IFS: Immediate reaction to today’s Scottish Spring Budget Revision

David Phillips, head of devolved and local government finance at the Institute for Fiscal Studies explained how the latest plans for spending in 2024–25 will boost the amount the Scottish Government has to spend next year and beyond 

“Today's Spring Budget Revision provides the final, updated budgets for Scottish Government departments in the current financial year, 2024–25. As of December, around £1.3 billion remained unallocated for day-to-day spending this year, following the announcement of additional funding for the Scottish Government in the October 2024 UK Budget.  

The Spring Budget Revision allocates approximately £1.1 billion of that funding to different services. The Scottish Government no longer intends to draw down any income from Scotwind offshore windfarm licenses this year – the £160 million it was planning to drawdown in December will instead be carried forward and available in future years.  

In addition, whereas the Scottish Government was planning to borrow £187 million to help offset errors in past forecasts for income tax revenues, it will no longer do so. That will reduce its debt repayment and interest costs over the next few years, which will free up money for other things. 

But rather than reduce its borrowing, the Scottish Government could have chosen to reduce the amount it plans to draw down from its financial reserves – whereas actually it increased this from £162 million to £265 million. The Scottish Government's reserves powers are more flexible than its borrowing powers, and reducing its reserve draw down rather than reducing its borrowing would have given it more scope to top-up spending next year if it wished to. 

We've previously said it was likely that some funding could – and should – be carried forward. The Scottish Government faces significant spending pressures in the coming year, not least from increases in employer National Insurance Bills. Reports suggest that planned top-ups to UK government funding to compensate the Scottish Government for the additional costs of these increases will fall short of what is required by hundreds of millions of pounds.  

We've already heard that spending plans for 2025–26 initially announced on December 4th will be topped up by £17 million as part of the Scottish Government's deal with the Scottish Green Party and Scottish Liberal Democrats. We may see the announcement of further top-ups over the next few weeks as the Budget Bill progresses through parliament using the funding being carried forward. The Scottish Government could also hold off confirming any top-ups until the Autumn, although that would mean more uncertainty in the short-term for parliament, public services and other stakeholders.”