Spring Budget Revision 2025-26 - supporting document

Introduction

1. This booklet provides information for the Parliament and others in support of the ‘Budget (Scotland) Act 2025 Amendment Regulations 2025’ – the Spring Budget Revision. The Order is a Scottish Statutory Instrument laid before the Scottish Parliament by the Scottish Government in January 2026. The booklet itself has no statutory force – it is produced as an aid to understanding the Order.

2. The purpose of the Spring Budget Revision is to amend the Budget (Scotland) Act 2025, which authorises the Scottish Government’s spending plans for the financial year 2025-26.

3. The main changes to the Scottish Government’s spending plans, as set out in the supporting document to the Budget Bill, are explained below:

i. Funding changes to reflect deployment of available resources to portfolios (total net decrease to the budget of £462.2 million).

ii. Technical adjustments (net increase to the budget of £3,777.6 million).

iii. Whitehall Transfers and HM Treasury allocations to the Scottish Government (an increase of £79.5 million).

iv. The transfer of resources between Scottish Government portfolios.

4. In total these changes will increase the Scottish Government budget by £3,394.9 million from £64,526.8 million to £67,921.7 million.

5. The purpose of the Spring Budget Revision is to seek Parliamentary approval for these changes.

Funding Changes

6. Following the completion of the 2025-26 Autumn Budget Revision, changes to the overall funding have occurred. Analysis of all funding movements is set out in tables 1.7 c, d and e. This funding has come from a number of sources. These include:

• £45 million of additional Barnett consequentials confirmed at the UK Autumn Budget.
• A further £55 million of Barnett consequential at UK Supplementary Estimates, which is subject to change with estimates due to be published in February. This amount is offset by a £34 million reduction due to return of funding for McCloud pension remedy costs from 2024-25.
• A £350 million reduction in the Barnett settlement to reflect the change in classification of Police and Fire Pension top ups from DEL to AME.
• Changes to the assumed levels of capital borrowing and ScotWind utilisation as set out in the Scottish Budget on January 13^th, 2026.
• An additional £14 million projected to be carried forward in the Scotland Reserve from 2024-25.
• Revised devolved tax forecasts and block grant adjustments.

7. The largest element of funding deployed in the budget revision is being provided to the Health and Social Care portfolio, totalling £123 million, of which £100 million relates to resource. Of this £25 million relates to Clinical Negligence and Other Risks Indemnity Scheme (CNORIS) prior year outturn which has been carried into 2025-26. The balance of £75 million has been provided to support health services, driven by additional demand and inflationary pressures.

8. In addition, £23 million of Capital budget is being provided to support research and development costs.

9. The Finance and Local Government portfolio is seeing a £12 million reduction in funding relating to Public Sector Reform.

10. As well as this funding reduction, a total of £252 million is being held centrally within the portfolio, which comprises of:

• Up to £200 million is held as contingency for emerging pressures in January to March 2026 and year-end audit adjustments (which is required annually) as well as allowing for any changes in demand led schemes and devolved tax receipts as the financial year concludes.
• £52 million of potential carry forward. Within the 2026-27 Scottish Budget there is currently a £150 million Scotland Reserve carry forward assumption supporting the overall resource funding envelope.

11. The Social Justice portfolio has a funding reduction of £226.2 million. This is driven by changes in demand led social security benefit expenditure which have reduced by a net £224 million, with £298 million of forecast reductions offset by £74 million of forecast increases. The funding reduction in benefit expenditure is driven by lower than anticipated demand for Adult Disability Payment (£208 million), Child Disability Payment (£33 million), Carer Support Payment (£21 million), Scottish Child Payment (£14 million) and Two Child Limit payment (£11 million).

12. The offsetting funding increase is driven by the gross presentation of the Pension Age Winter Heating Payment (£46 million) as well as increased demand for the Pension Age Disability Payment (£17 million) and Scottish Adult Disability Living Allowance (£11 million).

13. The balance of Social Justice movements relates to £2.3 million for a capital underspend for the Communities Analysis Division Regional Rent Services Dundee.

14. The Education and Skills portfolio is receiving a net funding increase of £11.3 million, with £36.4 million of funding increases offset by £25.2 million of funding reductions. This incorporates previously announced funding of up to £15 million of financial transactions made available to the Scottish Funding Council to support the sector, £11.4 million of resource budget to the Scottish Funding Council for College Maintenance, with £13.7 million of capital surrendered to reflect the requisite budget classification of the maintenance. Funding of £10 million has been provided to the portfolio to support pressures in resource, with reductions of £10 million of capital in Learning and £1.5 million in Education Reform.

15. The Justice and Home Affairs portfolio is receiving £30.4 million of additional funding in the SBR. The largest component of this relates to £24.7 million provided for the additional cost incurred as a result of the United States Presidential and Vice-Presidential visits.

16. A further £5.5 million of resource budget is provided to the Scottish Police Authority to meet the costs of the pay inflation agreement with £0.2 million of previously unallocated eNICs consequentials also provided.

