investment comes at a critical time for both sectors. Scotland’s colleges will see a combined increase of £70 million in resource and capital funding, equivalent to a 10 per cent uplift on last year’s budget. This is an opportunity for the sector to demonstrate how they can come together to help people all across Scotland to fulfil their potential, and ensure that Scotland’s workforce needs are met. Unlike the UK Government, we are also supporting Scotland’s competitive edge internationally by not introducing an international student levy.

Our commitment to apprenticeships continues, providing pathways into sustainable employment for people across Scotland. The Budget will provide funding to partners to enable delivery of 25,000 Modern Apprenticeships, 5,000 Foundation Apprenticeships and at least 1,200 Graduate Apprenticeships in 2026‑27.

We are allocating £93 million capital and financial transactions funding to build critical Offshore Wind infrastructure and develop the supply chain. To address sector‑specific needs, we are allocating £8 million to support delivery of our wider Offshore Wind Programme, including our new skills action plan. This will help ensure a skilled workforce for this growing industry and enable Scotland’s people and businesses to benefit from the opportunities in our renewable transition. In the North East, a Transition Training Fund with multi‑year match funding, and £9 million from the UK Government, will support oil and gas workers to retrain in renewable sectors.

By enabling regions to develop and thrive, we will create opportunities for employment and ensure that economic growth benefits communities across Scotland. Regional empowerment is central to inclusive growth. We are investing over £215 million in our City and Regional Growth deals, support for regional economic partnerships and Community Wealth Building.

Investment in our strategic infrastructure underpins Scotland’s competitiveness, drives regional regeneration, and supports inclusive growth. Our investment in transport infrastructure includes nearly £200 million for the A9 dualling programme this year. We will invest £1.8 million in 2026‑2027 to remove peak fares on Northern Isles ferries for island residents. Improving connectivity will strengthen local supply chains and attract investment as the costs of doing business reduce, and opportunities to access growth sectors are opened up.

Published alongside this Budget is our Infrastructure Delivery Pipeline. This shows planned investment over the next four years across the length and breadth of Scotland. Infrastructure investment is a key enabler of growth, and our investment from 2026–27 will support Scotland’s economic ambitions.

Our 2026‑27 Budget also includes:

• Total investment of £7.6 billion across capital projects in Scotland.
• Provision of £3 million in 2026‑27 to support a just transition for the communities impacted by the closure of the Fife Ethylene Plant at Mossmorran.
• A combined increase of £70 million in resource and capital funding into Scotland’s colleges, equivalent to a 10 per cent uplift on last year’s budget.
• A combined increase in resource and capital funding into Scotland’s Universities of over £55 million, equivalent to a 5 per cent uplift on last year’s budget.
• An increase of our investment in protecting Scotland’s cultural heritage, including provision of £11.7 million for The Art Works project, to establish a National Collections Hub for National Galleries of Scotland and National Museums of Scotland, delivering significant socio‑economic benefits as part of City of Edinburgh Council’s Granton Regeneration.
• Investment of an additional £4 million for VisitScotland to manage the Rural Tourism Infrastructure Fund (RTIF), supporting regional destination development.
• A new £2.5 million Young Entrepreneurs Package.
• Investment of £8 million resource funding to support delivery of the Offshore Wind Programme including our new skills action plan and the Scottish Marine Energy Research (ScotMER) Programme.

Tackling the climate emergency

Delivering on our climate commitments is integral to meeting our legal and moral obligation to future generations. By investing in a just transition to net zero and climate resilience, we create new jobs, reduce household energy costs, and build healthy and resilient communities.

This Government remains committed to reducing carbon emissions including policy action across areas such as transport, heat in buildings, and agriculture as part of efforts to meet five year carbon budget targets in the draft Climate Change Plan. As the accompanying Climate Change Taxonomy of the Scottish Budget shows, we are investing £5 billion of climate positive spend in 2026‑27.

Our 2026‑27 Budget delivers investment in public and low‑carbon transport to tackle climate change. We will invest £316 million in sustainable travel, low carbon and climate positive activities to support the switch to sustainable modes of transport and promote walking, wheeling and cycling for shorter journeys. We are also using our Non-Domestic Rates regime to further our net zero ambitions by introducing a relief for qualifying Electric Vehicle charging points for 10 years.

