UK Autumn Budget: Letter to the Chancellor

15 October 2025

Dear Chancellor,

UK Autumn Budget – Scottish Government priorities

I am writing to set out Scottish Government priorities for the UK Autumn Budget. I look forward to further discussion with the Chief Secretary to the Treasury at the Finance: Interministerial Standing Committee (F:ISC) on 17 October.

Investment in public services

The UK Spending Review (UK SR) set out our expected funding over the next three years for day-to-day spending. While I welcomed the funding uplift that you announced in your Autumn Budget last year, the UK SR settlement did not build sufficiently on this increase in investment. We are set to receive a real terms increase in resource funding of on average 0.8% a year over the UK SR period. This was both below our forecast funding ahead of the UK SR and the average real terms funding uplift of 1.2% for UK government departments. As I set out in the Scottish Government’s Medium-Term Financial Strategy, this means that we face an increasingly challenging budget situation in the years ahead with demand for services and costs increasing at a much faster rate than funding.

I appreciate the financial challenges that you are facing, with reports suggesting that you need to find around £30 billion of additional headroom. This is clearly of concern to all governments across the UK, and I would not want to see constraints on our funding as you seek to address these challenges. I would urge you to consider all alternatives to spending cuts. As you are aware, we are already having to deal with the impact of the increase in employer National Insurance contributions within our budget, as the additional funding from HM Treasury fell well short of the actual cost to public services, a shortfall which we estimated at around £400 million.

It is vital that the funding outlook in the UK SR is maintained, and indeed enhanced, to support the public services on which we rely. I will be setting out the Scottish Budget and a Scottish Spending Review in early January and this will be based on the levels of funding in the UK SR, as baked into our own Medium Term Financial Strategy and Fiscal Sustainability Delivery Plan. Clearly any reduction in this level of funding would have severe consequences for public services in Scotland.

Investment in infrastructure

The UK SR also set out the future funding for infrastructure investment, which is vital to support economic growth, meet our net zero ambitions and fund maintenance across the public sector estate. However the funding we expect to receive represents a 1.1% real terms reduction to our capital block grant between 2025-26 and 2029-30. We will be publishing a renewed Infrastructure Investment Pipeline alongside the Scottish Budget and want to maximise the value of our capital investment, but face persistent high inflation and rising costs in construction, which puts our budget under further pressure.

The UK SR provided a welcomed increase in Financial Transaction funding for capital investment, however this falls far short of a fair share for Scotland (at around 3.4% of the overall UK allocation). Financial Transactions funding has played a crucial role in underpinning our Affordable Housing programme and the investments made by the Scottish National Investment Bank. It is vital that we receive a fair share of future financial transactions funding, so that Scotland does not miss out on this important funding for economic growth. We are already in discussions with HM Treasury about the role that the Scottish National Investment Bank and other Scottish bodies can play in the new funding context and I am keen that we work together to realise the contribution that these bodies can make. I am also aware that institutions such as the British Business Bank will be investing across the UK and it is important that Scotland receives its fair share.

Working together to support economic growth

As part of the UK SR I set out how the Scottish Government can work with the UK Government to support economic growth. It is imperative that this budget is targeted at realising the significant economic opportunities arising from the clean energy transition, both for the growth of the UK’s domestic supply chain, and in terms of export opportunities. Supporting local content and resilient home-grown supply chains should be a key priority.

I welcomed the announcement on support for the Acorn Carbon Capture and Storage project in the UK SR and am keen that this progresses. I also set out the key role that Scotland can play in renewable energy and on offshore wind in particular, highlighting that in order to deliver, the UK Government will need to ensure sufficiency of budget for forthcoming Contracts for Difference allocation rounds and support for Floating Offshore Wind in particular. Given AI’s potential for transformative growth, it is vital that our governments work together, to deliver on the recommendations in the AI Opportunities Action Plan. This should include the establishment of an AI Growth Zone in Scotland at the earliest opportunity.