17. Alongside the noted movements in Justice there is a £350 million reduction to reflect the transfer of the Police and Fire Pension top ups from DEL to AME budgets. There is a corresponding funding increase to reflect the change in classification, meaning there is no net impact on the discretionary spending as a consequence of this change.

18. The Transport portfolio sees a net reduction in funding of £56.7 million in the SBR. £72 million of emerging capital underspends for slippage in projects within Ferry Services (£38.4 million), Sustainable Travel, Low Carbon and Other Transport (£33.1 million) and Rail Services (£0.5 million) have been returned.

19. These funding reductions are partially offset by £15.3 million of funding increases. This includes £10 million for latest the forecast costs for Concessionary Fares and £5.3 million of capital budget for Caledonian Maritime Assets Ltd (CMAL).

20. The Rural Affairs, Land Reform and Islands portfolio sees a net funding increase of £10.6 million. This is driven by £16 million of funding for the Marine Directorate to enable distribution to Local Government of Crown Estates Net revenues relating to income generated within 12 nautical miles of the coast.

21. The portfolio has returned savings of £5.4 million, £3.1 million of which relates to slippage on the Royal Botanical Garden Energy Centre. Elsewhere within the portfolio, a number of minor savings have been provided totalling £2.3 million.

22. The Climate Action and Energy portfolio sees a funding reduction of £157.6 million, which is driven mainly by slippage in capital projects spend. Offshore Wind has reduced by £102.9 million. Energy Transitions has been reduced by £25.2 million and Environmental Services reduced by £13.0 million.

23. Within the portfolio, linked to the slippage in capital projects are related resource savings of £16.3 million, which have been released to support other priorities.

24. The Deputy First Minister, Economy and Gaelic portfolio has a net funding decrease of £79.2 million. This is made up of £34.8 million of funding increases offset by £113.9 million of funding reductions. The funding reduction figure includes £100m of anticipated additional income from the European Structural Funds programmes.

25. Additional funding of £8.9 million has been provided to support the operational costs of the Scottish Child Abuse Inquiry, with a further £9.1 million to meet the costs of increased Redress Statutory Scheme Payments. Highland and Islands Enterprise have received £4.4 million for the Island Resilience Fund, Ferguson Marine has received £4.1 million to provide bridging support covering the lead in time for new materials being acquired for orders, and Scottish Enterprise is receiving £2.2 million.

26. Highlands and Islands Enterprise have returned £6.1 million in funding due to delays in capital projects, with Digital also returning £5 million in capital funding.

27. The Housing portfolio sees a net funding reduction of £6 million. There are £42 million of funding reductions relating to; £15 million of additional Housing Financial Transaction receipts and a £27 million reduction in demand impacted Heat in Buildings capital expenditure. These are offset by £36 million of capital funding being provided for the Affordable Housing supply programme.

Technical Adjustments

28. The Spring Budget Revision records net positive technical changes of £3,742.8 million.

29. The biggest changes are within the Education and Skills portfolio, which sees a £3,001.5 million increase in overall budget. By far the largest element of this relates to technical, non-cash changes in valuation of Student Loans - a £2,939 million movement in the Student Loan carrying value. This large movement follows the implementation of a new, more accurate, model for forecasting student loan repayments and changes to the discount factor applied for that valuation.

30. There is a further £62.4 million of additional AME budget cover in respect of student loans capital and capitalised interest requirement. There is no impact on the Scottish Government’s discretionary spending as a result of these adjustments.

31. The Justice and Home Affairs portfolio sees a £340 million increase in their AME budget requirement, mainly driven by the £350 million switch of Police and Fire Pensions discussed in paragraph 17 above.

32. The Finance and Local Government is receiving £50.5 million for technical adjustments that provides AME budget cover for provisions.

33. There is £126 million of additional budget cover being provided to the Health and Social Care portfolio for technical adjustments. £109.9 million of non-cash budget cover is provided for changes to the scoring of PFI leases and donated assets, which has no impact on the Scottish Governments discretionary spend. Additional depreciation budget is also provided (£49.8 million) as well as £5.1 million of IFRS16 AME. These amounts are offset by a £32.2 million net reduction in Non-cash AME requirements.

34. There is a £115.7 million increase in the forecast costs for future NHS and Teachers pension costs. This arises from the refinements of forecast based on scheme pension benefit payments and member employer and employee contributions. There is no impact on the Scottish Government’s discretionary spend as a consequence of this revised forecast.

35. The Deputy First Minister, Economy and Gaelic portfolio will receive £127.4 million of budget cover for other technical adjustments. This includes £80 million for the Scottish National Investment Bank to offset changes in the value of the bank’s existing investments, and £45 million for the existing provision for Redress Statutory Scheme Payments, required as a result of increases in the expected number of applicants.

36. Transport Scotland have returned £12.6 million of working capital cash cover for the Scottish Rail Holdings, whilst Sustainable Travel, Low Carbon and Other Transport have received £1.2 million of non-cash AME budget cover.

37. Crown Office and Procurator Fiscal Service have received £13.3 million in Non-Cash AME.

38. The remaining technical changes relate to small adjustments to existing IFRS16 budgets.

Whitehall transfers

39. There are a number of specific Whitehall transfers and allocations from HM Treasury recognised at the Spring Budget Revision. The net positive impact on the Scottish Budget overall is £79.5 million.