Improving energy efficiency is one of the most cost‑effective ways to cut emissions and reduce bills. Our Budget provides over £335 million funding for heat in buildings programmes, supporting households and businesses to transition to low‑carbon heating systems.

We are investing £926 million in 2026-27 into our Affordable Housing Supply programme, ensuring new, affordable homes are energy efficient and meet environmental standards. We will continue capital programmes for retrofitting social housing and the public sector estate, alongside targeted support for domestic and business energy efficiency measures. These investments will reduce emissions while tackling fuel poverty and lowering household energy costs.

Scotland’s renewable energy sector is a cornerstone of our net zero transition and supporting our economy. To support the just transition of the industrial sector, we are investing £45.5 million across capital and resource, which includes £15.6 million targeted investment in the Grangemouth Industrial Cluster Strategy.

In recognition of the importance of a just transition in delivering our climate ambitions, our investments in Offshore Wind skills and the Transition Training Fund will support this priority. We are also maintaining our support for the Just Transition Fund by investing £15.9 million this year, which supports the North East and Moray transition to net zero, delivering benefits for business, workers and communities in the region.

We are investing over £26 million in Nature Restoration, supporting projects that reverse biodiversity loss and restore ecosystems. We are investing £37.4 million in woodland creation and £28 million in peatland restoration, to help sequester carbon and protect habitats.

Through the Vision for Agriculture, we are committed to transforming farming and food production, supporting Scotland to become a global leader in sustainable and regenerative agriculture, and enabling these industries to contribute to our statutory emission targets. Our funding for agriculture supports delivery of this Vision and a range of outcomes, including emissions reductions. In particular, working with the sector, we will provide £170.5 million to deliver key activities including the Agri‑environment and Climate Change scheme, the Agricultural Reform Programme and an additional £26 million for the Agricultural Modernisation Fund.

Internationally, we remain committed to climate justice, with over £12 million allocated to support vulnerable communities in the Global South, particularly women and young people. More widely, we remain steadfast in our support for international development and humanitarian responses at a time when other governments have reduced their overseas assistance. We are allocating £16 million in our International Development Fund, which includes £1 million for humanitarian crises.

Our 2026‑27 Budget also includes:

• £31.7 million to make progress in Scotland ’s transition to a circular economy. We will deliver actions from Scotland ’s Circular Economy and Waste Route Map to 2030 to drive further waste reduction, boost reuse, repair and recycling, and reduce emissions associated with waste and resource management.
• £3 million to support former oil and gas workers to reskill into renewable and sustainable energy jobs, project co ‑funded by UK Government .
• £5 million to support the development of the Scottish Cluster carbon capture projects .
• £1.1 million to the Scottish Climate Intelligence Service to help build capacity in local authorities to baseline emission levels, drive emissions reduction and support resilience to the impacts of a changing climate.
• £6 million to support our national network of Community Climate Action Hubs, empowering local communities to understand the impacts of climate change and to work together to develop place‑based responses to increase resilience and reduce emissions.

Improving public services

Public services are central to achieving our vision of a fairer, healthier and more prosperous future. Given the fiscal constraints, our investments must be efficient, effective and targeted to deliver the greatest impact where need is highest. These principles underpin our public service reform agenda and guide our 2026‑27 Budget decisions.

The Public Service Reform Strategy sets out how barriers to reform will be removed to realise the scale and pace of change we are committed to. The strategy commits us to deliver a more preventative, joined‑up and efficient system. Each element has a critical role to play in meeting the fiscal sustainability challenge.

Our published Portfolio Efficiency and Reform Plans are a core part of this. Published as part of the SSR, these Plans outline £576 million of savings in 2026‑27 alone – through reforming the public sector while protecting frontline services.

We will also intensify preventative spend across justice, health and families – embedding bail and release reforms, delivering the Violence Prevention Framework and the National Mission on Drugs.

Health and Social Care

Bold and ambitious reform is essential to address the challenges facing health and social care: to improve the health of the population and to deliver sustainable services.