As you take forward investment through the National Wealth Fund and GB Energy, it is important that you take account of Scotland’s unique public sector investment landscape and work with us to maximise the benefits. Scotland should secure an above-population share of total GB Energy funding, given its disproportionately large contribution to UK clean energy goals and the significant clean energy supply chain opportunities for growth. More broadly, wider funding under the Industrial Strategy, through mechanisms such as Investment Zones, and from bodies such as the OFI and Innovate UK, needs to be mobilised to attract maximum inward and private investment in our clean energy sectors and their supply chains.

There also needs to be agreement on how the apportioning of the £2.5 billion that was ring fenced for the steel sector will give proportionate support to the maintenance and development of a green steel industry in Scotland, which will be key to supporting areas such as defence, green energy transition and Net Zero targets.

The UK Modern Industrial Strategy was published in June and we are keen to ensure that there is appropriate consideration of how to deliver programmes within the Industrial Strategy in Scotland given the differences in the delivery landscape between Scotland and England. In particular there needs to be discussion and agreement on how funding to deliver the strategy in Scotland is allocated. In particular there needs to be discussion and agreement on funding to deliver the strategy in Scotland to support cross cutting themes such as innovation and our priority sectors of Advanced Manufacturing, Digital and Data Technologies and Life Sciences. In particular, we need to see support for our priority sectors of Critical Technologies, Space and Robotics Cluster. We are also keen to engage your teams on the allocation of the funds as part of the Defence Growth Deal for Scotland, which we are keen to continue to support engagement with your teams on design and implementation.

The UK SR set out the UK Government's plans for future local growth funding, successor to the UK Shared Prosperity Fund. Along with the other devolved governments, we have been clear that there must be a role for the Scottish Government is delivering this. The UK Government has announced its plans for Wales but is yet to clarify how this will be delivered in Scotland, how we will be involved in this process, and whether the role of the Scottish Parliament will be respected. As you will be aware, Scottish Ministers have been clear in their opposition to the UK Government’s use of the UK Internal Market Act to spend directly in devolved areas. I would welcome your assurance that your approach to this and other growth funding respects the devolution settlement.

The marine and agriculture sectors make a hugely important contribution to the Scottish economy and our rural communities. I have previously raised our concern that the way in which funding is now provided to Scotland does not reflect Scotland’s share of land and seas, nor the contribution that we can make to climate change and food security. I encourage you to look again at how this funding is calculated. I am also keen to see a fair share, based on previous EU funding allocations, of the UK Government’s £360 million Fishing and Coastal Growth Fund to be devolved to Scotland.

Welfare reforms and eradicating child poverty

The UK Autumn Budget will underpin the first year of action in the UK Government’s forthcoming Child Poverty Strategy, and it is critical that you are ambitious and take this opportunity to drive forward the progress that is sorely needed at a UK level. As the Scottish Government has demonstrated, through our investment in the Scottish Child Payment and other measures, it is possible to drive meaningful progress on child poverty. Through our correspondence with co-chairs of the Child Poverty Taskforce, we have set out a range of priorities which I would urge you to support.

The First Minister has made clear our commitment to eradicating child poverty and we are already taking action to effectively scrap the two-child limit in Universal Credit from next March. We have of course long-called for the UK Government to abolish this damaging policy and I am heartened to see reports that this now appears to be a prospect you are considering. I urge you to scrap the cap in full and, as the Cabinet Secretary for Social Justice set out in her recent correspondence, it is vital that the UK Government provide detail on its plans at the first available opportunity.

There has been a great deal of uncertainty with regard to the UK Government’s approach to welfare reform over the past year. We welcomed the halt to changes to Personal Independence Payment (PIP), as well as the reversal of your original decision on Winter Fuel Payment, which impacted on the equivalent devolved payment. I would however take this opportunity to reiterate calls to halt the planned changes to Universal Credit at least until you have undertaken a full and comprehensive assessment of the impacts the changes will have on disabled people.

