Scotland faces a £650 million reduction in the spending power of its block grant next year, according to Deputy First Minister Jenny Gilruth, who has warned that the UK Budget will place further pressure on public services.
Responding to Chancellor John Healey’s Budget announcement on Wednesday 28 October, Gilruth said the Scottish Government’s resource funding would fall by 1.3% in real terms during 2027 to 2028.
That represents a reduction of approximately £550 million in funding for day to day public services, alongside a further £100 million reduction in capital spending.
The capital budget, which supports investment in infrastructure and public buildings, is expected to fall by 1.5% in real terms over the same period.
The figures describe a reduction in purchasing power after inflation rather than a straightforward cash reduction.
However, the UK Government has presented a different picture, announcing an additional £600 million for the Scottish Government through changes introduced in the Budget.
The contrasting figures reflect different comparisons, with the UK Treasury highlighting additional funding arising from Budget measures while Scottish Ministers focus on the overall reduction in real terms spending power in 2027 to 2028.
Energy bills have also become a central point of disagreement between the two governments.
The Deputy First Minister confirmed that households in Scotland will benefit from the £100 energy support payment announced by the Chancellor, although the Scottish Government has yet to explain the arrangements for delivering that support.
Gilruth welcomed measures intended to reduce energy costs but argued that the package did not go far enough to address the financial pressures facing households.
She said:
“The Scottish Government’s budget will be cut by around £650 million next year, reducing the money we have to spend on public services and supporting people with the cost of living.
“The Prime Minister has previously claimed that he would respect devolution and the Scottish Government, but his actions do not match his words.
“Cutting Scotland’s budget shows that, yet again, we are being treated as an afterthought.
“The Scottish Government will ensure that households in Scotland will benefit from the one-off £100 payment for energy bill support, however, it is clear that the measures announced today fall far short of the action which is required.
“Furthermore, this support does not come close to meeting the promises on which the UK Government came to office, including reducing energy bills by £300 which remain significantly higher than they were in July 2024.
“The UK Government has failed to meet the moment and has failed to keep its promise.
“It is also unacceptable that there was no announcement about ending wider austerity policies which are pushing families into poverty like the bedroom tax, the benefit cap and “young parent penalty” in Universal Credit which would make a significant difference to tackling poverty.
“The Chancellor had the opportunity to lift thousands more families out of poverty, and he has chosen not to.
“We will now take the time to assess the full implications for Scotland of today’s statement.
“I will be announcing further details as part of the Scottish Budget on 3 December.”
The UK Treasury maintains that its Budget provides additional money for Scottish public services alongside measures intended to reduce household costs, including support for heating oil users and an extension of reduced VAT on domestic electricity.
The Scottish Government will now examine the financial settlement before presenting its own Budget on 3 December, when the consequences for devolved spending priorities will become clearer.
For communities across Scotland, the central issue will be how the available funding translates into public services, household support and investment over the coming year.