40. Funding of £85.3 million is being provided to the Health and Social Care portfolio. This includes £71.3 million of AME budget cover for the Scottish Infected Blood Support Scheme interim payments which are funded from the UK Department of Health and Social Care, £10.9 million for Branded Medicines Pricing and Access funding and £1.8 million of funding for Research Data Scotland.

41. There is a reduction of £30.7 million in the Deputy First Minister, Economy and Gaelic portfolio. This is driven by £47.8 million in City Deals funding being returned to HM Treasury. This will be reprofiled into future years with no loss of funding for the overall City Deal programme. The portfolio has also received £14.4 million from the UK Ministry of Housing, Communities and Local Government in respect of Investment Zones and £6.3 million from the Department for Science, Innovation and Technology for Project Gigabit whilst returning £3.6 million in respect of Green Freeports.

42. £12.7 million is provided to the Climate Action and Energy portfolio in respect of GB Energy funding to support CARES Recovery programme (£10.3 million) Grangemouth Skills Intervention (£1.4 million) and Oil and Gas Regional Skills partnership (£0.9 million). £8 million has been provided to the Housing portfolio following a CMA Housebuilding payment.

43. Funding of £1.7 million is being provided to the Finance and Local Government portfolio primarily for Regional Connectivity. Scottish Courts and Tribunals Service have received £1.7 million relating to the devolution of Personal Independence Payment appeals from HM Courts and Tribunals Service.

44. Social Justice have received £0.4 million for Ukrainian Refugee Thank You Payments while Transport received £0.4 million for A75 Union Connectivity Funding.

Internal Transfers

45. Internal transfers do not affect the Scottish Government’s budget as a whole and net to zero. Internal transfers move budget provision within or between portfolios, often to reflect changes in responsibility between portfolios, changes in payment mechanisms and virement intended to maximise the use of available resources. The significant portfolio transfers are as follows:

• Transfer from Education and Skills to Local Government within the Finance and Local Government portfolio to support Teacher numbers (£186.5 million).
• Transfers from Transport to Local Government to fund grant payments to local authorities for the provision of Cycling, Walking and Safer Routes programme and Support for Inter-Island Ferries programme (£60.3 million).
• Transfer from Health and Social Care to Education and Skills for New Medical Places Funding at Scottish Universities (£22.7 million).
• Transfer from Health and Social Care to Education and Skills to support teaching fees (£20.0 million).
• Transfer from Climate Action and Energy to Deputy First Minister, Economy and Gaelic portfolio for Offshore Wind investment programme funding for Highlands and Islands Enterprise (£19.1 million).
• Transfer from Housing to Local Government within the Finance and Local Government portfolio to support the Scottish Government’s Cladding Remediation Programme for the commissioning of Single Building Assessments (£15.4 million).
• Transfer from Health and Social Care to Education and Skills for Student teaching grants (£10.8 million).

Format of Supporting Document

46. The Scottish Government continues to discuss with the Finance and Public Administration Committee and others how it can improve the presentation and usefulness of supporting information.

47. The summary tables on pages 16 to 25 set out the changes sought in the Order at portfolio level, and the effect of the proposed changes on the overall cash authorisations. There is a clear read across from the numbers shown on the face of the Budget Act to those in these tables, and to the revised numbers shown in the Spring Budget Revision Order itself. Tables 1.5 and 1.6 provide a reconciliation between budgets and the cash authorisations. Tables 1.7 (a) to (e) show the sources of funding that support the changes applied and the movement of available resources. Table 1.8 shows the voted Capital Spending and Net Investment for each portfolio following the ABR adjustments. It should be noted that for the remainder of the document, only spending that scores as capital in the Scottish Government’s or Direct Funded Bodies’ Annual Accounts is shown as capital. Numbers within the table made not base due to rounding differences.

48. The main body of the document then provides a more detailed analysis of the proposed changes on a portfolio by portfolio basis. For each portfolio and direct-funded body, it shows:

• a summary of the changes proposed for the portfolio;
• how the proposed revised portfolio budget is comprised in terms of operating and capital resources, divided into the main spending aggregates: Expenditure Limit, UK Funded AME (Annually Managed Expenditure) and Other spending to show TME (Total Managed Expenditure) in respect of the Scottish Budget;
• details of the proposed major changes; and
• details of the proposed revised budgets disaggregated to Level 3.

49. The Scottish Government’s spending proposals are in the main presented to Parliament in resource terms. To meet the requirements of the “Public Finance and Accountability (Scotland) Act 2000”, Budget Bills and Revisions seek authority for the budgets of NDPBs in cash, and NDPB numbers in this supporting document are also given in cash terms. In order to allow comparison with NDPB budgets presented in other Scottish Government publications, the following table compares cash and budgets.

Process for the Budget Revision

50. Following detailed consideration by the Subordinate Legislation and Finance Committees, the Scottish Parliament has an opportunity to vote on the Spring Budget Revision Order subject to a recommendation by the Finance and Public Administration Committee.