The Health and Social Care Service Renewal Framework and the Population Health Framework provide a blueprint for that long‑term transformation. This Budget provides a record of almost £22.5 billion to deliver and reform the health and care services we all rely on.

Funding of over £17.6 billion for NHS Boards includes investment in reforms such as the Agenda for Change workforce package, including a reduced working week, and supports our commitment to fair pay settlements, including the implementation of the second year of a two-year 8 per cent pay uplift for Agenda for Change staff.

Recognising the critical role that the social care sector plays in supporting some of the most vulnerable in our society, investment of over £2.3 billion in Social Care and integration exceeds our 2021 Programme for Government commitment to increase social care spending by 25 per cent over the Parliament, by more than £0.5 billion in 2026‑27. It also provides an uplift to adult social care pay and supports delivery of improvements to wider terms and conditions for workers such as maternity and paternity pay, and help with payment of Protection of Vulnerable Groups checks.

We will continue to build on the progress made to achieve further reductions in waiting times and eliminate long waits for patients. This will include implementing and scaling productivity and efficiency gains to create additional capacity, develop national and sub‑national plans for specific specialities and continue to expand the number of Hospital at Home beds by at least 2,000 by December 2026.

We also aim to improve access to primary care and shift more care into the community, guided by the Primary and Community Health Outcomes and Route Map. We have further invested in core general practice with £98 million of additional funding in 2026‑27 as part of a three‑year deal (£531 million total over the period 2026‑29). Our investment in general practice will ensure that we strengthen the General Practice workforce and improve access, quality, patient outcomes and sustainability .

This Budget also increases investment in other primary care services including dentistry and community eyecare. It supports the continued roll out of enhanced service provision for community glaucoma and anterior eye, as well as additional investment to support design and development work for a community low vision service.

We are also providing a further £36 million to establish new high street GP walk‑in centres, providing additional same‑day access for communities. We will also embark on a programme of primary and community care infrastructure investment with an expected capital value in excess of £500 million which will create a network of local care and wellbeing centres across Scotland.

Investment across the NHS estate to modernise infrastructure and maintain and improve essential facilities will ensure resilience across services and properties. Funding enables continued development of major capital projects including University Hospital Monklands, Princess Alexandra Eye Pavilion and Belford Hospital replacements, Barra’s St Brendan’s Hospital, as well as priority maintenance and equipment replacements which support service continuity. We are investing almost £126 million in digital, data and AI technologies to ensure safe digital foundations for services and accelerate digital transformation, supporting our workforce to deliver services more efficiently and enhance patient access and outcomes.

We will also continue to support key services such as Mental Health, including providing additional multi‑year funding of £10 million over the next three years, to deliver our Changing Places Toilet programme, starting with £3 million investment in 2026‑27. We will provide over £7 million of investment in 2026‑27 to support implementation of improvements in neurodevelopmental assessments and care for children and young people. We will continue to address the harms caused by alcohol and drugs, protecting funding to support the delivery of the new Alcohol and Drugs Strategic Plan.

And in the year that Glasgow hosts the Commonwealth Games and the men’s national football team competes in the FIFA World Cup, we will invest in a healthier Scotland and celebrate a Summer of Sport by committing an additional £40 million to sport and physical activity, giving children across the country new opportunities to get active.

Local Government

This 2026‑27 Budget delivers a real terms increase in the Local Government Settlement to almost £15.7 billion. Following extensive engagement with COSLA and Councils throughout the year, the Budget honours the commitments made to support the local government pay deals, provides additional funding for the Real Living Wage in commissioned services across social care and childcare, and makes available further support to promote sustainable inter‑island connectivity.

The Budget also further consolidates the settlement by baselining over £770 million in 2026‑27, taking the total funding baselined to over £2 billion since the Verity House Agreement was signed. It also allocates £5 million in 2026‑27 towards a targeted Council Tax revaluation of properties worth over £1 million, to support the introduction of two new ‘high value property bands’ from 1 April 2028. As well as providing revenue raising in future years, this policy commitment recognises the reality that some multi‑million pound homes currently face bills not materially different from far more modest properties and seeks to address that unfairness.

