First Minister: Funding for Scotland in UK budget must increase

Expected measures include increasing employer contributions to national insurance and cuts to benefits impacting those unable to work due to long-term illness. 

Ms Reeves is expected to announce a rise of over 6% to minimum wage in Labour's first budget since 2010.  Reports suggest more than one million low-paid workers will benefit from a pay boost as a result of the increase.

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Ian Murray, Scotland secretary said:  "Labour's plans to make work pay will deliver a pay rise for Scotland, with the biggest increase for young workers on record, as well as more rights and security at work for everyone.

"These changes will help 200,000 of the lowest paid workers in Scotland.

"This is the change Scotland voted for and the beginning of the change Scotland needs to see. The budget will herald an era of growth for Scotland." 

Ahead of the tax and spending plans announcement, however, the First Minister said the budget must include  “an immediate and significant” increase to Scotland’s resource and capital funding so that the Scottish Government can invest more in public services. 

Speaking to business leaders at a reception on Tuesday, Mr Swinney said: “The Office for Budget Responsibility highlighted recently the potential for public investment to deliver permanent improvements in the economy.

“It is welcome that my calls for the Chancellor to amend her fiscal rules have been heard, with indications last week that there will be scope for greater investment.

“The Chancellor has the chance to choose to deliver a UK Budget that invests in our public services and supports the entrepreneurial spirit displayed in Scotland’s business sector.

“With these new rules in place, the Chancellor must use the fiscal headroom they create to deliver a Budget that immediately and significantly enhances Scotland’s resource and capital funding, enabling us to invest more in our public services and take forward the vital infrastructure projects that support economic growth, net zero, and action to tackle child poverty.”

The First Minister’s comments come after Finance Secretary Shona Robison was forced to make more than £500 million in-year cuts to balance the Scottish Government’s budget earlier this year. 

In his speech to business leaders, the First Minister pushed for Ms Reeves to “evolve economies” in the UK budget.

Mr Swinney said by “advancing” projects such as Acorn carbon capture and storage this could provide employment opportunities for oil and gas workers impacted by the closure of Grangemouth oil refinery and provide more jobs for those in other parts of Scotland. 

Scottish Chambers of Commerce chief executive Liz Cameron warned the Budget will have a direct impact on business confidence.

“Our Budget focus is on growth, investment and competitiveness. That means investing in skills, technology and infrastructure, and equipping the workforce for tomorrow’s challenges,” she said.

“The Chancellor’s actions and the message they send will directly impact business confidence and investment at a time when we need to create positive momentum. We hope that our calls to support business have been listened to and not ignored.”

An HM treasury spokesperson said the Chancellor has vowed to lead "the most pro-growth Treasury in history".

A spokesperson added: “The Scottish Government receives over 20% more funding per person than equivalent UK Government spending in other parts of the UK, £8.5 billion more per year on average for the Scottish Government.”

It was previously agreed that the Scottish Government’s capital borrowing powers will rise in line with inflation which would enable further investment in public services and infrastructure. Maintaining these the arrangements in the new Scottish fiscal framework was a manifesto commitment from Labour.  ​

Yesterday, during a debate on fiscal sustainability at the Scottish Parliament, Ms Robison told MSPs additional borrowing and investment powers for Scotland would allow for “greater investment to renew and enhance public infrastructure and deliver projects that support the transition to net zero”. 

The finance secretary, however, added the Scottish Government must also “take action” as Scotland faces a “significant and growing gap” between funding and spending.

“However, there is only so far we can go within our limited powers," she said, "Funding for hospitals, schools, transport and other infrastructure is vital for economic growth and cutting emissions, so it is important that the Chancellor uses the autumn Budget to deliver sustainable funding for the future and significantly increases capital funding.”

The UK government has confirmed extra NHS funding will be made available in the Budget for appointments and infrastructure projects. This would feed through into the block grant to Holyrood, however, it is then up to MSPs to decide where funding is allocated. 

The Scottish Liberal Democrats say the UK government must ensure their budget "helps fix the NHS" by ensuring funding for health is a "top priority". 

Scottish Lib Dem MP Christine Jardine said: "The Chancellor must invest any extra borrowing wisely including paving the way for productive investment in Scotland's crumbling NHS buildings and the local face-access health facilities our communities need." 

The Scottish Conservatives, meanwhile, warned of the potential for a “tax double whammy” if the UK Government increases levies on Wednesday and the Scottish Government follows suit in December.

Reports have suggested the Chancellor could increase national insurance contributions on employers, capital gains tax and fuel duty. 

Scottish Tory finance spokesman Craig Hoy said Ms Reeves’s Budget will condemn hard-working Scots to a tax double whammy.

Mr Hoy said: “Keir Starmer is shamelessly breaking his pre-election promises, with a host of punishing tax rises which have already been leaked to the media.

“The damage caused by Labour’s eye-watering tax rises will be felt worse by Scots, because we’re already the highest taxed part of the UK thanks to years of SNP misrule.

“These left-wing parties wrongly believe that constantly raising taxes is the solution to everything. It’s not – and it’s putting intolerable strain on household budgets and stifling economic growth.”

The Scottish Conservatives will lead a debate in the parliament tomorrow where they will argue the Scottish Government has failed to deliver sustained levels of economic growth in Scotland and has created a "damaging tax differential with the rest of the UK". 

Their business motion reads: "The parliament... acknowledges that despite increased taxes and higher spending on devolved public services, this has failed to deliver better outcomes for the taxpayers who fund these services, and calls on the Scottish Government to examine the potential positive impact on jobs and economic growth of beginning to lower tax in the upcoming budget."

The Scottish Greens are urging the UK Government to tax the “super rich” - the wealthiest 1% of UK households - in their spending plans to fund the green transition and tackle the climate emergency.

The party’s Co-leader, Lorna Slater said: “There is more than enough money to support our transition to a greener future and create thousands of high quality, well paid green jobs, but so much of it is being hoarded by a tiny number of extremely wealthy people who don’t need it.

“The solution is staring us right in the face. By asking the richest people and corporations to pay their fair share we can transform our economy and protect future generations.” 

Ms Slater added that Labour has “doubled down” on “Tory austerity” by cutting universal winter fuel payments and not scrapping the two-child benefit cap. 

However, the Scottish Labour finance spokesman Michael Marra insisted the Budget will “end the era of austerity and put growth front and centre”.

He added: “Labour is fixing the fundamentals across the UK, but we need an end to the economic and financial mismanagement of the SNP too,” and he urged the Scottish Government not to “squander the opportunities” the Budget will create.

After the Chancellor has presented her budget speech tomorrow afternoon, the Office for Budget Responsibility will hand the Scottish Government a figure it can expect to receive in the block grant from Westminster for 2025-2026. 

Scotland’s Finance Secretary Shona Robison will then have until December 4 - when the Scottish Government budget is due - to allocate that and consider other sources of revenue such as Scottish income tax so that she can lay out her financial plan for the coming year. 

As a minority administration, the Scottish Government must win over support from opposition parties by February 2025 to pass its budget. If they do not, an early election may be called.