Scotland to Receive £820m Budget Boost, Rachel Reeves Says

The UK Budget: Boost for Scotland Amidst Tax Hikes and Universal Credit Changes

Chancellor Rachel Reeves has unveiled a significant financial package aimed at bolstering the Scottish economy with an additional £820 million over the next three years. This announcement, part of the UK Budget 15 hours ago, comes as the Labour government seeks to address economic challenges and support public services in Scotland.

Scrap Two-Child Benefits Cap but Tax Increases

In a move that could impact thousands of families, Chancellor Reeves pledged to lift the two-child benefits cap for Universal Credit claimants starting from April. This decision is expected to benefit 20,000 children across Scotland by reducing their relative poverty levels, according to Scottish government estimates.

However, these welfare changes come with a trade-off. The chancellor warned that her plans would result in more Scots paying income tax and National Insurance.

Additionally, new levies on pension contributions are being introduced. These measures aim to balance the budget while providing financial support to vulnerable families.

New Oil and Gas Exploration Rules

In an effort to boost energy production, Labour ministers have proposed relaxing rules for new oil and gas exploration in the North Sea. This move is part of a broader strategy to enhance Scotland’s energy security and potentially increase government revenues from offshore resources.

While these changes could lead to increased economic activity, they may also raise environmental concerns among those advocating for stricter regulations on fossil fuel extraction.

Tax Cuts and Other Financial Measures

The chancellor extended the freeze on National Insurance thresholds until 2030. This policy aims to maintain take-home pay levels as salaries rise over time, benefiting many working Scots. However, an exemption for salary-sacrificed pension contributions above £2,000 annually will be removed from April 2029.

Other measures include a reduction in green levies on energy bills and the continuation of fuel duty freezes until September 2026. A new mileage-based charge is set to come into effect for electric and plug-in hybrid cars from April 2028, reflecting the government’s commitment to reducing carbon emissions while supporting renewable technologies.

Response from Scottish Government and Opposition

The Scottish government welcomed the extra funding but criticized the tax increases. First Minister John Swinney pledged to use any savings from removing the two-child benefits cap to combat child poverty. Meanwhile, Scottish Labour leader Anas Sarwar praised the budget for its focus on reducing energy bills and increasing wages.

Scottish Conservative leader Russell Findlay, however, accused the Labour government of implementing a “£26 billion tax bombshell” that would hit hard-working families and businesses alike.

Implications for Scottish Budget

The block grant paid to the Scottish government by the UK Treasury is adjusted relative to what is spent on devolved services like health and education in England. The Scottish government will announce its own tax and spending plans on 13 January, a month later than usual due to delays in the UK Budget.

Given the upcoming Holyrood election just four months away, these announcements are likely to play a significant role in shaping public opinion and policy debates across Scotland.

The UK Budget 2025 has set the stage for significant financial changes in Scotland. As these policies begin to take effect, their impact on the Scottish economy and society will be closely monitored by both supporters and critics alike.