The Settlement provides over £680 million of capital funding, which includes a further £20 million of one‑off funding to respond to the Climate Emergency and over £15 million for inter‑island connectivity.

Education and Skills

The Education and Skills budget is delivering over £3.5 billion of investment supporting children and families, schools, colleges and, universities across Scotland.

This Budget maintains support for high‑quality, sustainably funded education and skills services with reforms being progressed in digital transformation, automation, shared services, and workforce optimisation. The budget also provides funding to deliver post‑school system reforms, including our action to simplify the system via the Tertiary Education and Training Bill.

Our significant new investment in Scotland’s Colleges and Universities will ensure these important institutions are fiscally sustainable into the long term, and can undertake important reform.

Reform of public bodies, including the establishment of Qualifications Scotland and His Majesty’s Inspectorate of Education, will streamline governance and improve accountability. The Budget will also provide for the reformed public bodies to make reforms to school curriculum and qualifications flowing from the recent reviews of Scottish education, as set out in the plan published in June 2025.

We are targeting funding to prevent and respond to child sexual exploitation, strengthening safeguarding and supporting early, trauma informed intervention for children and young people at risk.

We are Keeping The Promise for care‑experienced children and young people, ensuring that every child grows up loved, safe and respected. Investment supports delivery of the ambitions set out in the Independent Care Review and the Children (Care and Justice) (Scotland) Act, strengthening early support, improving outcomes for care‑experienced children and young people, and helping to prevent family breakdown and unnecessary entry into care.

Our 2026‑27 Budget also includes:

• Investment up to £200 million to support the further improved attainment and outcomes of children and young people impacted by poverty.
• Provision of over £50 million to support Health and Wellbeing including further expansion of free school meal provision.
• Investment of over £57 million for additional support for learning.
• A combined increase of £70 million in resource and capital funding into Scotland’s colleges, equivalent to a 10 per cent uplift on last year’s budget.
• A combined increase in resource and capital funding into Scotland’s Universities of over £55 million, equivalent to a 5 per cent uplift on last year’s budget.
• Funding to honour our commitment to the University of Dundee and its sustainable future, with up to £20 million available to support their recovery plan.

Justice

This Budget will ensure the provision of effective justice public services, including an additional £59 million resource budget for policing and £20 million for fire as essential frontline emergency services, enabling them to fulfil their critical role as first responders.

It will provide an additional £20.8 million resource budget to the Scottish Prison Service to manage the prison population and support the effective delivery of our civil, criminal and administrative justice systems, including courts and tribunals, legal aid system and criminal justice social work.

It provides an additional £10 million investment in community justice services which will continue to support our shift to the use of more community‑based sentences which evidence shows can help reduce reoffending.

The Budget also maintains our commitment to supporting victims, survivors and witnesses of crime, through support for third sector services with our investment of £25.9 million for victim and witness support.

Maintaining the £3 million funding for Police Scotland’s Retail Crime Taskforce and its associated activity will allow the service to continue work to prevent shop‑based theft and pursue those responsible.

Our 2026‑27 Budget also includes:

• Provision to support capacity in our frontline justice public services.
• Expansion of Community Justice services through an additional £10 million investment to support our shift to the use of more community based sentences which evidence shows can help reduce reoffending.
• Investment of £3 million to continue the work of Police Scotland’s Retail Crime Taskforce to support efforts to prevent shop‑based theft and pursue those responsible.
• Investment of £459 million to support the Scottish Prison Service to progress the replacement of HMP Highland and HMP Glasgow, wider estate maintenance, and implement recommendations from fatal accident inquiries.

Funding for every Scottish Government portfolio is set out in the relevant budget chapters.

3. Delivering a balanced and sustainable budget

The Government’s Medium‑Term Financial Strategy (MTFS) makes clear that fiscal sustainability is central to improving outcomes for the people of Scotland by transforming how services are delivered, protecting our natural environment, and reducing inequalities. Our strategy is built on three pillars:

• Public spending – Ensuring public money is focused on delivering government objectives, underpinned by reform and prioritisation to maximise impact.
• Economic growth – Supporting sustainable, inclusive, economic policies with the greatest potential to grow Scotland’s economy, expand and broaden the tax base to fund public services.
• Taxation – Ensuring a strategic approach to tax revenues, which considers the longer‑term impact of our tax choices and competitiveness.