It is important that the UK Government engage early with the Scottish Government on any planned policy changes emerging from the Timms Review of PIP. This is especially so where these changes will impact on the funding received through the BGA to deliver Adult Disability Payment and if they could impact on delivery of Scottish benefits, i.e. requiring devolved disability benefits to passport to reserved benefits. These interactions are complex and it is important the UK Government work with us to understand the impact on Scotland.

The Scottish Government is already spending £142 million in this year’s budget to mitigate policies put in place by the previous UK Government that contribute to poverty. In addition to continued investment in our Scottish Welfare Fund, this includes allocating over £99 million to local authorities to spend on Discretionary Housing Payments, helping to mitigate the ‘bedroom tax’, Benefit Cap and shortfalls in Local Housing Allowance rates. These policies impact on child poverty and I would urge you to consider reversing them as part of your forthcoming Child Poverty strategy. This would remove the need for the Scottish Government to provide such mitigations, enabling us to use that funding for further ambitious anti-poverty measures.

Fuel poverty continues to be a significant issue in Scotland. In 2023, an estimated 34% (around 861,000 households) of all households in Scotland were in fuel poverty. It is clear that high energy prices must be addressed, and the fundamental fiscal and policy levers to make a real difference lie with the UK Government. Progress towards heat decarbonisation also depends on wider urgent UK Government action, which includes rebalancing policy costs from electricity to gas bills to incentivise the installation of clean heating in a way that alleviates fuel poverty.

We have previously called on the UK Government to implement a social tariff in the form of a targeted bill discount, as it will address high costs at source and ensure energy bills are both more affordable and sustainable in the longer-term, reducing the likelihood of building up energy debt that will likely never be repaid. We welcome the UK Government’s Warm Home Discount scheme, but this is an interim solution and we require urgent action from UK Government that is sustainable in the long term and supports households who are struggling to pay their fuel bills. The powers to deliver a social tariff rest with the UK Government but we would urge you to consider its role in tackling poverty and would welcome further discussion.

Taxation measures

There is currently a lot of speculation about what tax changes may be included in the Autumn Budget. As you will be aware, changes you make to taxes that are devolved can have significant and direct impacts on the Scottish Government’s funding via Block Grant Adjustments, while there can also be important cross-border effects to consider in setting Scottish Government policy. Even when taxes are fully reserved, there can still be substantial implications where they interact with devolved taxes.

The limited time between the UK Budget and the Scottish Budget on 13 January means that we will have little time to consider the implications of any tax policy changes for Scotland. I would appreciate any engagement on proposals so we can understand potential impacts and to help us prepare effectively for the Scottish Budget.

We have used the limited tax powers that we have available to deliver a fair and progressive tax system which has raised significant revenue for public services. We think there is scope for the UK Government to learn from the ambitious Scottish approach and consider how it best uses the range of tax powers at its disposal.

In the run up to the UK Budget, we encourage you to listen carefully to the concerns being expressed by businesses around the impacts of the Energy Profits Levy. The UK Government needs to set out how a stable and long-term fiscal regime will be used to deliver business and investor certainty for the North Sea. The Energy Profits Levy was always supposed to be a temporary measure and we want to see the earliest possible end date, as it is now affecting investment and jobs in the North East of Scotland. The aim of the successor regime must be to give the offshore energy sector much needed certainty and treat it fairly, alongside other parts of the UK economy.

The Scottish Government has also long called for stability, clarity, and fairness in the approach to alcohol duty. The decision in the last UK Budget to raise alcohol duty whilst reducing draught duty widened the disadvantage facing Scotland’s iconic national drink. The near 14% raise in the duty levied on spirits in recent years disproportionately affects the Scotch whisky industry and we would welcome action to address this disparity in the upcoming UK Budget.

The impact of the UK Government’s changes to Agricultural Property Relief continues to be a real concern to Scotland’s agricultural community. While the Scottish Government continues to call for inheritance tax powers to be devolved, I welcome the ongoing constructive dialogue between the Scottish Government and HMRC officials to seek to mitigate the impact of these changes on heritable Scottish agricultural leases.

I am copying this letter to the Chief Secretary to the Treasury, the Rt Hon James Murray MP.

Your sincerely

Shona Robison