Published in June 2025, the Fiscal Sustainability Delivery Plan (FSDP) sets out more detail on how progress will be achieved. Alongside this, the Public Service Reform Strategy (PSRS) outlines how barriers to reform will be removed and how the pace of change will be increased. This Budget and the accompanying Spending Review provides more detail on how we will deliver on these objectives.

Public spending

Under the public spending pillar, the FSDP sets out four measures: increasing public value, efficiencies and productivity, service reform, and prevention.

This Budget delivers on these ambitions for 2026‑27. We have utilised all the limited funding levers at our disposal to boost the funding available and achieve a smoother funding profile, as set out in Annex A, while keeping spending firmly focused on the government’s four priorities.

The Spending Review strengthens our approach to managing public spending. By providing greater certainty on future funding to public sector leaders, we are seeking to unlock genuine opportunities for innovation, reform and better partnership work. Recognising that delivering efficiencies and reform often needs investment, for instance in digitisation or automation of services, the Budget will provide £30 million for an Invest to Save Fund. Portfolios will also be supported to prioritise budgets towards additional investment in reform.

The Spending Review also sets out how the efficiency and reform agenda will be delivered, with the accompanying Portfolio Efficiency and Reform Plans detailing how £1.5 billion of cumulative savings measures will be delivered, freeing up further funding towards investment in frontline services.

We have also published an Integrated Pay and Workforce Policy alongside the Budget. It sets out a co‑ordinated approach to managing the public sector pay bill and workforce size through aligned pay and workforce planning. Engagement, fairness, and transparency will underpin every aspect of reform, recognising the value of Scotland’s public servants and their essential role in delivering positive outcomes for citizens.

Economic growth to fund public services

The Fiscal Sustainability Delivery Plan (FSDP) set out interventions to expand the economy and broaden the tax base by boosting business activity, raising employment, and increasing average wages through skills development and attracting high‑value sectors to Scotland. This Budget and SSR support these priorities, for example through investing £2.4 billion in Scotland ’s colleges, universities and skills system; and providing capital investment of over £480 million in key growth sectors over the Spending Review, through our Enterprise Agencies.

Looking ahead to 2026‑27, the Scottish Government will continue to strengthen economic and investor confidence by driving sustainable, inclusive growth through targeted private‑sector investment and strategic sectoral opportunities, particularly in offshore wind, green supply chains and high‑value innovation clusters. Recent progress under our Economic Strategy demonstrates Scotland’s appeal – securing major commitments such as Sumitomo’s £350 million subsea cable facility and other Green Freeport‑linked investments that reinforce Scotland’s position as the UK’s leading foreign and direct investment (FDI) destination outside London.

A strategic and progressive approach to tax

On tax, we will continue to deliver on our progressive approach which has enabled the Scottish Government to raise revenues for investment in public services. The SFC estimates that our Income Tax decisions since devolution will raise up to an additional £ 1.8 billion in 2026‑27 compared to the position had we matched UK Government policy.

The Tax Strategy, which we published alongside the 2025‑26 Scottish Budget, recognised the importance of stability and certainty for taxpayers. The decisions we have taken in this Budget live up to these commitments.

Whilst the UK Government has chosen to freeze all tax thresholds until 2031, we have chosen to support those with lower incomes by raising the Basic and Intermediate Rate thresholds in 2026‑27 by 7.4 per cent, significantly more than inflation. This will help ensure that we meet our commitment that more than half of taxpayers are expected to pay less Income Tax than they would in the rest of the UK – Scottish Government analysis based on independent SFC forecasts suggest that 55 per cent of taxpayers can expect to pay less in 2026-27. At this Budget, we are also setting out our intention to continue to freeze the thresholds for the Higher, Advanced and Top rates for the Spending Review period, up to 2028‑29.

Our 2026‑27 tax policies are set out in full in chapter 2.